The UK Bribery Act is wider in scope than the US Foreign & Corrupt Practices Act (FCPA) in a number of respects.
As such it may not be safe for corporations and other commercial organisations to rely on their existing FCPA compliance for protection against liability under the Bribery Act. Below are some of the key points that need to be considered.
There are four main offences -
(i) Under Section 1 - The promise, offer or giving of a financial or other advantage to another (Active Bribery).
(ii) Under Section 2 - Requesting, agreeing to receive or accepting a financial or other advantage (Passive Bribery).
(iii) Under Section 6 - Bribing a foreign public official with the intention of influencing that person in that capacity.
(iv) Under Section 7 - A failure by a commercial organisation to prevent active bribery (the Corporate Offence).
A commercial organisation can be prosecuted for any of these offences. For certain of these offences, individuals can be prosecuted and liable for imprisonment of up to 10 years and/or an unlimited fine.
FAILURE TO PREVENT BRIBERY
The "Corporate Offence"
Section 7 of the UK Act creates a new strict liability offence for commercial organisations of failing to prevent bribery occurring within the organisation. Knowledge of the bribe is not a requirement of the offence. The only defence is that the organisation had in place "adequate procedures" designed to stop incidences of corruption. The UK Secretary of State has published formal guidance on the extent and meaning of "adequate procedures". This sets out a number of principles and is goal setting rather than prescriptive. The guidance is based on six broad management principles, namely, proportionate procedures, top level commitment, risk assessment, due diligence, communication (including training), and monitoring and review. There is a focus on the culture of an organisation and the expectation that there will be zero tolerance of bribery and corruption at all levels.
The Corporate Offence applies to any commercial organisation that carries on a business or part of a business in the UK. It also applies to conduct that takes place outside the UK. The effect is that as long as it carries on business in the UK, a foreign organisation can commit the Corporate Offence by its failure to implement "adequate procedures" in relation to conduct in a foreign country that is not connected with any business undertaken in the UK. The legislation's extraterritorial reach is therefore broader than that of the FCPA.
Commercial organisations can be guilty of the Corporate Offence if they fail to prevent an "associated person" carrying out an act of bribery on their behalf. Unlike the FCPA an "associated person" is not defined by reference to the nature of the relationship with, or the control exercised over, that associated person by the commercial organisation. Under the UK Act an "associated person" is one which performs services on behalf of the organisation. The definition is vague with a decision as to whether or not services have been performed to be determined by reference to all relevant circumstances and not merely to the relationship between the organisation and the "associated person". Certainly distributors, sub-contractors, joint venture partners and agents will all be classed as "associated persons". Improper performance will therefore arise if it is intended that in paying the bribe, the recipient would be expected to act otherwise than in good faith, an impartial manner or in accordance with a position of trust.
PRIVATE BRIBERY AND BRIBERY OF PUBLIC OFFICIALS
The UK Act outlaws bribery of private persons, thereby going further than the FCPA.
The UK Act also has a separate offence for bribery of a public official. By contrast to the FCPA, the bribery of a foreign public official does not need to include an intention that that person will improperly perform his duties nor does the payment need to be made corruptly. The elements of the UK offence are the intention to influence that person in his official capacity coupled with an intention to retain or obtain business or advantage in the conduct of business and that the act is not permitted by local written law.
The FCPA makes an exception for small facilitation payments (sometimes known as "grease money") paid to officials to smooth the relevant processes of official actions. No matter how small or routine or expected by local customs these are, they are illegal under the UK Act.
Like the FCPA, the UK Act prohibits all corrupt payments regardless of whether they are paid directly or on the organisations behalf by a third party.
PROHIBITION OF PASSIVE AS WELL AS ACTIVE BRIBERY
The UK Act not only covers active bribery but, unlike the FCPA, it also contains specific offences relating to passive bribery (i.e. the acceptance of a bribe).
HOSPITALITY AND BONA FIDE EXPENSES
Under the FCPA it is an explicit defence that the relevant payment represented reasonable and bona fide expenditure (such as travel or accommodation), expenses directly related to the promotion, demonstration or explanation of products or services or the execution or performance of a contract with a foreign government or its agencies. There is no such specific defence under the UK Act.
It should be remembered that under the UK Act offences can be committed without proof of intent. It will be sufficient that a reasonable person in the UK considered that in accepting hospitality the function was performed improperly or that it was accepted in anticipation of or as reward for improper performance. Whether hospitality is seen in such a light is, in reality, likely to be determined by how lavish it is.
The new individual and corporate offences require that the intention of the briber is that the person being bribed improperly performs his/ her duties. The definition of improper performance refers to a failure to perform one's duties in line with a "relevant expectation". Relevant expectations are:
(i) that the person performing the function or activity will perform it in good faith;
(ii) that a person performing the function or activity is expected to perform it impartially;
(iii) that the person performing the function or activity is in a position of trust by virtue of performing it.
The expectation test is to be judged by what a reasonable person in the UK would expect in relation to the performance of the type of function or activity concerned, not local standards, unless it is required or permitted by the written law applicable to the country concerned.
This could be quite a low threshold to meet and could cover a wide range of situations such as inducement to breach a contract with a third party. The only comfort to organisations is the stated intention of the UK government that prosecutors will maintain a discretion so that "non criminal" cases would not be prosecuted if it is not in the public interest to do so. However experience dictates that relying on an individual prosecutor's discretion is a considerable risk and underscores the need to have robust procedures in place to demonstrate a zero tolerance to corruption.
Imprisonment and fines
The penalties for breach are severe. For individuals they are up to 10 years imprisonment or a fine or both. For organisations, fines are unlimited.
Individual Liability of Management
The UK Act provides for imprisonment of up to 10 years or a fine or both for senior officers of the organisation if bribery (active or passive or bribery of a foreign official) is committed with their consent or connivance. Where the bribery takes place overseas, they must have a "close connection" to the UK to be personally liable. There is no personal liability for the Corporate Offence.
Debarment from Public Procurement Contracts
It is anticipated that any organisation convicted of an offence under UK legislation will be debarred from participating in future public contracts in light of the European Union Public Procurement Directive.
The UK authorities, whilst encouraging self reporting of corrupt practices with a view to a US style plea bargain settlement, have recently had their right to do so questioned by the courts with Lord Justice Thomas taking the view that they had no right to enter into such agreements and should not do so in future.
The Serious Fraud Office, which is responsible in the UK for enforcement of the legislation, has also indicated that it intends to take a tougher stance by pursuing a more aggressive crime-fighting strategy. The new incoming director, David Green, has indicated that unlike his predecessor he will be less willing to do deals with organisations who discover and self-report breaches of the legislation which previously had led to civil settlements rather than criminal prosecutions. The UK Government however has said that it is in favour of US-style deferred prosecution agreements and legislation is expected in the latter part of 2012. This would see an organisation admit wrongdoing and pay a fine in exchange for criminal proceedings being postponed, thereby enabling them to stay on public tender lists.
Whether or not corporations and other commercial organisations have FCPA compliance programmes already in place, it is clear that they should be giving particular consideration to addressing private sector corruption, facilitation payments and hospitality. However, there is a need to go further because of strict liability and to prevent liability attaching to third party acts. This will require organisations to ensure compliance throughout the supply chain giving particular attention to agency agreements, distributor agreements, joint venture agreements, employment contracts, due diligence procedures and the like. At the very least, corporations should ensure that they have "adequate procedures" in place in order to give themselves some protection against possible claims. In short, relying on FCPA compliance may not be enough to protect oneself against liability under the UK Act.
HOW WE CAN HELP
It is important that action is taken and our Regulatory team can help advise on the extent to which specific Bribery Act advice may be required and what actions may be taken to minimise risk. In particular, the team can help with:
- risk assessments;
- drafting/reviewing anti-corruption policies;
- drafting/reviewing gifts, hospitality and promotional expenses policies;
- developing a public statement of commitment and developing an accounting check list to identify possible infringements;
- drafting standard terms and conditions for third party contracts;
- reviewing/amending employment contracts;
- drafting/reviewing whistle blowing policies;
- anti-corruption training, including online training courses which includes assessments to prove knowledge and understanding of the course;
- advising on potential breaches of the legislation.