Bribery Bill: time to update corporate compliance
Following the Queen’s Speech in November 2009, the Bribery Bill has now been introduced into Parliament. If it makes it onto the statute books, the Bill will create a modernised suite of corruption offences which will have particular significance for commercial organisations.
Following the Queen's Speech in November 2009, the Bribery Bill (the Bill) has now been introduced into Parliament. The Bill, which has been some 14 years in the making, seeks to overhaul the UK’s current patchwork of anti-corruption legislation, which dates back to the late nineteenth century and has been widely decried as outdated and in urgent need of reform.
If it makes it onto the statute books, the Bill will create a modernised suite of corruption offences which will have particular significance for commercial organisations.
However, the Bill is just one part of a broader attempt to improve the UK's record on anti-corruption, which includes a new vigour on the part of the Serious Fraud Office (SFO) (see box “Recent cases”).
In that climate, whether or not the Bill is ultimately enacted, all businesses would be well advised to revisit their compliance programmes and to ensure they have in place adequate systems and controls in relation to business ethics. The eye-watering £500 million to £1 billion supposedly being sought by the SFO from BAE Systems only serves to emphasise the scale of the exposure for commercial organisations in this area.
The Bill introduces three key offences:
The basic offence. The Bill will make it a criminal offence to give, promise or offer a bribe (the basic offence). A bribe is defined as a "financial or other advantage" made with the intention to both:
Obtain or retain "business" or "an advantage in the conduct of business".
Induce or reward improper conduct (such as breach of an expectation that the recipient will act in good faith or impartially).
The basic offence applies both at home and abroad and, unlike the US Foreign Corrupt Practices Act 1977 (FCPA), to both the private and the public sector (see Focus “US bribery offences: don’t get caught out”, www.practicallaw.com/1-379-7651).
Bribery of foreign public officials. The Bill also introduces an entirely separate offence of bribery of foreign public officials (FPOs). Unlike the basic offence, the FPO offence is much more closely modelled on the provisions of the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention 1997. The key difference from the basic offence is that liability under the FPO offence turns on whether the written law of the relevant jurisdiction permitted the FPO to be "influenced" by the financial or other advantage.
The corporate offence. Most importantly for commercial organisations, the Bill introduces an entirely new offence of failure by a "relevant commercial organisation" to prevent bribery by persons working on behalf of the business, including employees, agents and subsidiaries (whether domestic or foreign) (the corporate offence).
The corporate offence
The most important change for commercial organisations since the Bill was published in draft in March 2009 (www.practicallaw.com/0-385-9951) is that the corporate offence is now one of strict liability: an organisation will automatically be guilty of a criminal offence where a bribe is paid on its behalf (subject to the defence of "adequate procedures" (see below)). There is no longer a separate requirement for the prosecution to prove negligence on the part of the organisation itself.
The government has, however, offered business something in exchange. In place of the negligence requirement, the prosecution must now prove not merely that a bribe was paid in connection with the organisation’s business, but that it was paid with the intention to obtain or retain business for the organisation itself.
This amendment may go some way to assuaging concerns about the breadth of the offence in terms of commercial organisations' liability for joint venture partners, contractors and subsidiaries (where the organisation will not necessarily have any practical control over the relevant entity). Nevertheless, it is still far from clear how the Bill will be applied in such scenarios.
Adequate procedures. If a bribe has been paid on the organisation’s behalf, the onus will then be on the organisation to prove (to the civil standard of a balance of probabilities) that it had in place adequate procedures to prevent its associates from paying bribes. In other words, the organisation itself can avoid criminal liability by demonstrating that any failings were not systemic.
As yet, the government has published little guidance on the meaning of "adequate procedures", other than to emphasise that the meaning is not intended to be prescriptive. As such, according to the Ministry of Justice, defendants can "adduce evidence which shows that ... given the size of the organisation, the particular sector or country in which it operated and the foreseeable risks, its procedures employed to prevent bribery being committed on its behalf were adequate despite the fact of the bribe".
In light of this, and the current enforcement climate, all businesses should ensure that anti-corruption is properly addressed. Particularly for larger businesses operating in higher risk jurisdictions, an adequate anti-corruption compliance programme needs to extend beyond written policies alone, to include steps such as:
Practical "on the ground" implementation and training.
Effective procedures for the vetting of third parties.
Follow-up monitoring and auditing to ensure that procedures are actually complied with in practice.
Extraterritorial scope. Providing that the other requirements are satisfied, liability will arise under the corporate offence even where the bribe was paid by a foreign agent or subsidiary in a foreign jurisdiction. Indeed, liability arises where the foreign agent or subsidiary merely procured or aided and abetted the payment of a bribe. The only necessary connection to this jurisdiction is that the commercial organisation itself is either a UK commercial organisation or carries on part of its business in the jurisdiction.
Facilitation payments. The Bill contains no defence or carve-out in relation to so-called facilitation or “grease” payments (unlike the FCPA). Facilitation payments are usually understood as small payments made to expedite the performance of routine administrative functions to which the payer is entitled (for example, to expedite the release of goods from customs or the connection of utility services). While it is difficult to envisage it ever being in the public interest to prosecute a one-off facilitation payment, particularly where it was effectively extorted in an overseas jurisdiction, such payments will remain illegal and the SFO has signalled that it expects commercial organisations to strive to eradicate them.
The Bill increases the maximum penalty for the basic offence and for the FPO offence from seven to ten years' imprisonment, plus an unlimited fine. The maximum penalty for the corporate offence is an unlimited fine. It will also introduce a new basis for holding senior officers liable where a company commits either the basic offence or FPO offence (where they consent to, or "connive" in, the commission of the offence).
The government has signalled its intention to get the Bill through Parliament and onto the statute books before the general election. Time is clearly tight, however. While the Bill is generally understood to have broad cross-party support, there is still a real possibility that it may not be passed before the general election (in which case it would need to be re-introduced afresh in the next Parliament).
Jeremy Cole is a partner, and Michael Roberts is a senior associate, in the Bribery and Corruption Task Force at Lovells LLP.
Recent cases involving the Serious Fraud Office (SFO) include:
In March 2008, after an internal investigation, AMEC plc reported to the SFO certain irregular payments associated with a project in which AMEC was a shareholder. AMEC paid nearly £5 million in settlement under a consent order.
In September 2009, Mabey & Johnson Ltd pleaded guilty to offences of overseas corruption and breaching UN sanctions, and was ordered to pay a total of £6.6 million. This was the first prosecution in the UK of a company for overseas corruption.
In October 2009, the SFO announced that it would seek authorisation from the Attorney General to prosecute BAE systems for offences relating to overseas corruption.