Ques: : The UK Bribery Act, 2010 was introduced by the UK Ministry of Justice and will come into effect from April, 2011. Can you explain as to how would this new piece of legislation enable prosecutors to respond more effectively to bribery in the United Kingdom?

Ans: This new piece of legislation means that there will be, subject to the final guidance, passage and implementation, a specific Act of Parliament in the UK relating to bribery offences that ought to achieve easier prosecutions for the prosecuting or enforcement agency, the Serious Fraud Office (SFO). The recent developments have demonstrated a major shift in that the SFO has shown more willingness to enforce laws already in place, while the new legislation makes it easier to prosecute companies and individuals for corruption. Moreover, the SFO has adopted a new strategy based on a carrot and stick approach whereby companies that self-report their corruption concerns are offered the prospect of a quick investigation and a plea bargain. Those that do not cooperate must face the full force of the law. This approach has led to some criticism from the judiciary and anti-corruption campaigners in view of the potential for plea bargains and willingness to settle defeating the overall objective for the UK to become a leader in anti-bribery and corruption regimes.

This is an Act that effectively replaces a mixture of other legislation so it is going to be easier to administer.  In addition it brings the OECD Convention on Combating Bribery of Foreign Public Officials into the UK law. Since 2002 it has been an offence for UK citizens and businesses to bribe overseas, even if none of the Activity takes place in the UK.  Businesses have been sanctioned with multi-million pound fines and individuals have been imprisoned. However, the 2010 legislation raises the platform considerably and must be taken very seriously in terms of business risk management.  The legislation covers the practice of offering, promising or giving a bribe, as well as accepting, soliciting or agreeing to receive an illicit payment. Its provisions cover foreign public officials and exposure to prosecution for failed policies, systems and controls – classed as operational risks within banks and financial firms. According to many commentators, the new bribery legislation will make it far easier for companies and senior management to be prosecuted where bribes have been offered, paid or received.

Ques: The test to determine bribery as per this Act is to determine whether the bribe was paid with the intention of gaining business advantage for business in the UK. Do you feel that in the light of this, if socializing with clients could be perceived as an attempt to win business opportunities thereby considering to be an act of bribery?

Ans: : As mentioned, we currently do not have the full guidance notes which are key to this legislation and its implementation: moreover we do not know how far the provisions may be watered down to achieve successful passage. As we understand it to date socialising with clients is not in itself likely to be seen as an act of bribery as entertaining a client in an attempt to win business opportunities is not an offence. There has to be an element of impropriety. In essence there are two strands to the offence – first there has to be a financial or other advantage for someone. Secondly, there has to be someone who performs a relevant function or Activity improperly. Nevertheless the payment and the improper Act do not have to be directly linked. To slightly paraphrase the key section of the Act:

-It is an offence where someone offers, promises or gives a financial or other advantage to another person, and he intends the advantage to induce a person to perform improperly a relevant function or Activity, or to reward a person for the improper performance of such a function or Activity.

-It is also an offence where someone offers, promises or gives a financial or other advantage to another person, and he knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or Activity.

-The person receiving the bribe does not have to be the same person as the person whose performance is improper.

So taking clients out to dinner is not in itself an offence – especially if the company doing the entertaining has to go through a procurement process to get work from those clients or the real decision makers are not the people in the client company who are being entertained.  On the other hand, paying for a senior government official in India to fly to London for three (3) days at the Olympics in the hope of getting a contract is likely to be seen as disproportionate and could be an offence.  It is significant that international business culture will also be impacted: the giving of gifts in many places is often regarded as a sign of respect for the recipient. During the Bill’s passage through Parliament the Government’s representative did note that “to the extent that reasonable hospitality is a normal part of business, we are not seeking to discourage such practices and that the public interest might not be held served by a prosecution unless…the hospitality was excessive or unreasonable”. This may be helpful as the Act is not intended to criminalise routine business marketing and evidently the reasonableness of a gift or hospitality will be decided by the discretion of the prosecutor. Meanwhile as regards facilitation payments, whereas it seems unlikely that companies will be prosecuted for small one-off payments to expedite routine administrative functions the Act does not include a minimum threshold and are technically made illegal.

Ques: As per this legislation, businesses in the UK face liability for bribes paid by their employees and business partners, wherever in the world that Activity takes place. Isn’t this provision harsh since, the entity may be sued even if it knew nothing about the bribe or had little practical control over the person paying the bribe?

Ans: The objective is to curb bribery anywhere in the world in line with the OECD Convention.  And it is probably true to say that bribery is more of a problem – and a way of life – for business outside the UK than within the country.  The US Foreign Corrupt Practices Act already has international reach so in that sense this is not new. On the other hand, the new UK legislation is even wider than the US Foreign Corrupt Practices Act, since it has created a zero tolerance regime to ‘facilitation payments’ and because it covers business-to-business transactions as well as business transactions with government or state-owned bodies. As a further deterrent, the rules also raises the maximum jail term for bribery from seven years to 10 years. A company convicted of ‘negligently failing to prevent bribery’ would face an unlimited fine. Whereas it has been noted that the UK has an unimpressive history in the prosecution of corruption cases - and has received criticism in the past from the United Nations and the US for failing to properly address the issue - the new rules would outstrip even the present US laws. It will be more important to consider appropriate processes that should be put in place to prevent or mitigate prosecutions.

Indeed, there are ways of limiting the risk and there is a potential defence in a case of the sort contemplated by this question: it is a defence to show that a company has ‘adequate procedures in place to prevent bribery on its behalf.’  The Government is due to publish Guidance on this topic before the Act is implemented. It has been suggested that organisations should consider the following precautionary measures:

• draft an anti-bribery policy;
• undertake enquiries into new and existing strategic partnerships;
• conduct a risk management assessment;
• undertake a full due diligence check;
• include the anti-bribery policy on the staff handbook;
• ensure that staff are aware of Actions that are prohibited through training;
• clarify what Actions should be taken to take if anyone comes across bribery;
• make clear what disciplinary Actions will follow in the event of a breach of the anti-bribery policy; and
• integrate whistle blowing procedures.

In practice, this is going to mean that British companies will need to have a Code of Conduct in place that sets out detailed procedures for dealing with third parties designed to avoid dealings which can result in an offence being committed by the company’s directors, employees, consultants or agents. Undertaking due diligence on prospective agents and representatives as well as steering clear of known bribe-takers in official positions will need to be covered – and the procedures rigorously enforced by the company. It is also going to be important for companies to have adequate safeguards in their contracts with agents and consultants, designed to prohibit any Actions that might cause an offence and including the right to terminate a contract and, perhaps, the right to  claim damages if an offence is committed by the agent or consultant.

Ques: Do you think that this Act could help tackle the threat that bribery poses to economic progress and development around the world?

Ans: Yes, though in countries where bribery is endemic, it is going to need official action in those countries as well as imposition of similar legislation on an international basis.

Ques: Do you suggest any further changes that could have been introduced in the Act?

Ans: Not so far although there is concern that it should be less harsh and brought into closer alignment with the US Legislation for various reasons particularly relating to competition and global business practices. It should be emphasised that, as mentioned above, for some time both international public and private organisations have demonstrated an increased interest in ethical issues involving business – principally in the fields of economic crime and corruption. The OECD and the International Chamber of Commerce (ICC) are two well known organisations that have been working to combat extortion and bribery within the global marketplace. Businesses should be aware that over 140 countries have signed the UN Convention against Corruption, which criminalises the official solicitation or acceptance of undue advantages in return for official Action or inaction. These initiatives also demonstrate and highlight the gradual agreement on some common, world-wide standards for global business operations, as well as the need to be proactive in dealing with such risks. One way forward, it is submitted, is through the evolution and implementation of sound ethical corporate policies. However, there have been several oppositions regarding this proposed legislation and it would be interested in watching the outcome over the next few months.