India Law Journal

Legal Articles

Further Comment on the UK Bribery Act 2010: Guidance and Enforcement

Dr. Linda S. Spedding provides an analysis on the enforcement of the UK Bribery Act, 2010 in her series of articles on this legislation for India Law Journal.

Introductory Remarks

Over many years, efforts have been made in fighting the growing problem of corruption, especially by multinational corporations including a task force of the United Nations studying the issue since 1976, the Organisation for Economic Co-operation and Development publishing its guides and the International Chamber of Commerce preparing an anti-corruption code. Meanwhile the competent committee of the US Congress imposed new norms of international behaviour through the enactment of the US Foreign Corrupt Practices Act (FCPA).

Ministry of Justice Guidance

As has been mentioned in earlier articles, the Bribery Act 2010 (the Act), which came into force on 1st July 2011, was the UK Government's latest attempt to regulate what is and what is not acceptable in the context of bribery and corruption. Shortly before the introduction of the Act, the Government published its Adequate Procedures Guidance (referred to further below).

To recap, the Act introduced the offence of commercial organisations failing to prevent bribery (Section 7). The only defence to the offence is to show that "adequate procedures" are in place to prevent bribery (Section 7.2). Moreover the act of bribery no longer needs to be defined by monetary favours. Gifts, favours to family and friends and even a charitable donation could all fall within the definition of bribery under the Act. It should be understood that the Act is not a retrospective legislation and therefore any offences committed before the Act came into force in July 2011 will still be dealt with by the existing legislation in force at the time of the offence. The effect of the legislation is to abolish existing anti-bribery laws (the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916). It introduced the following offences:

A general offence of bribing another person;

A general offence of accepting a bribe;

A discrete offence of bribing a foreign public official; and

A new offence applicable to commercial organisations of failing to prevent bribery by persons associated with that organisation acting in the course of its business.

Penalties for committing an offence include up to 10 years in prison and/or an unlimited fine.

Since 1^st July, therefore, the Authorities have been able to enforce the Act against both individuals and businesses. However, there is still confusion about the implications of the new legislation and its repercussions for individuals and businesses, large or small. As a result various forms of guidance have been published by relevant bodies. For instance after months of speculation and delay the UK Ministry of Justice (MOJ) published its guidance, outlining the procedures which businesses can put into place to prevent persons associated with them from giving bribes and paving the way for the Act to be implemented. It explains what “adequate procedures” are for the purposes of the defence contained within it. Whereas knowledge of the full guidance document is vital – it sets out enforcement Principles and gives practical examples – the MOJ has also published a "quick start guide" to assist smaller organisations, specifically Small and Medium Sized enterprises (SMEs) to understand the basics.

Moreover while various comments were made to reassure about the overall objective of the legislation to prioritise the activities of larger organisations, it will be discussed in later articles that on the ground risk assessment is also very important for SMEs in High Risk areas. Other guidance has also been published as regards the implementation of the Act, such as that published by Transparency International (referred to below) – intended to assist more generally - and the British Banking Association – intended to be more sector specific.
The MOJ guidance set out six principles, namely:-

Proportionate procedures;

Top-level commitment

Risk assessment;

Due diligence;

Communication/training; and

Monitoring and review.

Whistlelowing

While the Guidance set out six procedural principles required to prevent bribery the need for whistleblowing procedures has featured in three of the principles

Principle 1

Proportionate Procedures includes the need for 'speak up' or 'whistleblowing' procedures.

Principle 2

Top level commitment includes protection and procedures for whistleblowing.

Principle 5

Communication includes establishing secure, confidential, accessible whistleblowing procedures for internal or external parties and protection for those reporting concerns.

The requirement to have effective whistleblowing procedures in place in compliance with the Act has been an important feature of implementation and enforcement. As a result various organisations have developed software, to work alongside their reporting service to enable client staff to report or seek advice on the offer or receipt of corporate gifts and hospitality.

The benefits of using an independent software system are highlighted in the Transparency International guidance as follows: - "It could be decided that greater confidence would be provided to employees if the whistleblowing channel were to be provided by an independent provider appointed by the company".

Transparency International Guidance

Transparency International (TI) is a global organisation that has participated in the fight against corruption for many years and produced guidelines in the interests of transparency. It is interesting to note that the term “transparency” has often been used generally as a synonym for the absence of corruption and considered a solution against corruption in so far as corruption involves misuse of power including the misuse of public office for private gain. TI in the UK advised the Government on the Act and has published its own good practice guidance. Moreover TI UK’s recent report Corruption in the UK has highlighted concerns in several key national institutions including political parties, parliament, sport, prisons, the media, local government and social housing. TI has published its priorities as being:

Fighting corruption in the UK;

Reducing the UK’s corruption footprint overseas; and

Combating corruption in the international defence and security sector.

TI does this by increasing awareness of corruption, building constructive partnerships with government, the private sector and civil society and developing practical tools to tackle corruption. One of such tools is as follows: Adequate Procedures - Guidance to the UK Bribery Act 2010

Transparency International UK has published comprehensive Guidance on Adequate Procedures under the UK Bribery Act 2010 and one of the key checklists refers to the importance of setting the tone from the leaders of the organisation. It is intended to discuss further aspects of TI and other guidance in the next article.

Checklist: tone from the top

There is a public policy of zero tolerance of bribery.

The policy of zero tolerance of bribery has been formally approved by the board or equivalent body.

The company has a definition of what it means by bribery.

The definition is comprehensive and is consistent with the Bribery Act and other relevant legislation.

The company has a high level public statement such as a Corporate Values statement which includes a commitment to business integrity.

The company has a Code of Conduct or equivalent policy document which includes an explicit statement of the no-bribes policy.

The board of directors or equivalent body has formally approved the programme.

The board of directors or equivalent body provides oversight to the programme.

Board members have received written guidance on their responsibilities related to the programme including the expectations for their own integrity.

There is a procedure for dealing with breaches of the programme by directors.

The board is knowledgeable about the programme.

Anti-bribery is a standing item on the board agenda.

The board receives regular reports on the implementation of the programme.

The Chief Executive is responsible for ensuring that the programme is carried out consistently with clear lines of authority.

A senior manager has responsibility for implementing the programme.

A project manager has responsibility for the detailed implementation of the programme.

Unambiguous responsibility and authority is assigned to managers for carrying out the programme.

The Chairman and Chief Executive Officer demonstrate visible and active commitment to implementation of the programme.

The board and senior management provide an example for transparency and integrity through their own behaviour.

There is a policy for the company to be consistent with all relevant anti-bribery laws in all the jurisdictions in which the company transacts its business.

There is a procedure to ensure the programme is consistent with all relevant anti-bribery laws in all the jurisdictions in which the company transacts its business.

The board and senior management are familiar with the provisions and requirement s of the Bribery Act.

The company or its legal adviser maintains a register of anti-bribery laws and monitors changes law and court decisions.

Enforcement of the Bribery Act

Since the Act only applies to conduct post July 2011 evidently only one case has been reported in the UK so far which was reported as follows:-

http://www.independent.co.uk/news/uk/crime/court-clerk-jailed-for-taking-bribes-6264615.html

A court clerk has become the first person to be jailed under the Bribery Act when he was sentenced to six years yesterday.

"Munir Patel, 22, from Dagenham in East London, took £500 to avoid putting details of a traffic summons on a court database while he was working at Redbridge magistrates' court in August. He admitted one count of bribery but the prosecution at Southwark Crown Court believes he earned at least £20,000 by helping 53 offenders.

The court heard how he used his position to tamper with the court system so their cases would effectively be dropped.

He was given a three-year prison term for bribery and ordered to serve six years concurrently for misconduct in a public office.

Judge Alistair McCreath said: "A justice system in which officials are prepared to take bribes in order to allow offenders to escape the proper consequences of their offending is inherently corrupt."

Meanwhile clearly more concerted or coordinated efforts appear to be being made to use available legislation from the US in particular to add strength in relevant international cases Indeed cooperation between US and UK anti-corruption authorities have continued in 2011. For example in relation to the high interest case of News International, it has been reported in the Guardian Newspaper as follows:

http://www.guardian.co.uk/media/2012/feb/13/news-corporation-us-inquiry-sun

"It is also understood that the US Securities and Exchange Commission (SEC) is conducting its own inquiries. The SEC takes an interest in cases where false financial information has been provided – in the case of News International, the use of false names in company records and accounts to disguise the recipients of bribes from journalists could fall into that category.

Koehler said the FCPA inquiry was likely to consider whether any News Corp executives were culpable. "The Department of Justice and SEC wouldn't be doing their job if they didn't ask what the executive officers of the company knew about corruption and whether they authorised it, or did anything to stop it.

The scale of any penalties that flow from the FCPA investigation would be based on a calculation of how much benefit the company derived from any corruption. Against that, mitigating factors would be taken into account such as the extent of co-operation given to the investigating authorities by the company…..The costs of an FCPA prosecution can be severe. The largest fine in FCPA history was imposed in 2008 against Siemens for $800m (£508m), while the heaviest prison term was handed out last October to Joel Esquenazi, who is now serving 15 years in jail for bribery of telecoms officials in Haiti."

Concluding Comments

The Bribery Act affects corporations that conduct all or part of their business in the UK. The MOJ Guidance states that the UK Government will take a "common sense approach" to jurisdictions and "would not expect" a mere listing on the London Stock Exchange or the presence of a subsidiary in the UK automatically to bring a company within the jurisdiction of the UK courts". However the Director of the enforcement body in the UK, the SFO (referred to in previous articles) has warned that the SFO will take a "wide view of jurisdiction" and will not be impressed by “overly technical interpretations” of the Act crafted or designed to evade the UK’s jurisdiction. Indeed, it has been reported that he has mentioned that the SFO is actively seeking cases in which foreign corporations have disadvantaged “ethical” UK companies through corrupt activity in other countries.

DR. LINDA S. SPEDDING is an International Lawyer and Advisor.