The Bribery Act 2010 will come into force on 1 July 2011 and codifies offences of offering bribes (to be found in section 1 of the Act), receiving bribes (section 2), bribery of foreign public officials (section 6) and, most controversially of all, the failure by a commercial organisation to prevent a bribe being paid on its behalf (section 7). However, if an organisation can prove that it had “adequate procedures” in place to prevent persons associated with it from being involved with bribery then this will form the basis of a defence to the section 7 offence. On 30 March 2011 the Ministry Justice published guidance on just what “adequate procedures” might be.
This note will take a look at the key offences under the new Act (which carry penalties of up to 10 years imprisonment and unlimited fines), how the defence to section 7 is likely to work in the light of the new guidance, and the circumstances in which prosecutions are likely to be brought against both individuals and organisations under this new regime.
Section 1
Bribing another person: a person (“P”) is guilty of an offence if either of the following cases applies.
Case 1 is where P offers, promises or gives a financial or other advantage to another person, and P intends the advantage either 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. Note that it does not matter whether the person to whom the advantage is offered, promised or given is the same person as the person who is to perform the function or activity concerned.
Case 2 is where P offers, promises or gives a financial or other advantage to another person, and P knows or believes that the acceptance of the advantage would itself constitute the improper performance of a relevant function or activity.
In cases 1 and 2 it does not matter whether the advantage is offered, promised or given by P directly or through a third party.
The guidance indicates that “improper performance” of a function is performance which amounts to a breach of an expectation that the person will act in good faith, impartially, or in accordance with a position of trust. Functions in both the public and private sectors are included. The test is what a reasonable person in the UK would expect, and where the function is not subject to UK law then local custom or practice will nonetheless be disregarded unless the activity which otherwise amounts to “improper performance” is permitted or required by local written law contained in a written constitution, legislation or judicial decision. Hence, if local law in a foreign jurisdiction neither expressly permits or requires what, in essence, is bribery, then the fact that that local law does not expressly outlaw it will mean that the activity is caught under the new UK Act.
Offers of hospitality and similar benefits could be caught under section 1, but only if P intends it to induce an improper performance of a function or if P knows or believes that the acceptance of the hospitality would itself constitute improper performance (for example where P knows that the person to whom he is giving the hospitality is specifically prevented from accepting it by the rules attaching to his job).
Section 2
Accepting a bribe: a person (“R”) is guilty of an offence if any of the following cases applies.
Case 3 is where R requests, agrees to receive or accepts a financial or other advantage intending that, in consequence, a relevant function or activity should be performed improperly (whether by R or another person).
Case 4 is where R requests, agrees to receive or accepts a financial or other advantage, and the request, agreement or acceptance itself constitutes the improper performance by R of a relevant function or activity.
Case 5 is where R requests, agrees to receive or accepts a financial or other advantage as a reward for the improper performance (whether by R or another person) of a relevant function or activity.
Case 6 is where, in anticipation of or in consequence of R requesting, agreeing to receive or accepting a financial or other advantage, a relevant function or activity is performed improperly, either by R, or by another person at R’s request or with R’s assent or acquiescence.
In cases 3 to 6 it does not matter whether R requests, agrees to receive or accepts the advantage directly or through a third party, or whether the advantage is for the benefit of R or another person. In cases 4 to 6 it does not matter whether R knows or believes that the performance of the function or activity is improper. Finally, in case 6, where a person other than R is performing the function or activity, it also does not matter whether that person knows or believes that the performance of the function or activity is improper.
Section 6
Bribery of foreign public officials: a person (“P”) who bribes a foreign public official (“F”) is guilty of an offence if P’s intention is to influence F in F’s capacity as a foreign public official. P must also intend to obtain or retain business or an advantage in the conduct of business. P bribes F if, and only if, P offers promises or gives, directly or through a third party, any financial or other advantage to F or to another person at F’s request or with F’s assent or acquiescence, and F is neither permitted nor required by the written law applicable to F to be influenced in F’s capacity as a foreign public official by the offer, promise or gift.
“Influencing F in F’s capacity as a foreign public official” means influencing F in the performance of F’s functions as an official, and includes any omission to exercise those functions, and any use of F’s position as an official, even if not within F’s authority. The guidance indicates that where, for example, local planning law permits or requires a company doing business in a jurisdiction to put some additional investment into the local economy this is unlikely to trigger a section 6 offence unless the additional investment would advantage the official himself and the local law is silent on the matter, in which case the UK prosecution authorities might consider prosecuting in the public interest.
Section 7
Failure of commercial organisations to prevent bribery: a relevant commercial organisation (“C”) is guilty of an offence under this section if a person (“A”) associated with C bribes another person intending either to obtain or retain business for C, or to obtain or retain an advantage in the conduct of business for C. For the purposes of this section, A bribes another person if A is, or would be, guilty of an offence under section 1 or 6 (whether or not A has been prosecuted for such an offence).
A “relevant commercial organisation” is a body or partnership incorporated or formed in the UK (regardless of where it carries on business) or an incorporated body or partnership (regardless of where it is incorporated or formed) which carries on business or part of a business in the UK. Whether or not an organisation carries on business in the UK in any particular case would be a matter to be determined by the court, but the new guidance suggests that merely being listed on the London Stock Exchange would not automatically mean that the company “carried on business in the UK”. In addition, the fact that an organisation has a UK subsidiary would again not automatically mean that it carried on business in the UK for the purposes of section 7 since a subsidiary may act independently from its parent. Much will turn on the facts of each case.
A person (“A” above) is “associated” with a commercial organisation if he, she or it performs services for on behalf of the organisation. This can cover employees, agents, subsidiaries, contractors, suppliers and subcontractors. The guidance acknowledges that an organisation is likely only to have control over its relationship with persons with whom it has a contract and that it may not even know the identity of its subcontractors or that they are performing services ultimately on its behalf. However, all the guidance suggests is that the organisation concerned imposes anti-bribery procedures on its contractor (presumably by way of the contract) and requires the contractor to adopt a similar approach with the next party in the supply chain. As a result “anti-bribery clauses” are likely to become far more common in English law commercial contracts.
It is a defence to the section 7 offence for C to prove that C had in place “adequate procedures” designed to prevent persons associated with C from undertaking such conduct. The newly published guidance sets out six principles which should inform those procedures:
Principle 1: Proportionate procedures.
A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.
The nature of the risks faced by an organisation will be ascertained by a risk assessment exercise and will depend on factors such as its size, the nature and complexity of its business and the type and nature of persons associated with it.
Principle 2: Top-level commitment.
The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.
The guidance makes clear that top management must be involved with developing anti-bribery procedures and communicating to the rest of the organisation its anti-bribery stance.
Principle 3: Risk assessment.
The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.
The guidance makes it clear that the risk assessment exercise needs to consider elements such as country risks, sectoral risks, transaction risk, business opportunity risk and business partnership risk.
Principle 4: Due diligence.
The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.
The guidance suggests that an organisation’s monitoring of associated persons should continue throughout the business relationship. Organisations should also carry out due diligence in relation to their own employees who are in a position of vulnerability in relation to the potential for bribery.
Principle 5: Communication (including training)
The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.
The guidance indicates that internal communication will include a statement of policies, and external communication may include codes of conduct including information on the organisation’s procedures, controls and sanctions. Employees must be trained, along with associated persons where this is proportionate, and such training should be continuous, regularly monitored and evaluated.
Principal 6: Monitoring and review.
The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.
The guidance acknowledges that bribery risks will change over time and so policies and procedures should be kept under constant review. Emphasis is placed on financial control mechanisms. The results of reviews should be supplied to top management and an organisation should also consider external appraisal of its policies and procedures.
Prosecution
In England and Wales the main prosecution authority with responsibility for enforcing the Bribery Act is the Serious Fraud Office (SFO). The new offences under the Act are wide and, although there is the prescribed defence to the section 7 offence, generally prosecutors seem to have a particularly wide discretion which they must administer if injustices are to be avoided. As a result the SFO and the Director of Public Prosecutions issued guidance 30 March 2011 on bribery prosecutions under the new Act.
The general rules relating to most criminal prosecutions will still apply; there must be sufficient evidence of the offence and it must be in the public interest to bring the proceedings. Current guidance indicates that it is unlikely the prosecution will be in the public interest if the court is likely to impose only a nominal penalty, the suspect has already been subject to appropriate regulatory proceedings or a relevant civil penalty, or the offence was committed as a result of a genuine mistake or misunderstanding. But in addition the new bribery prosecution guidance suggests that prosecutions will not generally be brought where the harm caused is minor and resulted from a single incident, or the organisation involved adopts a genuinely proactive approach involving self reporting and remedial action. Interestingly the new guidance also suggests that if an organisation has sound anticorruption procedures, not only may this be a defence against a charge under section 7 but it may also lead the prosecutor to conclude the prosecution would not, in any event, be in the public interest. Such a stance reinforces the importance of commercial organisations adopting new and appropriate compliance procedures. However, the new prosecution guidance makes the point that under section 7 the defendant organisation has to prove on a balance of probabilities that its anti-bribery procedures were “adequate”; if the matter goes to court then there is an onus on the organisation to satisfy the jury that its procedures were sufficiently robust.
Conclusions
By and large sections 1, 2 and 6 restate the existing criminal law in respect to bribery and corruption. Section 7, by contrast, exposes a commercial organisation to unlimited fines for matters which may take place overseas without its knowledge. The defence is to persuade the authorities and, ultimately if necessary, a jury, that the organisation has procedures designed to prevent bribery on its behalf and those procedures are “adequate”.
A key element in all of the offences is intention; in essence, along with the giving or taking of money or other advantage there must be an intention that someone somewhere will behave “improperly”. But again section 7 departs from the usual approach here; it is not the intention of the commercial organisation (“C”) to induce improper behaviour that is required, but merely the intention of the person offering the bribe (“A”). Once that intention on A’s part is proved, the fact that C had no idea what was going on is irrelevant; C is liable for a very serious criminal offence unless it can prove it had adequate procedures designed to prevent such activities.
Given the extraterritorial reach of the new UK Act, companies who deal internationally will need to carefully assess their risks based, largely, on where they do business in the world and the types of people they do business with and through. Contracts will need to be more carefully drawn than in the past, and documented procedures will need to be put in place. Lawyers and compliance officers will have plenty to do, but how this affects the competitiveness of UK plc against those countries with less robust anti-bribery laws is perhaps another question entirely.
The new guidance from the Ministry of Justice is at http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf.
© Taveners 2011