As the corporate risk landscape changes, non-UK companies need to update their risk assessment and implement a top-down culture and compliance program against exposure to new legal risks connected with bribery and corruption. Our first series of CSR Law Bulletins look at the issue from three perspectives (that of the corporate legal counsel, the litigator, and the UK). In the final of the series, we provide tips from a UK perspective where the new Bribery Act is a hot topic in business and legal circles.
The UK Act applies to the act of bribery or receiving a bribe. It applies to bribery of private employees and public officials – domestic or foreign. An intention to corrupt need not be shown. Non-UK companies may be exposed.
Be Aware of Who is Included
The Bribery Act applies to any bribery in or involving the UK; also to UK companies and individuals (resident or national) bribing a private employee or official anywhere. Further, it makes any UK company or foreign company, which carries on any business in the UK liable for the actions of "associated persons" anywhere in the world of which it was unaware, unless the company has in place "adequate procedures" (the so-called "Corporate Offense").
An "associated person" is any person providing or performing services on the company's behalf, be it an employee, agent, contractor, supplier or any other person.
Understand Who is Liable
The company will be liable, as may the individuals responsible. If the bribe is authorized, made or acquiesced in by a director or manager who is the "directing mind or will" of the company (i.e., a senior executive officer), the Bribery Act will fault the company itself — not just the individual.
Any senior officer (e.g., director, manager or board secretary) with knowledge of an offense is liable for the offense in the UK. For an overseas offence, any senior officer with a close connection to the UK (nationality or residence) is also liable jointly with the company if the offense was committed with his or her consent or connivance.
Under the "Corporate Offence", a foreign company is liable for the actions of associated persons anywhere in the world if the company carries on a business or part of a business in the UK. There is still some disagreement as to which foreign companies are affected. According to the Ministry of Justice, merely listing stock on a UK stock exchange is not sufficient to create a place of business. But the Serious Fraud Office (the prosecuting authority) appears to be taking a more aggressive line, following more closely the US model that makes the FCPA applicable to any company listed on a US exchange. So for now at least, assume that a foreign company listed in the UK may be subject to the Bribery Act.
Understand the Offenses
The Bribery Act makes it an offense to offer any financial advantage to another person in two cases. First, if the intention is to induce or reward the improper performance of the recipient's duties. Secondly, where the payor knows that accepting such a benefit is improper performance of a relevant duty or activity of the recipient. A function or activity is deemed to be "relevant" if it is a function of a public nature, an activity connected with a business, an activity performed in the course of the person's employment or an activity performed on behalf of a body of persons (whether or not incorporated). It is deemed to be performed improperly if it is performed in breach of "relevant expectation", i.e. in breach of a duty of good faith or a duty to act impartially or in breach of a position of trust. The "reasonable expectations" are the standard in the UK.
Additionally, it is an offence to bribe a "foreign public official" which includes anyone holding a legislative, administrative or judicial position of any kind, whether elected or appointed, of any country outside the UK or any public agency or enterprise of that country, or an official of a public international organization. In the case of a public official, the performance need not be improper, but the benefit must be aimed at obtaining or retaining business. Unlike the US and Canadian law, facilitation payments are illegal under the Bribery Act.
The Act also makes it an offense to accept a bribe.
Application of UK Mores
Any company governed by the Bribery Act is required to disregard local customs unless a payment is permitted or required by the written law of the country in question, namely being in legislation or a written and published judicial decision. Otherwise, the test of what is proper or improper for overseas or UK is the same — what a reasonable person would expect in the UK.
Understand the Penalties
Under the Bribery Act, a company is liable to an unspecified fine and an individual is liable to a fine and/or imprisonment (up to 12 months for minor offenses and up to 10 years on indictment). A fine is likely to be calculated by reference to the benefit obtained, including "disgorgement of profits," which has been the feature of recent US prosecutions.
Since bribery is now a crime in the UK, the benefits obtained are therefore proceeds of crime and liable to forfeiture under the money-laundering laws. The Serious Fraud Office has signaled its intent to use all available laws to recover the proceeds of crime.
Additional penalties potentially include loss of any concession, license or contract obtained as a result of corruption; disqualification from public works under the EU public procurement and various national procurement rules; exposure to other anti-corruption laws; loss of export credit insurance cover and foreclosing on loans; risk of extradition; potential civil claims by competitors who lost out as a result of the corrupt act, class actions and shareholder actions (particularly in the US); and, of course, reputational loss.
If a company self-reports an issue, cooperates with the Serious Fraud Office and is found, on investigation, to have a serious anti-corruption ethos, the issue may be deemed an aberration. In such a case, the Serious Fraud Office may pursue a civil remedy aimed at disgorging the benefits of the corrupt act rather than exercising its option to pursue criminal charges.
The Serious Fraud Office has stated that it will use a wide range of intelligence-gathering techniques, including reports from embassies and local media, whistleblowers, sting operations and the full panoply of white-collar crime surveillance techniques to catch offenders. The richest source of intelligence is likely to be from whistleblowers within companies who suspect that the company is acting corruptly.
Protect Your Company
As tough as the Bribery Act is, it does in the limited case of the so-called "Corporate Offense" provide a solid defense for companies that don't know about the bribery and take the issue seriously. As mentioned above, any UK business or any foreign business conducting any business in the UK is liable if an "associated person" bribes another person (public or private) in the course of its business. It is an absolute offense, but it carries an absolute defense — that the organization put in place adequate procedures to prevent this and the offense occurred without the organization's knowledge or acquiescence. The fact that the organization did not know of the actions of the associated person is not a defense if the organization does not have adequate procedures in place.
The headline-making cases against executives from a number of high-profile, multinational organizations, and the jaw-dropping settlements of $560 million and $800 million by Halliburton and Siemens for their respective breaches of the US's FCPA have underscored that enforcement authorities worldwide are now taking corruption seriously.
Most businesses with international activities are already accustomed to dealing with the FCPA and have created enterprise-wide systems to manage the risks posed by international corruption. The UK's Bribery Act poses new challenges by creating risks that are alarmingly open-ended.
The message to all companies is to conduct a risk assessment and put in place a top-down culture and compliance program against bribery and corruption to avoid potential liability of criminal prosecution.