UK Bribery Act 2010 to Come into Force on 1 July 2011

Transcription

1 UK Bribery Act 2010 to Come into Force on 1 July 2011 The UK Ministry of Justice has issued, under section 9 of the Bribery Act 2010 ( Act ), its Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing ( Guidance ). The Act will come into force on 1 July As discussed in our Client Update, Strict Liability for Failing to Prevent Bribery (April 2010), the Act makes organisations liable for failure to prevent bribery. Organisations which carry on business or part of a business in the UK will be caught under the Act s long-arm jurisdiction even if they are incorporated outside the UK and even if the acts of bribery were committed in another jurisdiction. This Update takes a look at the Guidance. The Offence of Failing to Prevent Bribery Organisation responsible for associates acts The relevant provision of the Act is section 7, which provides that a commercial organisation is guilty of an offence if a person associated with it bribes another person to obtain or retain business for it, or to obtain or retain an advantage in the conduct of business for it. It should be highlighted that the offence is committed regardless of whether such bribery was sanctioned or even known by the relevant managerial staff of the organisation. Long-arm jurisdiction of the Act Section 7 catches any commercial organisation that is incorporated or formed in the UK regardless of where it does business. It also catches any commercial organisation that carries on business, or part of a business, anywhere in the UK regardless of where it is formed or incorporated. The Act does not specify what it means to carry on a business in the UK, and this is a matter that will be decided by the UK courts taking into account the particular facts of individual cases W ongpar tnership LLP (U EN : T08LL0003B) i s a l i mited liability law partnership registered in Singapore under the Limited Li abi l i ty Par tner shi ps Act (Chapter 1 63A).

2 The Guidance explains, however, that merely having a subsidiary in the UK does not necessarily mean that the parent company will be seen as doing business in the UK, since a subsidiary may act independently of its parent or other group companies. Similarly, merely being listed on the London Stock Exchange in itself would not amount to doing business in the UK. Liability for the Acts of an Associate Who is an associate A person is associated with the organisation so long as it performs services for or on its behalf, and the capacity in which these services are performed does not matter. The Act cites as examples employees, subsidiaries, or agents as being possible associates. It also makes clear that this is a question of fact that must be determined with reference to all the relevant circumstances. Contractors and suppliers The Guidance provides a little more information as to how this wide definition will be considered. It explains that contractors could be associated persons to the extent that they are performing services for and on behalf of the commercial organisation. Also, where a supplier can properly be said to be performing services for the commercial organisation rather than simply acting as a seller of goods, it may also be an associated person. Joint ventures On the other hand, the Guidance also explains that the mere existence of an incorporated joint venture between a commercial organisation and another party does not necessarily make the joint venture company an associated person for the purposes of the Act. This is because such a joint venture company would generally be acting for its own benefit and purpose. Where the joint venture is carried out by way of a partnership, however, then such a structure may give rise to liability if, for example, an agent for the joint venture were to give a bribe in order to advance the joint venture s business. Much will depend on the circumstances of the case

3 Intention is an important factor The Guidance notes that the associate must have intended to obtain or retain business or an advantage in the conduct of business for the organisation. Intention will be a question of fact. It will not generally be sufficient to show that the organisation benefitted indirectly from the bribe. Such an indirect benefit might, for example, arise where a bribe brings in a business contract to a subsidiary and as a result of profits made by the subsidiary, the parent company benefits via the distribution of dividends by the subsidiary to it. On the other hand, the requisite intention will be shown if an employee of a subsidiary has paid a bribe expressly with the aim that it result in a contract for the parent company. All Forms of Bribery Are Caught Facilitation payments also caught What may prove difficult for organisations to control is that the types of bribery caught by the Act are not confined to large or unusual transactions, but may be acts associated with mundane, everyday business to facilitate routine government action in that country. Such facilitation payments are, in some jurisdictions, part and parcel of the business culture. The Guidance explains that such payments have a corrosive effect and, while the solution will require the collaboration of multiple parties such as governments, international bodies, and other organisations, businesses also have a role to play in eradicating this culture. Prosecutorial discretion will be exercised, however, as to prosecutions in respect of such payments. Programme to Prevent Bribery Procedures that provide a safe harbour The Act specifically provides a safe harbour for organisations that can show that they had in place adequate procedures designed to prevent persons associated with them from undertaking bribery. Companies with corporate interests in the UK or that carry on business there should, as a part of their own corporate governance and risk management, consider how best such procedures may be put in place

4 Solutions must be tailored to needs The Guidance lists six principles that are intended to give guidance as to what procedures would be regarded as adequate for the purposes of the Act. These are summarised below. What is key, however, is that each organisation needs to examine its own circumstances and tailor solutions appropriate to the risks that it faces. The risks may be different for different jurisdictions, or different areas of business. There is no off-the-shelf one-size-fits-all solution that can be used. Principle 1: Proportionate Procedures Proportionality of measures An organisation s procedures should be proportionate to the bribery risks it faces and to the nature, scale and complexity of its activities. The procedures should also be clear, practical, accessible, effectively implemented and enforced. Examples of such procedures are: Conducting due diligence of existing or prospective associated persons; Having in place financial and commercial controls such as adequate bookkeeping, auditing and approval of expenditure; and Enforcement of the rules with disciplinary processes and sanctions for any breaches. Principle 2: Top-Level Commitment Visible commitment from management The organisation s top-level management should be committed to preventing bribery by persons associated with it, and should foster a culture within the organisation in which bribery is never acceptable. Hence, top-management can take the following steps, for example, to demonstrate their commitment: A formal statement by top-level management can be a very effective means of making this commitment clear; They should also show involvement and leadership on key measures such as a code of conduct and in raising awareness and encouraging transparent dialogue on anti-bribery policies throughout the organisation; and They should also provide general oversight of breaches of procedures

5 Principle 3: Risk Assessment Appropriate and periodic risk assessments The organisation should carry out periodic risk assessments of its exposure to potential risks of bribery on its behalf by persons associated with it. Such risk assessment should be documented. It should cover both external and internal risks. External risks can be categorised into five broad groups: country, sectoral, transactional, business opportunity related and business partnership related. Internal risks include having a bonus culture that rewards excessive risk taking, or having a lack of clear financial controls. Appropriate resources should be identified and dedicated to help ascertain the risks. Procedures that address how these risks can mutually abet and increase the risk of bribery should also be a part of the process. Principle 4: Due Diligence Continued monitoring and due diligence The organisation should engage in due diligence of persons who perform or will perform services for or on its behalf, in order to mitigate identified bribery risks. In situations of high risk, such due diligence may need to involve continued appraisal and monitoring. The extent of due diligence carried out should also be adapted to the post concerned; lower risk posts may not require due diligence. Principle 5: Communication and Training Training and informing employees The organisation should ensure that its bribery prevention policies and procedures are properly communicated, and that training in such policies and procedures are carried out. Another important aspect of internal communications is the establishment of a secure, confidential and accessible means for internal or external parties to raise concerns about bribery on the part of associated persons, to provide suggestions for improvement of bribery prevention procedures and controls, and for requesting advice

6 Principle 6: Monitoring and Review Regular internal reviews The organisation should monitor and review procedures designed to prevent bribery by persons associated with it and should make improvements where necessary. Such procedures can involve staff surveys and questionnaires, formal periodic reviews and reports for top level management, or obtaining some form of external verification or assurance of the effectiveness of anti-bribery procedures. If y ou would like information on this or any other area of law, you may wish to contact the partner at WongPartnership that you normally deal with or contact any of the following partners: JOY TAN Deputy Head Commercial & Corporate Disputes Practice Joint Head Corporate Governance & Compliance Practice DID: joy.tan@wongpartnership.com ANNABELLE Y IP Joint Head Corporate Governance & Compliance Practice DID: annabelle.yip@wongpartnership.com Website: Sin gapore Financial Services / Corporate / Intellectual Property One George Street #20-01 Singapore Tel: Fax: Litigation & Dispute Resolution / Tax 63 Market Street #02-01 Singapore Tel Fax Ch ina Shanghai Representative Office Unit 5006 Raffles City Office Tower 268 Xizang Road Central Shanghai, PRC Tel: Fax: Middle East A bu Dhabi Branch A l Bateen Towers Building C3 Office (P1) P.O. Box N o A bu Dhabi, UAE Tel: Fax: Licensed by the QFCA Office A mwal Tower, West Bay P.O. Box N o Doha, Qatar Tel: Fax: