The Delayed Implementation of The UK Bribery Act 2010: Efforts To Get It Right

Transcription

1 The Delayed Implementation of The UK Bribery Act 2010: Efforts To Get It Right John Rupp, Robert Amaee, and Alexandra Melia, Covington & Burling LLP By any standard, the UK Bribery Act 2010 ( Bribery Act ) has been a long time in the making. The Bribery Act s arrival on the statute book on 8 April 2010 was preceded by twelve years of intense effort on the part of the Law Commission and legislators to transform the UK s complex Victorian bribery and corruption laws into a more readily understandable and enforceable statutory package. 1 Yet, the Bribery Act s passage from statute book into practice has been beset by difficulty. The Bribery Act initially was expected to enter into force in October Prompted by concern from the business community, the UK Government announced a consultation on the guidance the Government is obliged to issue to assist commercial organisations prevent bribes being paid on their behalf. This initially meant that the Bribery Act s implementation was pushed back to April In mid January 2011, it became clear that the April 2011 in force date for the Bribery Act was looking very unlikely. It was revealed at that time that the Bribery Act would be examined as part of the UK Government s growth review. The review is tasked with attempting to stimulate economic growth by cutting the red tape faced by UK businesses. Then, on 15 February 2011, the Minister of Justice Kenneth Clarke stated in response to a series of written parliamentary questions that there would be a further delay in publication of the mandated guidance as well as in full implementation of the Bribery Act. While the Government has sought to dispel any suggestion that the delay in implementing the Bribery Act is part of an effort to water down the Bribery Act s substantive provisions, news of the latest postponement has fuelled criticism of the UK Government s commitment to fighting corruption. The criticism has emanated from, among others, respected organisations such as the Organisation for Economic Cooperation and Development (OECD) and Transparency International. An Impediment to UK Business Overseas? There is no doubt that business leaders, legislators and anti corruption campaigners support the Bribery Act s core aim of eradicating bribery. There is, at the same time, concern among the UK s business community that some of Bribery Act s broadly drafted provisions could have a detrimental effect on the competitiveness of British business overseas. John Cridland, the new Head of the Confederation of British Industry ( CBI ), crystallised those concerns when speaking on BBC Radio 4 s Today programme he recently stated that [e]xporters won t be able to hoover up the demand in developing countries like Asia if the new Bribery Act pre This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. Bloomberg Finance L.P. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.

2 vents them from knowing [on] which side of the law they stand. Within Government, some have been vocal about the perception that the Bribery Act was rushed through Parliament without its potential impact on British businesses receiving sufficient scrutiny. The Bribery Act did pass into law at great speed in the final days of the last Parliament; however, the Bribery Bill was extensively debated and assessed both by a Joint Committee in its draft state and by the Houses of Commons and Lords during its passage through Parliament. Another criticism of the Bribery Act has been that it leaves too much discretion to officials at the UK Serious Fraud Office ( SFO ) to resolve questions concerning the jurisdictional reach of the Bribery Act as well as with respect to some of the Bribery Act s substantive provisions. As Mr. Cridland has noted, [t]he problem is, the [Bribery Act s] not fit for purpose. I m afraid none of the definitions have been properly defined. In particular, the section 6 offence of bribing foreign public officials and the new section 7 corporate offence of failing to prevent bribery have been accused of being too wide in scope and involving novel concepts that the Bribery Act fails adequately to define. Section 6 Bribery of Foreign Public Officials A person will be liable under section 6 of the Bribery Act if he or she offers, promises or gives a financial or other advantage to a foreign public official with the intention of influencing that official and obtaining or retaining business or a business advantage. Businesses are concerned that this offence can be made out without any requirement to show that the person trying to win the business had a corrupt intent or intended to induce the foreign public official to perform his or her function improperly as is required for the section 1 offence of bribing another person and the section 2 offence of being bribed and that many legitimate and routine interactions with foreign public officials could amount to technical breaches of the Bribery Act. Section 7 Failure of Commercial Organisations To Prevent Bribery Pursuant to the new corporate offence of failing to prevent bribery, a UK registered company or a non UK registered company that carries on a business, or part of a business, in any part of the United Kingdom having no knowledge of or involvement in bribery could find itself having to explain to a UK prosecutor how a rogue employee or associated person in a remote part of the world could have paid a particular bribe. If facing such a charge, the company would have to convince the prosecutor and, in the worst case, a court that the anticorruption policy and procedures that it had developed and implemented were adequate. The stakes in that event would be high since companies with insufficiently robust policies and procedures would face an unlimited fine and substantial reputational harm. 2 The Bribery Act stipulates that a person is associated with a company if that person performs services for or on the company s behalf. 3 The Bribery Act cites employees, agents and subsidiaries as examples of associated persons. While there is a rebuttable presumption that employees will be performing services for or on behalf of their employer, the Bribery Act goes on to provide that, generally, all the relevant circumstances and not just the nature of the relationship must be considered when deciding who performs a service for or on behalf of a company. 4 The concept of associated person in the Bribery Act certainly gives UK prosecutors wide discretion in deciding whether a company should be held to account for the conduct of those who represent it. It should be noted though that for a prosecution to succeed, the errant associated person must be shown to have engaged in the bribery with the intention of obtaining or retaining business or an ad

3 vantage in the conduct of business for the company on whose behalf it is performing the services. In practice this is likely to limit the upward flow of liability. In addition, the test for whether a company is carr[ying] on a business, or part of a business, in any part of the United Kingdom is not defined or circumscribed in the Bribery Act itself. 5 Rather, it has been left according to the Bribery Act s legislative history to the judgment of prosecutors and the UK courts using their common sense to grapple with the pertinent facts on a case by case basis. It is hardly surprising that many in the UK s business community have not been entirely comfortable with a we ll define it as we go approach to criminal liability. What Will the Guidance Address When It Is Published? The Bribery Act obliges the UK Government, through the Secretary of State, to publish guidance on procedures that companies can put in place to prevent persons associated with them from engaging in bribery. 6 It is in response to the concerns articulated in large part by the business community that the Minister of Justice has promised to make that guidance practical and useful for legitimate business and trade. 7 Mr. Clarke also has stated that the Government s intention is to implement the Bribery Act at the same time as satisfy[ing] honest businesses that do not want unnecessary costs and burdens put upon them. 8 A senior Ministry of Justice official has suggested that the revised guidance will differ quite substantially from the draft guidance published in September 2010, although the six core principles for bribery prevention are expected to remain. These in essence are: Tone from the top, Comprehensive and continuous risk assessment, Clear and practical policies and procedures, Appropriate implementation, Risk based due diligence and Regular monitoring and review. The final guidance likely will address the topic of facilitation payments and the business community s concerns about the potential criminalisation of corporate hospitality and promotional expenditures. Notwithstanding Roderick Macauley s the Bribery Act implementation manager at the Ministry of Justice view that the Bribery Act s potential effect on corporate hospitality has been hugely exaggerated. Mr. Clarke recently has sought to make clear that [o]rdinary hospitality to meet and network with customers and to improve relationships is an ordinary part of business and should never be a criminal offence. 9 A recently leaked draft of the final guidance document is reported to state that non UK companies that are listed on a UK stock exchange but have no other operations in the UK would not be expected to be subject to the new corporate offence of failing to prevent bribery. 10 In response to the resulting media speculation, a Ministry of Justice spokesperson confirmed last week that "[a] common sense approach would mean that organisations which do not have a demonstrable business presence in the UK would not satisfy this test. The mere fact that a company is listed for London Stock Exchange purposes may not, in itself, be enough to amount to carrying on a business or part of a business in the UK. However, it will always be for the courts to decide in individual cases whether a foreign company carries on a business or part of a business in the UK. Other reports have suggested that the final guidance will seek to provide reassurance to companies on the extent of liability for the actions of third parties deemed to be associated with their company. The Ministry of Justice spokesman said in that connection that "[t]o commit the offence a person who

4 performs services for a commercial organisation must bribe another person and must by doing so intend to obtain or retain business or an advantage in the conduct of business for the organisation. If either of these elements cannot be proved to the criminal standard no offence will be committed. Parent companies will be liable for the actions of subsidiary companies (and vice versa) where the tests in the Act are met. Whether and to what extent those provision are actually addressed in the final guidance remains to be seen. When Will The Bribery Act Be Implemented? The UK Minister of Justice has stated that he will publish the mandated guidance once he is confident that it addresse[s] the legitimate concerns of all those who took part in the consultation process and who have made representations to [him]. 11 He also has said that the Ministry of Justice's guidance will be published alongside joint prosecution guidance issued by the Director of the SFO and the Director of Public Prosecutions. That guidance will set out the elements of each of the Bribery Act s offences as well as the public interest considerations that prosecutors will take into account in deciding whether to initiate a prosecution. Officials at the Ministry of Justice have suggested that the guidance will be published very shortly and, if that estimate holds true, the Bribery Act could enter into force three months thereafter. Companies subject to the Bribery Act therefore should ensure if they already have not done so that they have reviewed their existing policies and procedures to ensure that they are sufficiently clear and robust. Getting It Right The decision to postpone publication of the final guidance on adequate procedures to ensure that it is practical and comprehensive for businesses of all sizes demonstrates albeit late in the day that the UK Government has taken on board the concerns of the business community about some key provisions of the Bribery Act. Practical and comprehensive guidance certainly is a step in the right direction and will be welcomed by all British businesses as well as by non UK registered companies carrying on a business in the UK, the vast majority of which are working hard to compete globally whilst fulfilling their ethical obligations and staying in compliance with the law. John P. Rupp is a partner in the London office of Covington & Burling LLP and specialises in the handling of corporate compliance issues. His work has included designing compliance programs for individual companies and investigating possible wrongdoing. He also has conducted compliance GAP analyses for a variety of companies, with the goal of identifying deficiencies in the policies and procedures intended to ensure compliance with measures such as the US Foreign Corrupt Practices Act, UK Bribery Act 2010 and companion measures in other countries. Robert Amaee is of counsel in the London office of Covington & Burling LLP and is the former Head of Anti Corruption and Head of Proceeds of Crime at the UK Serious Fraud Office. He specialises in the handling of corporate compliance issues including designing compliance programmes for individual companies, analysis of existing programmes to ensure compliance with international measures such as the UK Bribery Act 2010 and investigating possible wrongdoing. Alex Melia is an associate in the London office of Covington & Burling LLP, whose practice encompasses a wide range of contentious and quasicontentious matters, including internal corporate investigations, litigation before the English courts and arbitral proceedings. She also advises clients on

5 the design, implementation and evaluation of global compliance programmes. * * * * As this article was going to press, the UK Government issued the final guidance. An analysis of the final guidance will be published shortly. 8 9 Hansard HC Vol. 523 Col. 794 (15 February Hansard HC Vol. 523 Col (15 February 10 Justice minister tries to ease anti bribery rules, The Guardian (15 March 11 Hansard HC Vol. 523 Col. 793 (15 February 1 In 1998 the Law Commission published a report entitled Legislating the Criminal Code: Corruption to which was annexed a draft Corruption Bill. That bill was heavily criticised during pre legislative scrutiny in 2003, culminating in a recommendation that the offences proposed in the bill should be restructured. In December 2005, the Labour Government published a consultation paper that revealed broad support for reform but a lack of consensus concerning how that might best be achieved. In 2006, a further draft Corruption Bill faltered, never receiving its Second Reading. In March 2007, the Labour Government asked the Law Commission to further consider options for reform based on the findings of the Government s consultation. A further Law Commission report was published on 20 November 2008, followed by the publication of the Draft Bribery Bill that subsequently became, in modified form, the Bribery Act in March In his sentencing remarks in the Innospec case, Lord Justice Thomas characterised the corruption of foreign government officials / ministers as at the top end of serious corporate offending both in terms of culpability and harm. He went on to state that whilst there may be reason to differentiate the custodial penalties imposed for corruption between the US and the UK, there is every reason for states to adopt a uniform approach to financial penalties for corruption * * * so that the penalties in each country do not discriminate either favourably or unfavourably against a company in a particular state. Regina v Innospec Limited, Sentencing Remarks of Lord Justice Thomas (26 March 2010) at paragraphs 30 and 31, respectively Section 8(1), Bribery Act Sections 8(4) 8(5), Bribery Act Section 7(5), Bribery Act Section 9(1), Bribery Act Hansard HC Vol. 523 Col. 793 (15 February