The U.K. Bribery Act, Year One
Companies that conduct business in the United Kingdom should review their existing anticorruption programs in light of the U.K. Bribery Act.
Before the enactment of the U.K. Bribery Act of 2010 by the British Parliament, bribery was a crime according to common law and in other statutes, such as the U.K.’s Prevention of Corruption Acts of 1889–1916. However, existing law was fragmented, outdated, and failed to comply with international standards of conduct regarding bribery of foreign public officials in business transactions, such as the Anti-Bribery Convention issued by the Organization for Economic Co-Operation and Development (OECD).
The U.K. Bribery Act was intended to provide a single, modern statute to tackle bribery in the United Kingdom and abroad, in both the public and private sectors. It also was meant to signal a greater focus by the U.K. government on aggressive anticorruption enforcement. The comparable statute in the United States is the U.S. Foreign Corrupt Practices Act (FCPA). Businesses should note, however, that there are significant differences between the U.S. and U.K. laws and understand that FCPA compliance may not be sufficient to achieve compliance with the U.K. Bribery Act.
The Bribery Act broadly addresses bribery in both the public and private sectors and replaces existing common law and prior statutes. The act broadly defines bribery as the offering, promising, or giving of any advantage and requesting, agreeing to receive, or accepting of any advantage. This is in contrast to the FCPA, which criminalizes the giving of a bribe, not the accepting of one.
Individuals convicted of offenses under the FCPA may be fined up to $250,000 per offense and sentenced to up to five years in prison; companies may be hit with fines of up to $2 million. Under the Bribery Act, both prison terms and monetary fines are unlimited.
The Bribery Act creates a specific offense for bribery of a foreign public official and creates a new “corporate offense” of failure by a commercial organization to prevent bribery on its behalf.
The act has broad extraterritorial application, and a U.K. citizen or entity can be subject to liability even where relevant conduct occurs outside the United Kingdom. Those who are not citizens of the United Kingdom can be liable if they carry on any aspect of a business in any part of the United Kingdom.
Under the act, liability can be imposed on an organization for “failure to prevent bribery by an associated person” whenever a person associated with the organization pays a bribe for the organization’s benefit. An “associated person” is defined broadly to include anyone who performs services on behalf of the organization. This differs from the FCPA, which holds an organization liable only for bribery committed by employees and agents.
Under the Bribery Act, no proof of knowledge or intent is required for an organization or individual to be found criminally liable under the law, as this is now a “strict liability” offense. Prosecution under the FCPA requires proof of corrupt intent.
The Bribery Act does provide one defense to the strict liability corporate offense: an organization accused of failure to
prevent bribery may be absolved of liability if it can demonstrate that it had established “adequate procedures” to prevent such bribery by associated persons. The act itself does not define “adequate procedures.” Instead, the act required the U.K. government to promulgate guidance on the procedures that commercial entities could put in place. The agency that handles this type of crime within the U.K. is the Serious Fraud Office (SFO). After several versions, it settled on guidance that ultimately tracked similar language in the U.S. and Europe.
That guidance went through several iterations, however, and some of the ways in which the new guidance took a tougher stance are highlighted ahead.
According to the SFO, adequate procedures include a proper “tone at the top” through clear policy and anticorruption guidance, supported at the highest levels in the company. Companies must also have specific training on the company’s anticorruption principles, policies, and procedures. Adequate procedures also include individual accountability, including appropriate whistleblower, disciplinary, and incentive programs.
A company should have a path for clear and direct reporting by executive management to the CEO. A company’s code of ethics and anticorruption principles must apply regardless of whether local laws permit bribery and whether improper payments may be culturally accepted.
The SFO had previously acknowledged that small payments to ensure that public officials carry out normal functions were, unfortunately, endemic in many countries and would take time to eradicate. The new guidance departs from this stance, simply stating: “A facilitation payment is a type of bribe and should be seen as such.”
The company should have a specific policy on gifts as well as policies on hospitality payments that address the corruption risks inherent in these types of actions. These areas can be particularly high risk as there is much open to interpretation when such payments are made, and the agency says that it will prosecute where it seems like the evidence would support a conviction.
We recommend that client policies establish a reasonably low dollar limit, require management approval and tracking, and clearly document any and all hospitality spending. We do not generally recommend a no-hospitality policy but do emphasize a no-quid pro quo statement and active oversight. With respect to facilitation payments, we recommend that those be prohibited unless the life or safety of the employee or agent is threatened, management approves, and there is a clear paper trail and proper accounting.
A specific policy should also be written to address the actions of outside agents, consultants, advisers, and third parties, including appropriate due diligence policies, procedures, and contract terms. Ongoing risk assessments and auditing functions should be included in the program.
Another significant issue involves self-reporting of corruption. Under its initial guidance, the SFO had reassured companies that they would normally face only civil law sanctions if they uncovered and reported their own wrongdoing. The new rules are far less comforting, with this plain statement: “If on the evidence, there is a realistic prospect of conviction, the SFO will prosecute if it is in the public interest to do so…. Self-reporting is no guarantee that a prosecution will not follow. Each case will turn on its own facts.”
Many observers had predicted the first prosecutions under the Bribery Act would signal the government’s serious dedication to anticorruption enforcement against big companies and high-ranking corporate officers. However, the first person to be charged and convicted was a lowly court clerk who was given a six-year prison sentence for requesting and receiving a £500 (approximately $788) bribe to fix speeding tickets. The court described the offense as “very serious” and a “very substantial breach of trust.” But the law has only been in force about a year, and its full impact has yet to be felt.
Meanwhile, the SFO is seeking monetary sanctions for corruption under different statutes. It obtained a recent court order requiring Mabey Engineering (Holdings) Ltd to pay £131,201 (approximately $206,850) plus costs of £2,440 ($3,846) under the Proceeds of Crime Act 2002, reflecting gains it derived from contracts won through unlawful conduct by officers of a subsidiary. An even more striking example involved the £1.9 million (approximately $3 million) fine the SFO obtained against Oxford University Press in 2012, in relation to dividend income it received through the unlawful conduct of subsidiaries in Tanzania and Kenya to win public tender contracts for educational publications.
While the enforcement record to date is somewhat sparse, the consequences under the Bribery Act can be considerable. Compliance professionals for companies that are listed, headquartered, have operations, or conduct any business in the United Kingdom should carefully review their existing anticorruption compliance policies and programs for adequacy in light of this new statutory regime.
Raymond L. Sweigart is a partner at the law firm of Pillsbury Winthrop Shaw Pittman in Washington, D.C. He practices in the United Kingdom as well as in Virginia and Washington, D.C.