Tuesday, February 8, 2011

Robert Amaee on the "The Elusive UK Bribery Act"

In this guest post, Robert Amaee (the former Head of Anti-Corruption and Proceeds of Crime Unit at the U.K. Serious Fraud Office and current counsel with Covington & Burling LLP in London - see here) addresses several issues regarding the U.K. Bribery Act, including its recently announced delay.


The Elusive UK Bribery Act

The UK Ministry of Justice (the “MoJ”) announced within the past few days that implementation of the UK Bribery Act 2010 (the “Bribery Act”) is to be postponed for a second time; leading to a barrage of criticism from respected sources such as the OECD and Transparency International. The Bribery Act will now not enter into force until three months after the MoJ publishes its guidance on certain provisions of the Bribery Act. The MoJ has not announced a date for the issuance of this guidance.

So, what’s going on?

Some business leaders and their representatives reportedly have complained about the impact the Bribery Act could have on the competitiveness of British business overseas; with the incoming head of the Confederation of British Industry claiming that the Bribery Act is “not fit for purpose”. The Bribery Act also stands accused of leaving too much discretion in the hands of officials at the UK Serious Fraud Office (the “SFO”) to resolve questions that have been posed concerning the Bribery Act’s jurisdictional reach as well as several of its substantive provisions. Others -- even within the UK Government -- are reported to have complained that the Bribery Act was rushed through Parliament without sufficient scrutiny of the impact on British business. So, what’s going on?

The Bribery Act has had an exceedingly long gestation period by any standard and, like many welcome but overdue arrivals, it is now causing a few birthing issues. You may not like this analogy much but the fact of the matter is that ever since the UK made a commitment in 1998 to fulfill its obligations under the OECD Anti-Bribery Convention and became a signatory to the UN Convention against Corruption, there has been an unremitting flow of effort aimed at transforming the UK’s complex Victorian laws on bribery and corruption into something more readily understandable and enforceable.

Since 1998, there has been, inter alia, in the UK a Law Commission Report, Draft Corruption Bill 2003, Draft Corruption Bill 2006, Law Commission Consultation 2007, a further Law Commission Report, a Draft Bribery Bill published in March 2009, the Joint Committee Report on the Draft Bribery Bill and the UK Government’s positive response to that report, which described the Joint Committee’s scrutiny of the Bill as “thorough.”

It is a fact that the Bribery Act did move through Parliament at breakneck speed in the final hours of the last UK Government in April 2010, receiving Royal Assent with little time to spare. What is also true, though, is that the Bribery Act was extensively debated in Parliament between November 2009 and April 2010 and made its way onto the statute books with resounding cross party support.

Will the Bribery Act ever enter into force?

There remains very strong support, across the UK Government and within the wider business community, for an effective and enforceable statute to combat bribery and other forms of corruption. The UK Attorney General Dominic Grieve QC has expressed publicly his support for the Bribery Act as has the Justice Minister and UK Anti-Corruption Champion, Ken Clarke. I believe that there is practically no prospect of the UK Government reneging on the commitments the UK has made to modernise the laws prohibiting bribery and other forms of corruption or indeed significantly disarming the Bribery Act, as enacted last April.

No one in the UK or elsewhere can assert a legitimate interest in permitting corrupt officials around the globe to continue to amass personal wealth at the expense of their fellow citizens, who often are left to endure abject poverty. Quite apart from the moral repugnance that one feels, it is important to ensure that corrupt officials do not act as an impediment to economic growth and job creation within their often resource rich countries by holding companies to ransom and pocketing their nation’s wealth.

The Bribery Act aims to tackle business involvement in corruption by making the boardroom responsible for keeping a tight reign on the company’s employees as well as the actions of “associated parties,” thereby aspiring to stem the flow of corporate funds into corrupt hands. No one will argue against that laudable aim but at the same time it is important to ensure that the law is not so widely drafted that it leaves well meaning and ethical companies in the invidious position of sanctioning technical breaches of the Act in the hope of salvation through prosecutorial pragmatism.

What’s all the fuss about?

The Bribery Act runs to a mere 17 pages and contains only four substantive offences. But it is the scope of two offences in particular that has caused business leaders to reach for the nearest packet of aspirin.

The major criticism has focused on the offences in sections 6 and 7 of the Bribery Act, both of which stand accused of being too widely drawn and introducing novel concepts that the Bribery Act fails to define. In relation to both of those sections, implementing policies to deal with corporate hospitality, facilitation payments and the extent of a company’s exposure to third party folly are regularly cited as problematic by company representatives.

In essence, the section 6 offence of “bribery of a foreign public official” makes a person liable if he or she offers, promises or gives a financial or other advantage to a foreign public official with the dual intention of influencing the official and obtaining or retaining business or a business advantage. The concern that has been raised is that for an offence to be made out under this section there is no requirement to show that the person trying to win the business had a corrupt intent or an intent to induce “improper performance” on the part of the official (as is required for the section 1 offence) and that many routine innocent interactions with foreign public officials could, as a consequence, amount to technical breaches of the Bribery Act.

Section 7 of the Bribery Act creates a wholly unprecedented UK offence of “Failure of a commercial organisation to prevent bribery.” A UK registered company or a non-UK registered company that “carries on a business or part of a business” in the UK, with no “knowledge” of or involvement in bribery could find itself in the uncomfortable position of 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, if it came to it, a court that the policy and procedures that it had developed and implemented amounted to the only defence available under section 7, namely the much talked about “adequate procedures”.

The Bribery Act stipulates that a person is associated with a company if that person “performs services” for or on the company’s behalf. The Bribery Act states that an employee, agent or subsidiary “may (for example)” be deemed to be an associated person but goes on to say that in determining the question of who performs a service on for you or on behalf of a company one would have to look at "all the relevant circumstances" and not just the ”nature of the relationship.”

The manner in which an “associated” person is treated in the Bribery Act certainly does give prosecutors wide discretion in deciding whether a company should be held to account for the conduct of those who are representing the company. In addition, whether a company is “carrying on a business or part of a business in the UK” is not defined or circumscribed in the Bribery Act itself. Rather, it has been left -- according to the Bribery Act’s legislative history -- to the judgment of prosecutors and the UK courts, grappling with the pertinent facts on a case by case basis and applying “common sense.”

In relation to the “adequate procedure” defence under section 7, 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. This will, in due course, be supplemented by prosecutorial guidance setting out the elements of each of the Bribery Act offences and the public interest considerations that prosecutors will take into account in deciding whether to prosecute.

The MoJ’s draft guidance on “adequate procedures” was published in September 2010 and was followed by a short consultation period, which ended in November 2010. The MoJ had been expected to publish in January 2011 its final guidance on “adequate procedures,” leaving thereafter a three month window for companies to digest the guidance and refine their anti-bribery procedures.

What’s next?

In postponing release of the final guidance and implementation of the Bribery Act, the UK Government appears to have taken note of the cumulative effect of the concerns outlined above, albeit rather late in the day, and put off implementation of the Act until the guidance can be shaped to address those concerns. The MoJ is reported to have explained the delay in issuing the statutory guidance by stating that it is assiduously working on the guidance to make it “practical and comprehensive for business.”

Practical and comprehensive guidance certainly would be a step in the right direction and would be welcome by all British businesses as well as by those non-UK registered companies carrying on a business, or part of a business, in the UK who are working hard to compete globally whilst staying on the right side of the law.

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