In sectors where bribery is more common, the Bribery Act 2010 should be seen as a core part of this wider organisational design, with non-executive directors (NEDs) taking a lead role in its implementation.
As such, the Bribery Act provides an opportunity for those NEDs looking to leave a positive mark on their organisation.
The Act came into effect in July 2011. It consolidated the traditional offences of passive bribery, active bribery, as well as the specific offence of bribing a foreign public official (section 6). In all cases, promising a bribe—regardless of whether the payment is effected—is enough to break the law. Under section 6 there need only be an intention to “influence”: there is no requirement to actually induce improper behaviour.
The Act significantly expanded the law by introducing a new strict liability offence: corporate failure to prevent bribery by an “associated person”, such as an agent, employee or subsidiary, who is supplying services for or on behalf of the company (section 7). This updated the law to seek to make companies responsible for actions of foreign intermediaries, acting on their behalf, who are involved in a high proportion of corruption cases.
Nevertheless there is a defence to protect unwitting firms, where an agent has, without their knowledge, been paying bribes—namely if the organisation can show it had “adequate procedures” in place designed to prevent bribery. For companies operating internationally it is key to carry out a risk assessment on their business, including the:
- territories where the company does business;
- company’s industry sectors;
- company’s level of interaction with the public sector;
- company’s use of intermediaries;
- company’s policies on gifts and entertainment.
The territorial scope of section 7 encompasses any organisation carrying on a business or part of a business in the UK, although individual liability for bribery overseas only extends to individuals with a “close connection” to the UK, such as UK nationals and overseas nationals resident in the UK (section 12). Section 7 liability covers the acts of anyone who performs services for or on behalf of the company, even if this person has no connection with the UK, and their precise capacity is immaterial.
The Act now means the UK has some of the toughest anti-bribery laws in the world. Under EU law, member states are currently left to enact their own regimes since bribery is usually a criminal act: it falls outside the traditional scope of Brussels.
Germany and France have similar prohibitions to the UK on active and passive bribery, but their reach is more limited. We understand that under German law foreign bribery will only be prosecutable if the “effect” occurred in Germany or if the perpetrator is a German citizen, whilst in France the offender or victim must be a French national, and the bribery must constitute an offence in both France and in the country where it was committed.
Other European regimes vary in strength, with those in the southern Mediterranean countries being notoriously weak. As a result there is now talk of an EU-wide regulation and centralised procedures for tackling bribery, not least because of endemic corruption in some member states’ EU-funded public procurement tenders, but it is too early to tell if this will gain traction.
The Act on its own has potentially heavy penalties: unlimited fines and up to ten years’ imprisonment. The courts can also make disqualification orders against directors, under section 2 of the Company Directors Disqualification Act 1986, for up to 15 years.
Under the Proceeds of Crime Act 2002 (POCA), following criminal prosecution, courts can also make confiscation orders for the benefit that a convicted defendant has obtained as a result of the bribery. This includes not only the profits realised by a criminal venture but the venture’s entire turnover.
POCA also provides for civil recovery orders. These do not require overcoming the criminal burden of proof of “beyond reasonable doubt”, only the lower civil “balance of probabilities” threshold. Essentially, any property that is the proceeds of crime can be confiscated under these orders.
If that were not enough, the victims of bribery themselves can make a claim for damages against the briber; and/or the contract may be declared void; and/or the party paying the bribe will be unable to enforce his/her rights, whilst the other side is able so to enforce. Finally, of course there is significant reputational risk from bribery.
Serious Fraud Office
Case law concerning the Act is so far limited and has tended to be on the vanilla side: individuals flagrantly bribing other persons from whom they seek to derive some benefit. We have not yet seen a corporate prosecution under section 7, although we understand that investigations are under way.
However, the lack of convictions using the Act is not a reflection of reticence on the part of the authorities to use it. Rather, as it typically takes around six years for a bribery case to be investigated and prosecuted, the main tools of the Serious Fraud Office (SFO) have remained the previous laws, given the Act only came into force in July 2011.
In February 2014 the SFO also introduced US-style Deferred Prosecution Agreements (DPAs). These are settlements that will keep many bribery cases out of the courts via a process of court-monitored mediation. Under a DPA the organisation avoids conviction, but can still be fined and suffer negative publicity. So far they have not yet been used, but they will certainly speed up the process.
Penalties for directors
Under section 14(2) of the Act, where an organisation is found guilty of an offence with the “consent or connivance” of a senior officer, he too may be prosecuted.
NEDs may be found guilty under criminal law of “encouraging and assisting” the bribery, opening themselves up to criminal penalties, if they attempt to turn a blind eye.
Potentially, as a non-executive charged with compliance duties, it is also possible that failure to seek to ensure the company’s compliance in accordance with the Bribery Act could lead to negligence claims by the guilty organisation itself, as well as prosecution.
Guidance for NEDs
In 2011 the Ministry of Justice provided a guidance note outlining “six principles for bribery prevention”, which contains examples of procedures deemed suitable for any business. Compliance with these will go a long way to prove the defence of “adequate procedures” outlined above. The onus is on the organisation to prove that it has complied.
The six principles and examples of actions that NEDs may wish to consider are:
|1. Proportionate procedures||Formal compliance procedures and codes of conduct covering common areas of misunderstanding: gifts, hospitality, tendering procedures, etc.|
|2. Top-level commitment||Board resolutions and company statements recording a zero-tolerance approach to bribery issued to all staff, agents, contractors and potentially published on the company’s website; a board-level compliance officer.|
|3. Risk assessment||Analysis: how the organisation is run, the parties with whom it does business, the geographies in which it operates, internal structures that may facilitate bribery.|
|4. Due diligence||Procedures in place for the assessment of counter-parties, agents, JVs, etc.|
|5. Communication (including training)||Practical training and circulation of materials to ensure there is a business culture in which bribery is deemed unacceptable.|
|6. Monitoring and review||A director or manager with responsibility for day-to-day implementation of anti-bribery measures; a system for anonymous internal reporting or whistleblowing; documentation procedures.|
Under section 7, businesses may be liable for the acts of their counterparts. There is no case-law yet on the interpretation of “associated persons”, but obvious examples would be agents and contractors, although it seems unlikely to extend to arms-length suppliers of goods who do not also supply related services.
Nevertheless, NEDs should give serious consideration to including a clause into their company’s standard templates, which would act as another “adequate procedure” and provide a route to claim damages from the counter-party. The International Chamber of Commerce (ICC) published an updated clause in 2012, which can be incorporated by reference or in full and constitutes an agreement between the parties to comply with the ICC Rules on Combating Corruption.
Responsibility & engagement
It goes without saying that a responsible business is one that is not corrupt. What is also apparent is that to follow the “adequate procedures” listed above is to be on trend with wider employee engagement, for example, having a set of tailored corporate “values” and publicising these; two-way dialogue with management; training, etc. In sectors where bribery is more common, the Act should be seen as a core part of this wider organisational design, with the non-executive director taking a lead role in its implementation. As such the Bribery Act provides an opportunity for those NEDs looking to leave a positive mark on their organisation.
Anthony Woolich is a partner and Christian Horbye is a trainee solicitor at Holman Fenwick Willan LLP, an international law firm advising businesses engaged in international commerce.