Firms get jitters over Bribery Act

Businesses are gearing up for compliance as facilitation payments and hospitality are set to come under closer scrutiny After widespread criticism of the lack of clarity in the original draft guidance to the Bribery Act 2010, the Ministry of Justice (MoJ) has rewritten it and the act will come into force on 1 July. The UK is under immense pressure to bring the act into force to ensure we comply with our international obligations, but businesses are justifiably concerned about the new law . It includes an extremely broadly drawn corporate criminal offence of “failing to prevent a bribe by an associated person”. This wide form of vicarious liability is subject only to a defence that the company had “adequate procedures” in place to prevent the commission of an offence. The company’s senior executives can also be liable if the offence is committed with their consent or connivance. The government was wary of making the guidance a detailed checklist, for fear that this could straitjacket the law’s flexibility or fetter charging decisions. Instead, the guidance sets out six key principles for businesses to consider and now includes some practical guidance for them to follow. So, for example, Principle 1 – Proportionate Procedures includes an accompanying case study about a medium-sized company which has acquired a new customer in a foreign country in which “facilitation payments” are the norm. The guidance suggests enlisting UK diplomatic channels in order to apply pressure on the foreign authorities to take action to stop demands for such payments. Pretty campaigning stuff for a medium-sized company involved in a new and possibly small contract, you might think. In the meantime, many businesses are devoting considerable energy to gearing up for compliance. One multinational, for example, is interrogating all its advisers on their corruption policies and extending that to law firms who advise third parties involved in joint ventures. Other global corporates are aggressively recruiting experienced regulatory lawyers to beef up their compliance departments. Many sectors are especially concerned about facilitation payments. They are already prohibited, but the act extends the territoriality of bribery to persons who have a “close connection” with the UK. Controversially, the guidance states that the mere fact that a company has a listing on a UK stock market does not of itself establish a sufficient link. And a subsidiary in the UK will not necessarily mean that the parent company has a sufficient nexus with the UK to be caught by the act either. Some contend that the guidance, produced under the current coalition government, has unlawfully watered down the territoriality of the act (which was passed by the previous Labour government). More generally, businesses will be closely scrutinising the guidance for the factors the Serious Fraud Office (SFO), in particular, will take into account when assessing whether to prosecute, such as self-reporting, post-investigation improvement and monitoring measures. In tandem with the MoJ guidance, the director of public prosecutions and the SFO director have issued joint prosecution guidance on the Bribery Act which spells out, for example, that facilitation payments are more likely to attract prosecution if premeditated. The act applies to commercial bribery but it also applies to individuals who attempt to influence the application of rules, regulations and normal procedures – hence the possibility of both CPS and SFO prosecutions. Other sectors are currently exercised about hospitality issues, although the SFO is likely to take a commonsense view of these – especially when it is reportedly only receiving an extra £2m to enforce the new law. And “reasonable hospitality to meet, network and improve relationships with customers” is excluded from the act. Nevertheless, some professional advisers have felt the need to clarify whether the provision for marketing purposes of company-branded mouse mats, calendars and golf umbrellas would be likely to attract criminal prosecution. The justice secretary, Ken Clarke, has now made it clear that “no-one is going to try to stop businesses getting to know their clients by taking them to events like Wimbledon, Twickenham or the Grand Prix”. The guidance goes further and considers whether providing free baseball tickets in New York is the wrong side of line. Unless the Big Apple has been chosen as a deliberately seductive location and is not at all incidental to the business being transacted, going to see the Yankees is unlikely to give rise to a prosecution at Southwark crown court. Another major issue is the scope of the public procurement rules, which prohibit companies convicted of corruption from tendering for EU public contracts. The government is proposing to amend those rules so that the new corporate bribery offence does not trigger debarment. At present, the only way to avoid this is for a company to self-report and to reach a purely civil settlement with the SFO, or to negotiate a plea bargain for non-corruption (eg “books and records”) offences. When Mahatma Gandhi was asked what he thought about western civilisation, he replied that he thought it would be a good idea in principle. I imagine that most people would take the same stance concerning broader criminal liability for bribery and corruption. All the more reason that the law should be crystal clear: it will not be a level playing field otherwise. The revamped guidance is surely a welcome attempt at that goal. Alex Bailin QC is a barrister at Matrix chambers and previously was a derivatives trader in the City of London Bribery Act corruption index Serious Fraud Office Alex Bailin guardian.co.uk

Posted by on April 1, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.