April 8, 2010
The United Kingdom has just enacted into law a new Bribery Act, which cleared the final stages of the Parliamentary process at an accelerated pace today. The Bribery Act, which is expected to come into force by autumn of this year, will dramatically impact the criminal exposure of corporations that do business in the United Kingdom.
This new UK anti-bribery legislation will have direct consequences not just for UK companies but for any company with a presence in the UK or that carries on any part of its business in the UK, as it will criminalize their alleged corrupt behavior regardless of the location of the alleged bribe. The Act, which addresses the bribery of public officials and private parties alike, creates personal criminal liability for senior officers of a company that commits a bribery offence with the consent or the connivance of that senior officer. Significantly, among the Act’s four new bribery offences is the corporate offence of failing to prevent bribery. The only defence to this new offence is that the company has in place "adequate procedures" for tackling bribery. What qualifies as "adequate procedures" is still unclear. What is clear, however, is that companies will need to take a hard look at their compliance programs to ensure they are up to scratch.
In addition to passing the Bribery Act, the UK Government is taking a hard line on bribery by increasing the resources of its anti-corruption enforcement agency, the Serious Fraud Office ("SFO"). Therefore, it is crucial that all companies carrying on business in the UK review their compliance programs, personnel training, and other anti-bribery measures now wherever they do business to ensure they are compliant with the new regime.
The Bribery Act was enacted on 8th April 2010. But when it will come into force is a matter for the new government. This is likely to occur in June or July 2010, save for the new corporate offence of failing to prevent bribery, which will come into force in October 2010.
The Bribery Act abolishes all existing common law and statutory offences and replaces them with new offences. In particular, the Act creates:
The giving and receiving of bribes
Under the Act, it is an offence for a person (P) to offer, promise, or give a financial or other advantage to another person where P intends the advantage to bring about an "improper performance" of a function or an activity (which can be any private business activity) by that other person, either to reward the improper performance or where P knows that the acceptance of the advantage in itself constitutes "improper performance".
The recipient of a bribe will also be guilty if he, she, or it requests, agrees to receive or accepts a financial or other advantage in certain circumstances.
Bribing a foreign public official
A person (P) who bribes a foreign public official (F) is guilty of an offence if P’s intention is to influence F in F’s capacity as a foreign public official. P must intend to influence F in the performance of his or her functions, and must intend to obtain or retain business, or a business advantage. Foreign public officials include government, administrative and judicial positions and people working for international organisations.
Who can commit these offences?
The above offences apply to UK companies, UK citizens and UK residents, wherever the alleged bribery occurs, even if it occurs outside the UK. Non-UK nationals or companies can be liable if an act or omission forming part of the offence takes place in the UK.
Personal criminal liability for senior management
Where a company has committed one of the above offences with the consent or the connivance of a senior officer (defined as a director, manager, secretary or other similar officer) then that individual is also guilty of the offence in addition to the company.
Failure of commercial organisations to prevent bribery
The offence is committed where an employee or an agent of a company bribes another person with the intention of obtaining an advantage in the conduct of business for the company. It applies to all companies and partnerships that carry on any part of their business in the UK, regardless of where they are incorporated or formed and regardless of where the alleged bribe takes place. This is clearly a far-reaching offence. However, if the company can show it has "adequate procedures" in place to prevent its agents or employees from committing bribery offences, it will not be guilty of the offence. What constitutes adequate procedures is currently far from clear. The UK government is required by the Act to publish guidance on this question. No date for the publication of such guidance has yet been announced.
In practice, the offence means that if the SFO has any grounds to believe that a company with a presence in the UK may have been involved in foreign bribery (this might be due to, for example, reports from a foreign regulator, press reports of bribery involving the company, the prevalence of bribery in the place or the sector in which the company operates) it could require that company, at its own expense, to conduct an investigation. Even if the business in the UK or the headquarters of the company knew nothing about the alleged bribery, that business could be guilty of a criminal offence unless it could satisfy the court that it had taken adequate anti-bribery steps. It will therefore be crucial for companies to scrutinise their compliance and other policies wherever they do business.
Companies and individuals found guilty of any of the offences will be liable to fines, which may be unlimited in respect of the corporate offence. For offences other than the corporate offence, individuals will also be liable to a term of imprisonment.
Even without the powers of the new law behind it, the SFO is responding to international pressure to bulk up its anti-corruption work and resources.
A major controversy concerning an aborted SFO investigation of a leading British defence company in 2006 sparked a major external review of the SFO. There followed sweeping internal personnel changes and the creation of a new "Anti-Corruption Domain". These measures have already produced results. In July 2009, the SFO announced that it had obtained a guilty plea to overseas corruption by UK construction firm Mabey & Johnson Ltd, the SFO’s first successful overseas corruption prosecution of a UK company. In October 2009, the SFO obtained a "Civil Recovery Order" of nearly £5 million against AMEC plc, an international engineering and project management firm. Prosecutions of individuals are also increasing. On 26 March 2010, the English Crown Court imposed a financial penalty of the sterling equivalent of US$12.7 million on Innospec Ltd for bribing third party employees and government officials in Indonesia.
 Mabey & Johnson pleaded guilty to charges of conspiracy to corrupt in Jamaica and Ghana and a breach of UN sanctions in Iraq. As part of its sentence, Mabey & Johnson will pay a total penalty of £6.6 million and retain an independent monitor.
Gibson Dunn has extensive experience in evaluating and designing corporate anti-corruption compliance programs. This includes assessing the structure and effectiveness of corporate compliance programs, reviewing reporting mechanisms, internal payment controls, and compliance messaging, as well as drafting new compliance materials, such as ethics and anti-corruption handbooks.
Our lawyers have also conducted numerous internal corruption investigations in dozens of countries. In doing so, we must often navigate overlapping legal regimes and accommodate competing cultural sensitivities during fast-paced internal reviews.
In addition to this extensive experience in a wide variety of international white collar matters, Gibson Dunn is a leading firm for advising on and helping clients negotiate the complex provisions of the US Foreign Corrupt Practices Act. Its global anti-corruption practice is seamless, with expertise in the US, Asia, Continental Europe and, now, in the UK.
Gibson Dunn now has a new team in London, led by Lord Falconer, former Lord Chancellor and Secretary of State for Justice, designed specifically to help companies comply with the Bribery Act and the new SFO regime. Lord Falconer, who spent 25 years as a commercial barrister, has a legal practice covering all areas of complex commercial litigation, international arbitration and corporate investigations. His team advises financial institutions and investment advisors in connection with securities litigation and investigations and represents a range of clients in connection with high-risk disputes and crisis management issues.
Gibson Dunn’s international team is ideally placed to help companies act now to ensure full protection from the SFO’s new enforcement regime. Companies that act swiftly and demonstrate their commitment to an anti-bribery regime will avoid the cost and reputational damage that an SFO investigation would cause.
Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you work, or any of the following lawyers in the firm’s London office:
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