Jonathan Hitchin | Allen & Overy | UK Bribery Act 2010


Every now and again you come across an article that’s worth reposting, we found this on the Allen & Overy website:

The Bribery Act 2010 came into force on 1 July 2011. The Act repeals and replaces England’s old, much-criticised, laws on bribery with a new comprehensive anti-bribery code.

There are four offences: the general offences of paying and receiving bribes, the bribery of foreign officials and the failure of commercial organisations to prevent bribery. The corporate offence represents the most significant departure from the old law on bribery and will place the onus on the corporates to ensure that their anti-corruption procedures are robust.

The Bribery Act offences

The Act envisages the following principal offences:

1. The general offences

The two general offences are not dissimilar in substance to the current law, albeit they introduce the central concept of “improper performance”. They are as follows:

  • Paying bribes: it is an offence to offer or give a financial or other advantage with the intention of inducing that person to perform a “relevant function or activity” “improperly” or to reward that person for doing so.
  • Receiving bribes: it is an offence to receive a financial or other advantage intending that a “relevant function or activity” should be performed “improperly” as a result.

“Relevant function or activity” includes any function of a public nature and any activity connected with a business. The person performing that activity must be expected to perform it in good faith or impartially or be in a position of trust. “Improper performance” will be judged by whether it breaches the expectation of what a reasonable person in the UK would expect in relation to the performance of the type of function or activity concerned. However, the function or activity need have no connection to the UK.

These definitions are complex and were deliberately widely drafted, so there is a potential risk that they could catch certain types of normal business conduct. This may well encourage an initial round of litigation when offences start to be prosecuted.

2. Bribery of foreign public officials

This offence will be committed if a person offers or gives a financial or other advantage to a foreign public official with the intention of influencing the foreign public official and obtaining or retaining business, where the foreign public official was neither permitted nor required by written law to be so influenced. This is in some respects a narrower test than the general offences, in particular given the “business nexus” element, but in other respects a wider test, given the broader concept of intention to “influence” (instead of intention to induce “improper performance” as in the general offences).

3. Failure of commercial organisations to prevent bribery

The most controversial offence is the new offence which can be committed only by commercial organisations (companies and partnerships). It will be committed where:

  • a person associated with a relevant commercial organisation (which includes not only employees, but agents and external third parties) bribes another person (i.e. commits one of the offences above) intending to obtain or retain a business advantage; and
  • the organisation cannot show that it had adequate procedures in place to prevent bribes being paid.

This offence is intended to reverse the rules on corporate attribution in relation to bribery. Under the old law (and under the new general offences), a company was likely to be guilty of a bribery offence only if very senior management were involved. Under this corporate criminal offence, the company may be guilty even if no one within the company knew of the bribery. The company’s defence is limited to showing that it had “adequate procedures” to prevent bribery. That effectively creates a burden on corporates to ensure that their anti-corruption procedures are sufficiently robust to stop any employees, agents or other third parties acting on the corporates’ behalf from committing bribery.

Under the Act the Government is required to provide illustrative guidance on what amounts to “adequate procedures”. This was published on 30 March 2011 . This requires procedures to be tailored to the individual circumstances of each business based on an assessment of where the risks lie. Ultimately, it will be left to the courts to assess whether a corporate has “adequate procedures” in place and it will be for the corporate to prove that it has. Given this question will only be tested in the courts when a bribe has in fact been paid, the burden may be a high one.

Extra-territoriality

All of the new offences will have extra-territorial application, namely the offences may be prosecuted if:

  • done by a British national or corporate or by a person who is ordinarily resident in the UK regardless of whether the act or omission which forms part of the offence took place outside the UK; and/or
  • if any act or omission which forms part of the offence occurs within the UK
  • in addition, the corporate criminal offence will apply to commercial organisations which have a business presence in the UK (regardless of where the bribe is paid or whether the procedures are controlled from the UK); this extends the reach of the legislation well beyond the current regime.

Penalties

The Act raises the maximum jail term for bribery by an individual from 7 years to 10 years. A company convicted of failing to prevent bribery could receive an unlimited fine.

Conclusion

While the Act may change little from an individual’s perspective, it puts significant pressure on corporates doing business in the UK to ensure that they have appropriate anti-corruption procedures in place before implementation of the Act.

Related articles:

Jonathan Hitchin specialist in Financial Fraud Law

Allen & Overy Jonathan Hitchin

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One Response to Jonathan Hitchin | Allen & Overy | UK Bribery Act 2010

  1. Talking about anti corruption – perhaps we should include the banking system? Let’s hope they get prosecuted, every one of them!

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