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The UK Anti-Bribery Law: Additional Compliance Obligations for Global Corporations

John R. Shane, Laura El-Sabaawi and Cari Stinebower
June 28, 2010

Introduction

U.S. corporations with a nexus to the United Kingdom (UK) should consider conducting a risk assessment for potential exposure to violations of the UK Bribery Act of 2010 [1] (UK Bribery Act).  The UK Bribery Act, enacted on April 8, 2010 and going into effect in October 2010,  differs from the U.S. Foreign Corrupt Practices Act (FCPA) in a number of ways. In particular the UK Bribery Act: (1) applies to entities with a nexus to the United Kingdom; (2) criminalizes more activities than does the FCPA, including but not limited to receiving a bribe and making a bribe to a private person; [2] (3) does not provide an exception for non-discretionary, facilitating ("grease") payments; and (4) penalizes an entity potentially more harshly than the FCPA.  Each of these differences is addressed below.

Scope of the UK Bribery Act

The UK exercises potentially greater jurisdiction under the Bribery Act than the United States does under the FCPA.  Under the UK Bribery Act, an offense occurs if (1) the act or omission occurs in England and Wales, Scotland or Northern Ireland; (2) the person who is engaging in a prohibited act or omission has a close connection [3] to the UK; or (3) regardless of the location of the prohibited act or omission, a UK entity fails to maintain adequate procedures. [4]  In addition, firms need only "carry on business" in the UK to bring any act of bribery in a foreign country under the UK's jurisdiction.  Such corporations are liable for the acts of their agents, employees and subsidiaries (among others) regardless of whether those individuals have any connection to the UK.

Bribing and Accepting Bribes

The UK Bribery Act criminalizes the act of bribing another person, as well as the act of receiving a bribe. [5]  These offenses are defined to include offering, promising or giving (or requesting, agreeing to receive or accepting) a financial or other advantage with the intention that a function or activity will be performed improperly. [6]  The bribe can be offered (or accepted) either directly or indirectly, through a third party.  "Advantage" is not defined, but "function or activity" is defined quite broadly. As long as the function or activity is one which is expected to be performed in good faith, performed impartially, or the person performing it is in a position of trust, all functions or activities: (1) of a public nature, (2) connected with a business, (3) performed in the course of a person's employment or (4) performed by or on behalf of a body of persons (whether or not incorporated) are captured by the law. [7]  As a result, unlike the FCPA, the UK Bribery Law prohibits private as well as public sector bribes. [8]

Grease or Facilitation Payments

The FCPA excepts so-called "grease payments" from its bribery prohibition.  Under the FCPA, grease payments are defined as "facilitating payments" for "routine government action."  The statute lists the following examples: obtaining permits, licenses or other official documents; processing governmental papers, such as visa and work orders; providing police protection, mail pick-up and delivery, phone service, and power and water supply. [9]  In contrast, under the UK Bribery Act, there is no exception for non-discretionary, facilitating payments.  Nonetheless, the determination as to whether a case should be brought for these payments is left with the prosecutor and it is not expected that many cases involving only small, facilitating payments will be brought. [10] 

Because other jurisdictions also tend to be critical of the "facilitation payment" exception in the FCPA, where an entity operates outside of the United States, the risk-based anti-bribery compliance program and training materials may want to address the topic specifically. [11] 

Penalties

Those who engage in prohibited activities under the UK Bribery Act also may face harsher penalties than under the FCPA.  These penalties include up to 10 years in prison and unlimited fines for some offenses. [12]

Bribing a Foreign Public Official

Bribing or offering to bribe a foreign public official is a separate offense under the Bribery Act. [13]  A "foreign public official" is defined as an individual who either: (1) holds a legislative, administrative or judicial position in a foreign country; (2) exercises a public function for or on behalf of a foreign country or for any public agency or enterprise of that country; or (3) is an official or agent of a public international organization. [14]  To be guilty of the offense, the person offering the bribe must intend to influence the official in his official capacity and intend to obtain or retain either business or an advantage in the conduct of business.  Again, the bribe can occur either directly or to another person (at the official's request or with the official's assent or acquiescence). In addition, the bribe must be illegal under the written law applicable in the official's territory. [15]

Like the general bribery offenses discussed above, the bribe of a foreign public official must either take place (in at least some part) in the UK or the person offering the bribe must have a close UK connection. [16]  In addition, as discussed below, corporations that carry on business in the UK can be held liable for offenses of "associated persons," regardless of where the offense occurs and whether the individual offender has any connection to the UK. [17]

Corporate Failure to Prevent Bribes

The Bribery Act creates a particularly strict legal regime regarding vicarious corporate liability for acts of bribery.  A "relevant commercial organization" is guilty of an offense if a person associated with the organization bribes another person intending to obtain or retain business or an advantage in the conduct of business for the organization. [18]  Notably, "relevant commercial organizations" include both bodies incorporated or formed under the laws of the UK and corporations or partnerships which carry on business in the UK (wherever incorporated). [19]  Moreover, the bribe giving rise to the vicarious liability can occur anywhere in the world.

"Associated persons" are also defined broadly under the Bribery Act, as persons who perform services for or on behalf of the organization.  The capacity in which the person performs services "does not matter," and whether or not a person is one who performs services for the organization is to be determined by reference to all the relevant circumstances. [20]  The Bribery Act's treatment of "associated persons" finds parallels in the FCPA, under which a corporation can be held liable for the acts of its employees and third party agents. 

Corporate bodies nonetheless have a defense to vicarious liability under the Bribery Act.  If the corporation can prove that it had adequate procedures in place designed to prevent persons associated with the corporation from engaging in bribery, the corporation will not be liable.

What constitutes "adequate procedures" is not defined, but there is reason to believe that UK authorities will hold corporations to a high standard. [21]  The emphasis on adequate corporate systems and controls for countering bribery risks was seen early last year in the UK's Financial Services Authority's (FSA) prosecution of Aon Limited.  Although Aon had compliance procedures in place, the FSA determined that they were either inadequate to counter the risk or had not been properly implemented and fined Aon approximately $7.2 million. [22]   The concept of an appropriately risk-based compliance program is one present across the board in the U.S. FCPA, anti-money laundering, export controls and economic sanctions programs and should not be a difficult concept for global entities adapting their anti-bribery programs to the new UK Bribery Act.

Conclusion

It is yet to be seen how the new Bribery Act will be implemented and enforced in the UK; however,  corporations, especially those with even minimal connections to the UK, should review and possibly revise their anti-bribery programs to ensure compliance with both the FCPA and the Bribery Act.  Corporations should also be aware that any voluntary disclosures of FCPA violations may be shared by the U.S. Department of Justice with the UK authorities, exposing the corporation to potential penalties in both jurisdictions.

* * *

While we are not licensed to practice law in the United Kingdom and are not UK law experts, Wiley Rein regularly provides U.S. companies with an overview of laws in the United Kingdom and European Union.   

 


[1]  See Ministry of Justice, Impact Assessment of bill on reform of the law on bribery, available at http://www.justice.gov.uk/publications/docs/bribery-bill-ia.pdf.  Although bribery was already illegal in the UK under the Prevention of Corruption Acts of 1889-1916 and common law, the former legal regime was fragmented and outdated.  The UK's Bribery Act 2010 (Bribery Act) was thus intended to provide a modern, consolidated piece of legislation to tackle the issue of bribery, particularly cross-border bribery by UK businesses in relation to overseas public procurement exercises. 

[2] Making a bribe to a foreign public official is a violation of both the UK Bribery Act and the FCPA. 

[3] A person has a close connection to the UK if the person is (1) a British citizen; (2) a British overseas territories citizen; (3) a British National (Overseas); (4) a British Overseas citizen; (5) a person who under the British National Act of 1981 was a British subject; (6) a British protected person within the meaning of that Act; (7) an individual ordinarily resident in the United Kingdom; (8) a body incorporated under the law of any part of the United Kingdom; or (9) a Scottish partnership. See Bribery Act, c. 23, s. 12 ("Bribery Act").

[4]  Id. at s. 7.

[5]  Bribery Act, s. 1 and 2.

[6] The FCPA, in contrast, prohibits paying, offering, promising to pay, or authorizing someone else to pay money or anything of value to a foreign official with the requisite corrupt intent.  Under the UK Bribery Act, "improper performance" is determined by a reasonableness test, based on expectations as to performance of the function or activity in the United Kingdom.  An offense can be committed even if the only improper performance is the very providing or accepting of the bribe itself. Bribery Act at s. 1(3) and 2(3) ("where… the request, agreement or acceptance itself constitutes the improper performance… of a relevant function or activity").

[7] Id. at s. 3.

[8] Of course, in the United States other statutes address private bribery, including but not limited to the Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. § 1961 et seq.

[9] 15 U.S.C. § 78dd-1(f)(3).

[10] See The Law Commission: Reforming Bribery (Nov. 19, 2008), p. 89, available at  http://www.lawcom.gov.uk/docs//lc313.pdf.  Specifically, the Law Commission states that "we suggest that it will rarely be in the public interest to prosecute individuals or organisations for the payment of small sums to secure the performance of routine tasks."  The Law Commission also explained that they recommended not authorizing facilitation payments because they were prohibited under prior law and could have a corrosive impact.  Id. at 85-86.  In addition, the Law Commission cited the OECD Working Group on Bribery, which identified two problems that arise where Parties provide a defense for facilitation payments: (1) a certain level of confusion on the part of the private sector concerning the differentiation between facilitation payments and bribes; and (2) an absence of judicial interpretations of the scope of defense. Id. at 86.

[11] See e.g., Organization for Economic Co-operation and Development ("OECD"), Working Group on Bribery, Annual Report 2009, available at http://www.oecd.org/dataoecd/23/20/45460981.pdf.

[12] Bribery Act at s. 11.

[13] Id. at s. 6.

[14] Id. at s. 6(5).

[15] Id. at s. 6(3)(b).

[16] Id. at s. 12.

[17] Id. at s. 12(5).

[18] Id. at s. 7(1).

[19] Id. at s. 7(5).

[20] Id. at s. 8.

[21] The Secretary of State is directed in the Bribery Act to publish clarifying guidelines on adequate corporate policies. Id. at s. 9.

[22] See FSA, Final Notice - Aon Limited (Jan. 6, 2009) available at http://www.fsa.gov.uk/pubs/final/aon.pdf.

 

For more information, please contact John R. Shane at 202.719.7222 or jshane@wileyrein.com and Laura El-Sabaawi at 202.719.7042 or lel-sabaawi@wileyrein.com.


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