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September 8‚ 2011
UK Bribery Act: Understanding & Mitigating
Risks
US companies doing business throughout the world, having
become comfortable with compliance programs under the Foreign Corrupt
Practices Act (FCPA), must now brace for new enforcement initiatives
compelled by the UK Bribery Act
of 2010 (the Act), which went into effect in July 2011. This poses a
new set of risks for companies with a UK presence.
The Act is a far-reaching statute that covers the giving and
receiving of bribes, bribing foreign officials, and failing to prevent
bribery. Also unlike the FCPA, the Act is not limited to bribery of foreign
officials — bribery in virtually every business situation is caught. The
Act also differs from the FCPA in that facilitation payments or “grease
payments” are illegal, and the FCPA’s requirement that a bribe of a foreign
official be offered “corruptly” is absent from the Act. There are steps
companies can take now to mitigate their global risks, including
implementing specific bribery-prevention procedures outlined in the Guidance
to the Bribery Act of 2010 (the Guidance), issued by the Ministry of
Justice.
Giving and
Receiving Bribes Generally
The Act prohibits giving or receiving bribes other than in a
purely private or domestic context. That is, a bribe is not caught if it
occurs entirely outside the context of any business or employment
relationship, public sphere of activity, or public or private organization.
The offenses of giving and receiving bribes are covered in Sections 1 and 2
of the Act.
Sections 1 and 2 apply to any person with a “close
connection” to the UK, with respect to actions anywhere in the world, and
to any person (regardless of his or her connection to the UK) who commits
the offending act in the UK. Corporations can be liable under Sections 1
and 2 if a senior officer consents to or connives with the offending act.
For purposes of Sections 1 and 2, bribery occurs when either
(1) the person giving the bribe intends to induce or reward an “improper”
action, or (2) where the acceptance of the inducement is itself improper,
regardless of whether the desired conduct by the recipient is improper. The
second example covers facilitation or “grease” payments, which are payments
made to someone (typically an official) to get him or her to do something
(or do something more quickly) that he or she is actually supposed to do as
part of his or her job, such as a customs official clearing properly
imported goods through customs. Unlike the FCPA, the Act does not have an
exception for any facilitation payments — a fact that has caused some
concern to UK businesses that operate in countries where facilitation
payments are routinely expected.
Bribing Foreign
Officials
Sections 1 and 2 of the Act apply to foreign officials as
well as people employed by private companies or organizations. The Act,
however, contains an additional basis for liability with respect to bribery
of foreign officials. Section 6 makes it an offense to offer, promise or
give anything of value to a foreign public official (or to another person
at the official’s request, assent, or acquiescence) with the intention of
obtaining or retaining business or an advantage in the conduct of business.
Critically, an element of the Section 1 and 2 offenses is
missing from the Section 6 offense: there is no requirement that there be
any intention that the foreign official act improperly or that the
acceptance of the inducement is itself improper. Nor is there any
requirement that the inducement be offered “corruptly” (as in the FCPA).
Furthermore, the Act does not contain any exceptions for ordinary corporate
hospitality or promotional activities. British companies and legal
commentators have rightly pointed out that, on its face, Section 6 can be
interpreted as making it illegal to invite foreign officials to participate
in promotional activities with any hospitality element.
The UK government’s response (both before and after enacting
the statute) has been to say that requiring proof of “improper” performance
of a foreign official’s job is too high of an evidentiary burden to place
on the prosecution and that instead companies should rely on the
government’s intention to exercise prosecutorial discretion. The Guidance
provided by the government indicates that ordinary, proportionate corporate
hospitality should not provide a basis for prosecution — but of course, the
Guidance is not law. (See in particular paragraph 23 of the Guidance, and
more generally, paragraphs 21 – 32.)
Note that “foreign officials” include persons who (1) hold a
legislative, administrative, or judicial position; (2) exercise a public
function on behalf of a country or one of its public agencies or public
enterprises (for example, state employees), in each case with respect to a
country other than the UK; or (3) are officials or agents of a public international
organization. Some commentators have suggested that the definition is less
expansive than the US courts’ interpretation of “foreign official” for
purposes of the FCPA, but until that is tested in court, we suggest
assuming that the more expansive interpretation applies.
Failing to
Prevent Bribery
Section 7 of the Act creates an entirely new corporate
offense of failing to prevent bribery. Section 7 applies to companies
organized in the UK and to foreign companies that do business in the UK.
The standard for “doing business in the UK” is not settled yet, but the
Guidance suggests that some active business presence is necessary. Note
that this might include the occasional presence of sales reps even if there
is no permanent sales force in the country.
Section 7 makes a company (or other commercial organization)
guilty of an offense if a person associated with the company bribes someone
with the intention of obtaining or retaining business for the company, or
an advantage for the company in the conduct of its business (essentially, a
Section 1 or 6 offense). It doesn’t matter whether the company had
knowledge of the bribe, and the associated person can be any person
operating anywhere in the world, regardless of that person’s connection or
lack of connection to the UK. Nor is there any requirement that the person
who offered or received the bribe be charged or convicted (although the
criminal standard of proof will apply to the determination of whether or
not bribery occurred). It should be noted that a company’s associates
include anyone providing services for or on behalf of the company — so the
acts of contractors and agents (and possibly others) as well as employees
could create liability for a company.
What Companies
Can Do to Reduce Their Risk
The Act provides an affirmative defense to a Section 7
charge: It is a full defense if the company can prove (by a preponderance
of the evidence standard, called “balance of the probabilities” in the UK)
that it had in place adequate procedures designed to prevent persons
associated with the company from making bribes. Accordingly, companies
concerned about their potential liability for failing to prevent bribery
are giving serious attention to putting “adequate procedures” in place.
The Guidance suggests specific procedures, including risk
assessments, training, developing, and communicating policies internally
and externally; involvement of top-level executives in developing and
implementing policies; and ongoing enforcement and monitoring. The Guidance
makes clear that any initiatives should be proportionate to the company’s
assessment of the likely bribery risk in any given situation.
The most fundamental step that a company can take to help
ensure compliance with the Act and mitigate its risk under the “failure to
prevent bribery” corporate offense is to prepare, implement, and enforce a
group-wide anti-bribery policy. Many companies will already have a policy
in place that complies with the FCPA. Since the Act is more expansive, it
is advisable to review existing policies and revise them as appropriate to
cover the offenses covered by the Act. The Guidance emphasizes that the UK
Government expects companies to take proportionate, but proactive, steps to
prevent bribery. Ongoing review of bribery risks and monitoring of
compliance with a company’s anti-bribery policy are critical aspects of the
Section 7 affirmative defense of having adequate procedures in place to
prevent bribery.
In the case of non-employee associates in particular, there
are various steps that a company can take to demonstrate that it has
adequate procedures in place to prevent bribery by such associates. These
range from informing non-employee associates of the existence of an
anti-bribery policy to contractually requiring compliance with the
company’s policy. Intermediate options include a more limited contractual
requirement to comply with the Act (without necessarily referring to the
full company policy) or permitting termination if the company believes the
associate is not complying with its anti-bribery policy or the Act. In many
instances, associates may have their own anti-bribery policy, in which case
it may be adequate to request their policy, review it, and potentially
include a contractual provision requiring the associate to comply with the
associate’s own policy (assuming it is roughly equivalent to the company’s
policy and consistent with the Act).
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