Editor: Please give our readers an overview of the new UK Bribery Act ("Act").
Maples: Before the election and the change of government in the UK in May, one of the final acts of the last Parliament was to pass new anticorruption legislation in the form of the Bribery Act 2010. The UK has long had laws against corruption, but this new law is designed to update those laws and bring them into line with international practice. In fact, in some respects the Act goes a good deal further than its counterparts in other countries. The Act comes into force in April 2011 and companies affected by it should be taking steps now in order to ensure compliance.
Editor: What is the definition of "bribery" under the Act?
Shankland: The main scheme of the Act is to outlaw or to prescribe as an offense the act of giving or offering a bribe. It's also notable that under our Act, it will be an offense to receive or solicit a bribe. The offense is not simply aimed at offering bribes to public officials, it's extremely broad. It covers bribes offered or received in almost any business, commercial, governmental or regulatory context. All that is required is evidence that the bribing party sought to obtain influence over the actual or would be recipient of the bribe in order to gain a business advantage or to obtain or retain business. The penalties prescribed in the Act are an unlimited fine and potentially ten years in prison. The Act is aimed at both individuals and companies.
Editor: How does this differ from the approach taken by the U.S. Foreign Corrupt Practices Act ("FCPA")?
Maples: The Act is broader in its scope than the FCPA in several important respects. Unlike the Act, the bribes prohibited by FCPA are limited to those to foreign officials. The FCPA does not target those who receive bribes and does not require some payments to have been made corruptly. However, the UK Act follows the FCPA in prohibiting indirect bribery, that is to say to use a third party to make a bribe.
Editor: Are so-called "facilitation payments" acceptable under the Act?
Shankland: Facilitation payments are generally taken to be payments which are routinely made, typically to officials in a foreign country, but for which there is not actually any statutory or legal requirement to be met: for example, the issuance of permits or occupation certificates, registration fees and that kind of thing. Typically those are functions which the relevant authority is already obliged to perform, but in many places these are given as a matter of course so the question is whether they will fall foul of the Act. The answer to that is potentially they will, but the UK authorities have already indicated that they wouldn't expect to prosecute someone in a case of small payments made which are necessary to the conduct of a business abroad.
Editor: Like having lunch with someone to discuss a business matter?
Shankland: Well that is a slightly different point and again there is guidance on that too. On both points what the government has in effect said is, "Look we're aware of facilitation type arrangements and we are aware of corporate entertainment and provided that they are within reasonable boundaries, it is unlikely that a diligent, properly-run company would be prosecuted for making those types of payments."
That said, it's clear from the draft guidance that has been issued that it will be a fact-sensitive question so in the case of a "facilitation payment" an enormous payment dressed up as something which is routinely done in that jurisdiction may well be an offense and in the case of corporate entertainment, the question will be whether or not the entertainment is reasonable in the circumstances or unduly lavish.
Editor: What is the territorial scope of the Act?
Maples: The Act is broad in its territorial scope; it applies to any set of facts which even in part took place in the United Kingdom. Furthermore, even if the defendant, person or company, can prove that none of the relevant activities took place in the UK, it may still face liability if there is a "close connection" with the UK, that includes being a UK citizen or a company incorporated in the UK. This broad extraterritorial reach will plainly be of particular concern to multinational companies that have some activity in the UK and/or some other connection to the country.
Editor: What activities trigger entity liability under the Act?
Shankland: Depending on your perspective, the most revolutionary or most progressive provision in the Act makes a business liable for actions of parties on its behalf. A commercial organization would be guilty of an offense if someone "associated" with it bribes another person intending to obtain or retain business for that organization.
The question that is on everyone's lips therefore is what does "associated" mean? It appears that it means that the party must perform services on behalf of the company so that would clearly cover employees, agents and other consultants, but it's unclear whether or not it goes so far as group subsidiaries or other companies in structures which are closely associated with it. The breadth of the term "associated person" is probably the area of most concern for U.S. corporate counsel considering how their company might be affected by the Act.
The other point to note here is that this is a strict liability offense. So, even if no one within the company was aware of the fact that somebody associated with was offering bribes, the company potentially could be found guilty of the offense. This differs from the previous position in English law where in practice the company would not be found guilty of a corruption offense unless its senior management was involved.
It is a statutory defense to a strict liability offense if the company can show that it had in place "adequate procedures" to prevent bribery, but there is always debate about what adequate procedures are.
Editor: What must a company do to show that it has "adequate procedures" in place?
Maples: The new UK government is due to publish guidance in January 2011 on what constitutes adequate procedures. Two things though are already clear. First of all, the relevant procedures will need to reflect the particular circumstances of the business in question, taking into account those aspects of the business which are most vulnerable to bribery taking place. Secondly, the procedures cannot simply be based on procedures already in place to comply with legislation and sentencing guidelines in other jurisdictions, such as under the FCPA. As we've already explained, the scope of the new UK legislation is extremely broad and the procedures will need to reflect that breadth.
Tempering some of the concern that your readers might have about what I just said, Lord Bach, one of the Ministers responsible for this legislation, said, "It is not our intention to drag well-run companies through the courts for every infraction." Therefore, although the requirement to have adequate procedures is well enshrined, there is some hope that this requirement will be interpreted in a sensible manner. We expect that the government's guidance will recommend that procedures be put in place to address things like corporate governance, training, internal and external audits and whistleblowing.
Editor: Who is responsible for prosecutions under the Act, and what is the impact of the recent Innospec case on prosecutions?
Shankland: It's important to note when discussing prosecuting authorities, that the Act is extremely broad in its scope. So, potentially the prosecuting body, which in this case is the Serious Fraud Office, is looking at prosecuting people and business organizations in a number of different places for a number of different things.
The SFO in recent times has been very active in trying to present itself as a progressive form of policeman/mediator and in particular has openly declared that it would like to base its approach to prosecution more on the approach of U.S. regulators and law enforcement agencies who often resort to things like plea bargaining, financial settlements with defendants, offering whistleblowers protection from prosecution or other offers of immunity. That approach has been used by the SFO in several quite high profile cases recently. It has allowed the SFO to work more freely with other agencies such as the U.S. Department of Justice and SEC.
Although these practices might seem very sensible, they were brought into question by the Innospec case. This case was brought under the previous bribery laws. In it, the judge made a very important point. He effectively said that while the SFO might consider it expedient or convenient to settle with people or potentially not prosecute them or to move straight to a sanction or a lesser sanction with them, it's for the court and not for the SFO to actually impose sentences for bribery as with all other criminal activity.
Thus, this case casts doubt on the ability of the SFO to use plea bargain arrangements, global settlements and the other approaches I just mentioned. We would certainly hope that when the Act goes into effect, the SFO will be able to take a more pragmatic approach. Nevertheless, the Innospec case is a severe warning that the Act is apt to be strictly and very vigorously enforced by the SFO and the courts here. Your readers should be sure that they have "adequate procedures" in place so that this defense is available to them should they ever attract the attention of the SFO in the context of a bribery case.