Editor: Please tell us about your practice, which extends from your London office internationally to worldwide areas.
Ornstein: I’m responsible for Proskauer’s UK Labor & Employment Practice, covering a full range of issues, including litigation, traditional labor law and counseling. I’m also co-head of Proskauer’s International Labor Law Group, which is responsible for dealing with cross-border labor and employment issues. We work closely with our offices in the U.S., Paris, Hong Kong and China, as well as other labor and employment teams from our network of partner firms across the world.
Editor: Are there any significant trends you’ve noticed in regard to UK and international employment issues?
Ornstein: One significant trend amongst our multinational clients is an increasing desire to have consistent policies, practices and procedures across all their international offices. The challenge is to create a neat balance between the legal and cultural differences in different jurisdictions and uniformity in procedures and practices, which at times produces real tensions. Clients are turning to us increasingly to work with them to find creative solutions where this tension exists in order to harmonize policies and practices across different jurisdictions.
Editor: Why is the Bribery Act becoming an issue for labor and employment lawyers?
Ornstein: The new act, which became effective in the UK on July 1, 2011, contained a fairly radical and controversial provision – the introduction of a new corporate criminal bribery offense whereby commercial organizations can now be criminally liable if they fail to prevent bribery by persons associated with them. The sole defense to this offense is for a business to show it has adequate procedures in place to prevent bribery. This specific defense to the corporate offense has made the Bribery Act an issue for labor and employment lawyers in the UK. In particular, many organizations have implemented new antibribery policies and training to ensure they have a defense to the new corporate offense. As you’d expect, drafting and implementing these policies, providing training, and giving advice to clients when they need to investigate and take disciplinary action against non-compliant employees is involving employment lawyers. There was a frenzy of activity to ensure that organizations had policies in place in time for the new legislation. Some of that initial activity has slowed down, but now we’re reviewing policies, dealing with the consequences of their implementation, and providing training.
Editor: Is there a template that tells you what would be approved as an adequate compliance program?
Ornstein: The guidelines that’ve been issued are based around six principles for adequate bribery prevention: proportionate procedures, top-level commitment, risk assessment, due diligence, communication (including training) and monitoring and review. Examples of how this should be put into practice include providing employees with regular antibribery and anticorruption training (for example, as part of their induction and thereafter on a regular basis). The principal issues that training should cover include ensuring employees understand what’s meant by bribery and the different types of bribery that are prohibited by the Act. Employees should understand the risks of engaging in corrupt activity both to themselves and to their business. They should be very familiar with their company’s anticorruption and antibribery policies and be aware that companies must have top-down zero tolerance approaches towards bribery and corruption. They should be given clear guidance as to how they should report corruption, and there should be clear processes in place to allow employees to make complaints and report any corrupt activity. There must also be clear communication to employees that they will be protected against any retaliation arising out of their having raised concerns. As well as being regular, training programs should be monitored and, ideally, evaluated. As one would expect, the training should be tailored to a company’s particular business having regard to the jurisdictions where employees work, the places they do business, and the particular risks of that business, such as any red flags that can be identified. Those employees who are engaged or exposed to a higher risk of corruption should be provided with more intensive training. The form of the training can vary from online to classroom courses.
Editor: Have there been any prosecutions under the Bribery Act? Do you expect the Serious Fraud Office (SFO) will enforce it strictly? Has there been any guidance provided by the SFO or other governmental organization?
Ornstein: There’s only been one prosecution to date under the Act. A former court administrative officer was sentenced to a three-year prison term for bribery offenses as a result of accepting a £500 bribe to remove a speeding charge from the court record. There have not yet been any prosecutions under the new corporate offense mentioned earlier. However, it’d be wrong to assume this means the SFO doesn’t take this matter seriously – there are suggestions that a number of significant investigations are underway. Other regulatory bodies, such as the Financial Services Authority, have powers to impose fines on businesses involved in bribery and have imposed multimillion-pound fines, such as one imposed last summer on a business as a result of its failure to take reasonable care to establish and maintain effective systems and controls for countering the risks of bribery and corruption. When the SFO decides to bring criminal prosecutions arising out of Bribery Act offenses, they must follow the guidance contained in “the full code test,” a general guidance prosecutors must follow to determine whether or not to bring a prosecution.
In addition, the SFO published the “Bribery Act Prosecution Guidance,” which details how it intends to exercise its prosecutorial discretion in relation to the Bribery Act, setting forth relevant factors for determining whether or not to prosecute bribery offenses. For example, factors tending in favor of a prosecution would include the likelihood of a significant penal sentence where the offense is premeditated; where the offense of the person who has been bribed facilitates more serious offenses; and where the person involved has abused a position of authority or trust. Conversely, factors tending against prosecution include where the harm is minor and resulted from a single incident, or where self-reporting remedial action has occurred. In determining whether to bring a prosecution, the SFO is also required to look at factors specific to the alleged offense. For example, in making a charging decision for a corporate offense, the prosecutor would consider whether it was likely an organization had adequate procedures in place to enable it to invoke the statutory defense to a corporate offense – still another reason to show why adequate procedures and a strong compliance culture will not only help a company defend itself in any court proceedings but may actually help the company avoid any charges being brought against it in the first place.
Editor: How frequently does your practice call for advising clients to counsel and train their employees as to the terms of the Act?
Ornstein: When the Act was first enacted, we received many requests from clients to draft and implement policies and help them with training of personnel to prevent bribery. We’re now at a stage where most of our suggested procedures are in place and our work is more related to updating policies, providing training and dealing with queries arising out of potential breaches of policy. We’re also involved in advising on investigations and disciplinary hearings arising out of failures to comply with policies.
Editor: How many of your clients have compliance programs? What are the constituents of their training programs?
Ornstein: I’d go so far as to say all of our clients with any material UK workforce have compliance programs in place. In some cases our clients use external trainers such as ourselves; in other cases they use their own compliance officers to provide training (with whom we often work to put programs together). Key to any program is tailoring it to a business – identifying the particular risks faced by that business to ensure that employees understand those risks and that there are clear ways to report concerns without risk of retaliation. It’s important to document that the training has been carried out and, most importantly, to ensure the business practices what it preaches. In practical terms, the training we recommend uses case studies to give employees real-life scenarios illustrating how to deal with likely risks and ensuring that employees understand the prohibitions under the Act. Carrying out that type of training, as well as having relevant policies, is crucial to showing the company has a defense to any possible corporate offense and to reducing the chances of employees engaging in unlawful conduct.
Editor: The Bribery Act outlaws facilitation payments unequivocally. Is it possible for some companies to obtain relief in order to prevent sanctions against their employees under unusual stress conditions?
Ornstein: Facilitation payments are clearly and unequivocally unlawful under the Bribery Act with no exceptions, and it’s important for international businesses to understand this. Nonetheless, the Bribery Act Prosecution Guidance notes that when exercising its prosecutorial discretion in relation to an unlawful facilitation payment, factors tending against a prosecution include a payment being a small and one-off incident, which might result in a nominal fine, or where a facilitation payment comes to light as a result of a genuinely proactive approach involving self-reporting and remedial action by the company making the payment. As to the stress positions, a situation where the payer of the payment is in a vulnerable position because of the circumstances in which the payment was demanded may be grounds for the prosecutors to exercise discretion not to initiate a prosecution. However, it would be unwise to view this guidance on prosecutorial discretion as constituting an exception to the prohibition against facilitation payments.
Editor: In terms of your clients in the Organization for Economic Cooperation and Development (OECD) generally, how seriously do the signatory countries enforce the antibribery provisions of the treaty?
Ornstein: The OECD is having difficulty in persuading many of its signatories to its antibribery convention to enforce its provisions. For example, Transparency International, an international anticorruption organization, publishes regular reports on the enforcement of the OECD Anti-Bribery Convention. Its 2011 report concluded there was inadequate enforcement of the convention by its signatories. Of the 37 signatories, Transparency International held that there was active enforcement in only seven countries, including the UK and the U.S.; moderate enforcement in nine of the signatory countries; and little or no enforcement in 21 of the countries signatory to the convention. The report concludes that for many signatories, enforcing anticorruption legislation so as to comply with the OECD Anti-Bribery Convention is not a priority. The convention itself has no effective enforcement mechanism and therefore its enforcement’s broadly left to individual governments.
Editor: Is there any provision in the EU governance mechanism to incorporate the provisions of the OECD as regards its constituents?
Ornstein: While all EU member states are signatories of the OECD Anti-Bribery Convention, an EU Commission press release issued in February 2012 indicated that in spite of the legal and policy initiatives taken by the EU so far, the actual results in tackling corruption (including complying with the convention) remain unsatisfactory in many EU member states. To combat this, the EU’s taking measures to seek to reduce corruption amongst member states, including, starting in 2013, the release by the European Commission of a biannual diagnosis of corruption-related problems in the EU, pointing to critical issues and proposing solutions to help intensify anticorruption measures. In many respects the lack of success by both the OECD and the EU in reducing levels of corruption highlights that the responsibility to reduce levels of corruption and bribery still remains with national governments. In that regard the UK Bribery Act is a good example of a national government taking the initiative to implement effective and enforceable legislation to reduce bribery and corruption. When the Bribery Act was implemented, there were claims from business that the stringency of the legislation, especially the new corporate offense, might deter businesses from operating in the United Kingdom as well as place UK businesses at a competitive disadvantage outside of the UK (where, because of its extra-territorial scope, the Bribery Act still applies) on the grounds that non-UK competitors are not required to comply with such stringent legislation. In my view this risk has not materialized. I take this optimistic stance that the new legislation has bolstered the reputation of the United Kingdom as an honest, fair and open place to do business.