1st July 2011
The 'Massive Reach' of The Bribery Act 2010
Has it bitten off more than it can chew?
John Williams comments on the coming in to force today of the UK Bribery Act 2010.
On 1st July 2011 the new Bribery Act 2010 came into law. Viv Robinson QC (Current General Counsel for the SFO) has commented to Jonathan Humphries on BBC Radio 4 today on the 'massive reach' of the new Act; Click Here for the link. The Act certainly is an ambitious attempt to put the UK at the forefront of anti-bribery States. The Act has attracted some controversy and a certain amount of prevarication from the current administration. It follows criticism of the UK by the OECD following the dropping of the BAE investigation in to the Saudi Arabian al-Yamamah arms deal. There are 3 major features of the Act which have provided the focus for controversy namely:
The extra territoriality of the Act and the fact that a 'relevant commercial organisation' which need not be incorporated in the UK but which carries on a business or part of a business in the UK can be guilty of an offence if it fails to prevent bribery. It should also be noted that the bribery in question need not have occurred in the UK. In this regard Mr Robinson is correct when he says that the new Act has a 'massive reach'.
The Act provides a defence to companies if they can establish that they have 'adequate procedures' in place to prevent bribery. The Ministry of Justice have produced guidance on the new Act and a framework for what might constitute 'adequate procedures'. In this respect the UK administration and the SFO are attempting to encourage companies to act as internal policemen and self report if they discover bribery within their organisation. Notably no 'de minimis' provisions have been included in the guidance setting out a level below which a payment will not be construed as being a bribe. The 'adequate procedure' provisions have exorcised many responsible compliance officer for UK and foreign based companies with business dealings in the UK. Companies who have not yet carried out risk assessments on anti-bribery procedures and if necessary put procedures in place would be well advised to do so without delay.
Facilitation payments are not exempt from prosecution (unlike the FCPA legislation in the USA). In this regard UK businesses are seen to be at a distinct disadvantage to businesses in its competitor States. However, of course under the extra territorial provisions of the Act there will be nothing to stop UK businesses complaining against competitor companies who carry on business in the UK but who engage in business in part in the UK and fail to prevent bribery (wherever it is in the world) from complaining to the SFO about those companies.
A KPMG survey release in June 2011 found that a third of UK companies had not yet conducted an anti-bribery and corruption risk assessment and also that 71% of companies surveyed believed that there are some places in the world where business cannot be done without engaging in bribery and corruption.
UK businesses have expressed real concern that they will be at a serious disadvantage to their competitors. If 71% of the respondents to the survey take the view that there are some places in the world where business cannot be done without engaging in bribery and corruption then an objective risk assessment by companies trading in those countries may lead them to conclude that they cannot carry on trading in that country if the company and its directors want to avoid the risk of prosecution and imprisonment/confiscation of assets. The incorporation of 'facilitation payments' within the definition of bribery only adds to the woes and worries of these companies and their directors. Whether embassies in those countries are able or willing to offer practical assistance to such companies is also open to question. A real possibility is that companies will either pull out of that market or base themselves in a more friendly jurisdiction and cease to have business dealings in this country. Both outcomes are likely to have adverse implications for profits and tax revenues in this country.
The guidance issued by the Ministry of Justice emphasises that companies should carry out risk assessments. Should their risk assessments include an analysis of how likely it is that the SFO would make a decision to prosecute? An analysis of the SFO's recent track record in pursuing contested corruption cases would tend to suggest that contested prosecutions are few and far between. In the cases that have been brought they have usually been on the basis of a settlement and the SFO have also been criticised by the Courts in reaching settlements with companies which are close to attempting to usurp the function of the court. Obtaining admissible evidence of 'facilitation payments and practices' carried out by countries and officials who do not score well on Transparency International corruption perception ratings where those countries may not react kindly to the UK's attempt to impose 'Western' business values on them is likely to be very problematic and costly. In these days of cutbacks is there is a real political will to fund the prosecuting authorities properly to investigate and prosecute this 'massive reach' of potential cases? How will the UK taxpayer react to increased taxes for the UK prosecuting authority to act as world's foremost anti-bribery policeman whilst at the same time tax revenues may fall because of UK based companies migrating to friendlier jurisdictions and taking their profits and jobs with them? All in all the risk assessment of the likelihood of a successful contested prosecution may be small.
The consequence of a low risk of prosecution because of evidential difficulties and a lack of resources could lead to the law falling in to disrepute. After all this hype what will be the implications of few successful prosecutions? This would produce the worst of both worlds in that legitimate businesses will have been discouraged either from continuing to trade in low rated countries or they will have located elsewhere. At the same time the UK would be perceived by some countries as being arrogant, interfering and even colonial in approach whilst the anti bribery lobbyists may perceive us as 'talking a good talk' on anti-bribery but in reality not being prepared to 'put our money where our mouth is' and fund this 'Massive Reach' of UK law properly. This legislation is ambitious but not without real risk and it will be interesting to see how it develops in years to come.
John Williams 1st July 2011.
John has represented clients in major corruption investigations and also presented a webinar to in house counsel for Lexis Nexis on the Bribery Act 2010. If you or your company would like advice on anti-corruption procedures please either email john.williams@banksidelaw.com or telephone on 0844 745 4000.