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Focus: New UK Bill to impose corporate criminal liability for bribery

22 September 2009

In brief: The UK Parliament is expected to pass a new Bribery Bill, which will impose criminal liability on corporations and senior officers for giving bribes, receiving bribes, or bribing a foreign public official. The Bill will have extraterritorial reach, so corporations with a direct or indirect business presence in the UK may face criminal liability for acts committed in the course of the company's business abroad. Lawyer Tess Fitzgerald, Senior Associate Rachel Nicolson and Partner Annette Hughes examine the Bill's provisions.

How does it affect you?

  • If your company has a direct or indirect business presence in England and Wales or Northern Ireland, or you do business with companies that have such a presence, the company's activities in the UK and around the world may be subject to investigation by UK regulatory authorities and prosecution in the UK under this Bill.
  • The draft Bill underlines how important anti-corruption compliance programs and procedures are, as they may act as a defence to a prosecution.
  • The Bill, and the mirror laws in other jurisdictions such as the US and Australia, shows the importance of effective due diligence of joint venture partners, distributors, agents and other third parties, particularly in jurisdictions where there is a high risk of corrupt activity.
  • The Bill will increase the jurisdictional web of liability that criminalises corrupt conduct abroad. Companies and senior officers of companies need to be aware of their potential criminal liability for such acts committed in the course of the company's business abroad.

Background

Allegations of corporate involvement in bribery and corruption at home or overseas present significant legal, reputational and operational risk for any multinational company. Anti-bribery and corruption laws apply in most jurisdictions around the world. This is particularly the case for OECD nations, including Australia, the US and the UK, as a result of the obligations imposed by the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

To implement its OECD Convention obligations, Australia amended the Commonwealth Criminal Code (1995) by, among other things, creating an offence for a person or corporation to bribe a foreign public official (Division 70). The US, which had already criminalised bribery of foreign public officials before the OECD Convention, amended the US Foreign Corrupt Practices Act of 1977 to reflect the OECD Convention approach to the offence of bribery. These provisions have extraterritorial reach, meaning that any Australian or US citizen or corporation can be found liable in their home country for improper conduct occurring overseas, for which they are either directly or indirectly responsible. These statutes also prohibit corrupt conduct in their domestic jurisdictions.

In contrast, the UK has faced criticism from the OECD for its lack of clear substantive prohibitions on bribery, and its failure to comprehensively implement and enforce its obligations under the OECD Convention.

In response to these concerns, and in an effort to simplify the UK's bribery laws, the UK Parliament published a draft Bribery Bill on 25 March 2009. In place of the former 'motley of common law and statutory offences',1 the Bill creates two general offences of bribery and a specific offence relating to bribery of foreign public officials. Notably, the Bill also creates a new offence of negligent failure to prevent bribery that applies specifically to corporations and partnerships.

The UK Bribery Bill has extraterritorial application. In this regard, it forms part of the international trend towards criminalising corrupt conduct abroad, by allowing for prosecution of bribery that occurs anywhere in the world, so long as the company has a business presence in England and Wales or Northern Ireland.

The Bill is likely to go before Parliament in the 2009-10 sitting and, if passed, as expected, come into force in 2010.

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Offences under the Bill

The Bill amends and repeals existing anti-bribery offences under the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916 and abolishes the common law offences of bribery and embracery (ie bribery of jurors).

Under the Bill, it is an offence to:

  • Give a bribe: This offence will occur where a person offers, promises or gives a financial or other advantage to another person. The advantage must be intended to bring about (by inducement) improper performance or reward improper performance, or the acceptance of the advantage must be known or believed to constitute an improper purpose. The offence arises in relation to bribery of any person, including a person in public office or business and trade, so long as the person is expected to perform their function or activity in good faith or impartially, or the person is in a position of trust by virtue of their functions or activities.
  • Receive a bribe: This offence will occur where a person requests, agrees to receive or accepts an advantage (whether or not the person actually receives it). The advantage must be linked to an intended improper performance by the person, or a reward for improper purpose, or the requesting, agreeing to receive, or receiving may itself be an improper purpose. Alternatively, where there is actual improper performance, the improper performance must be in anticipation or in consequence of a request, agreement to receive or acceptance of an advantage. As with the above, the offence arises in relation to any person who receives, accepts or agrees to receive a bribe, including a person in public office or business and trade, so long as the person is expected to perform their function or activity in good faith or impartially, or the person is in a position of trust by virtue of their functions or activities.
  • Bribe a foreign public official: This offence concerns the offering, promising or giving of bribes directly or indirectly to a public official to obtain an advantage where that advantage is not legitimately due (clause 4). In order to commit the offence, a person must intend to influence a foreign public official in the performance of his or her functions and must also intend to obtain or retain business or an advantage in the conduct of business.
  • Negligently fail to prevent bribery: This offence can only be committed by a 'relevant commercial organisation', which includes any corporation or partnership carrying on business in England, Wales or Northern Ireland, whenever incorporated or formed. 'Bribery' for the purposes of this offence refers only to offering, promising or giving a bribe. The offence is committed when:
    • a person performing services for the company or partnership bribes another person in connection with the company or partnership's business; and
    • a person (or persons) connected with the company or partnership, who has the responsibility of preventing bribery, negligently fails to prevent the bribe.

If there is no 'person responsible' for preventing bribery within the corporation or partnership, responsibility for the offence is deemed to be that of any senior officer (such as a director, secretary or manager) of the company or partnership. A defence is available if the company or partnership can show it had adequate procedures in place to prevent bribery being committed on its behalf, but only if there was no negligence on the part of a senior officer.

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Penalty and enforcement

The Bill provides that offences by individuals are punishable by fine or imprisonment of up to 10 years. Offences by corporations are punishable by a fine that, in the case of conviction for negligent failure to prevent bribery and other convictions on indictment, is unlimited.

In recent months, the UK's Serious Fraud Office (the SFO) has made numerous public statements on the measures it will use to encourage compliance with the new provisions and in prosecuting offenders once the Bill is enforced. These include:

  • self-referral: Companies that identify that they have a serious problem in relation to corruption can self-refer to the SFO. Advantages of self-referral include that the SFO will assist the company in addressing its problems and aim to settle any breaches of law outside of the criminal system (ie by civil settlement).
  • investigation: The SFO intends to increase its monitoring and investigation of potential offences under the Bribery Bill. This includes an intention to use a broad range of investigative powers and tactics, including electronic and human surveillance to monitor company activities where there are allegations or suspicions of bribery, in cooperation with other investigative agencies in the UK and abroad.
  • prosecution: The SFO is committed to investigating and prosecuting offences, and intends to make use of the tough sanctions available under the Bill in prosecuting offences. The SFO will view a failure to self-refer as a negative factor when deciding whether to prosecute a company.2

The SFO has published a Guide for companies and advisers explaining its approach to self-referral.

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Extraterritorial application

The extraterritorial application of the Bill, and particularly the clause 5 offence of negligent failure to prevent bribery, has consequences for any company that has operations in the UK, or that does business with any UK company. For example, the offence of negligent failure to prevent bribery does not require that the act of bribery, or the negligent failure to prevent bribery, occur in the UK. Rather, to evoke UK jurisdiction, it is enough that the offence was committed by a company who carries on business in England and Wales or Northern Ireland.

In relation to the other offences, the UK's jurisdiction will be evoked if any part of the offence is committed in England and Wales or Northern Ireland.

There are also extraterritorial implications associated with the SFO's self-referral, investigation and monitoring programs. As an offence involving conduct occurring outside of the UK will frequently also comprise an offence in other jurisdictions, as a part of the SFO's self-referral settlement process, the SFO may assist a company by advising settlement with authorities in other jurisdictions (in discussion with the company). On the flip side, however, the SFO may also share information gathered under its investigation and monitoring program with agencies abroad. In the case of Australian companies, this information could then be used domestically in prosecutions under the Commonwealth Criminal Code.

Footnotes
  1. The Law Commission Report No 313, Reforming Bribery (19 November 2008) Part 2.
  2. See, for example, http://www.sfo.gov.uk

For further information, please contact:

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