Britain’s new Bribery Act, which received Royal assent and whose implementation has now been indefinitely delayed until the government issues further guidance to business, extends far beyond the British Isles.
“The act is far-reaching, its scope is worldwide, its potential defences unclear, and its sanctions include prison terms of up to 10 years and unlimited fines,” says Marc Hansen, a partner at Latham & Watkins LLP in London, England.
While the legislation overlaps significantly with the U.S. Foreign Corrupt Practices Act, it diverges in several important ways. For example, liability under the British legislation attaches no matter where the offence is committed so long as it’s perpetrated by a British resident, a corporation incorporated there or one that carries on any part of its business there.
“It doesn’t matter if the activities or functions that the bribe seeks to affect have no connection with the U.K.,” says Greg Williams, a partner at Australian firm Clayton Utz. “It’s also no defence that local custom doesn’t require these activities to be performed impartially, unless the practice is enshrined in a written law.”
Otherwise, the British legislation extends to the bribery of private citizens while the U.S. act does not. And unlike the U.S. counterpart, the Bribery Act doesn’t require explicit knowledge of an illegal payment as an element of criminal liability.
Its language also more clearly covers payments made to secure favourable treatment other than the awarding of specific contracts. Finally, the Bribery Act doesn’t provide a defence for reasonable and good-faith business expenses directly related to certain promotional activities and makes no exceptions for “facilitating payments.”
The upshot is that Canadian companies operating in the United States and Britain would be in error in assuming that existing compliance policies related to the U.S. legislation will suffice under the Bribery Act.
Generally speaking, the Bribery Act criminalizes the giving or taking of a bribe by individuals in the public or private sectors.
“The U.K. has become one of the first countries to codify anti-corruption legislation in the private sector,” Hansen says.
But perhaps the most daunting aspect of the legislation is the new strict liability corporate offence of failing to prevent bribery on the part of persons associated with the company. This means that international businesses will have to consider the extent to which they must monitor the activities of subsidiaries or joint-venture partners.
“Traditionally, British law limits corporate criminal liability to circumstances in which a person who is the ‘directing mind’ of the company is guilty of the offence,” says Katherine Addleman, a partner at Haynes and Boone LLP in Dallas.
“The Bribery Act, however, broadens corporate liability by making a company liable to criminal prosecution if anyone associated with it pays a bribe in connection with any aspect of its business.”
Unlike its sister provision in the U.S. act, this strict liability offence attaches not only to large or unusual transactions but also to business as mundane as connecting a telephone line.
However that may be, the U.K. legislation allows companies to avoid liability by demonstrating the existence of adequate procedures to prevent bribery.
“The Bribery Act does not provide detailed guidance concerning what constitutes adequate procedures,” Addleman says. “But key issues likely to factor into the determination are a top-level commitment to anti-corruption efforts and the maintenance and enforcement of suitable policies concerning payments, gifts, due diligence of agents and consultants, and proper monitoring of relevant company activities.”
The upshot is that corporations will need to implement programs to prevent bribery. While the government has indicated it will issue guidance three months before the offence provisions come into force, all appearances are that it won’t be prescriptive.
Rather, Lord Willy Bach, one of the Bribery Act’s sponsors, has stated publicly that the guidelines will “set out relevant principles backed up by illustrative good practice examples.”
Bach also specifically referenced the Organisation for Economic Co-operation and Development’s good practice guidance on internal controls, ethics, and compliance and the anti-bribery strategies published by Transparency International and the Global Infrastructure Anti-Corruption Centre.
Otherwise, the GC100, a group of general counsel from prominent U.K. companies, has already published a draft guidance that sets out its view of the key components of adequate procedures.
A review of these materials reveals an emphasis on an appropriate tone at the top of the corporate hierarchy characterized by a statement of values; a code of conduct including clear policies regarding bribery, gifts, hospitality, political and charitable donations, and facilitation payments; vetting of agents, business partners, and other representatives; the hiring of a compliance officer; training and reporting procedures; disciplinary consequences; individualized risk assessments; appropriate risk management by way of monitoring and reassessment, including adaptation of accounting and financial procedures; and whistleblowing mechanisms.
The indications are, then, that the requirements for adequate procedures will resemble the sentencing guidelines for offences under the U.S. act. Under these guidelines, it’s not enough for companies to attempt to discourage bribery by having policies in place. Rather, companies seeking mitigation of sentence must actively attempt to detect and prevent it throughout the organization.
There are concerns, however, about the significance of the government’s delay in issuing the guidelines.
“There’s definitely a question mark over the content and there is definitely some political concern about them,” says Daniel Smith of Latham & Watkins.
In the meantime, Homer Moyer of Miller & Chevalier believes the adequate procedures defence is a double-edged sword. “On the one hand, there’s nothing in the [U.S. act] that is such an explicit incentive to good compliance,” he says. “But the defence is also potentially a huge loophole for U.K. offenders.”
Despite the breadth of the Bribery Act, then, it is too early to assess its precise impact.
Moyer observes, however, that British regulators have indicated they’ll act reasonably.
“For example, it’s quite clear that the U.K. will not be prosecuting companies for making the type of facilitating payments that are exempt under the [U.S. law],” he says.
Overall, Moyer expects enforcement patterns in Britain to approximate those in the United States. For example, because any domestic or foreign company listed in the United States is subject to prosecution under the U.S. law, authorities could in theory prosecute a British company for paying a bribe in Malaysia.
“But we haven’t done that unless the issuer’s conduct has significant impact on the information provided to U.S. investors or some part of the illegal activity has occurred in the U.S.,” Moyer says.
“The act is far-reaching, its scope is worldwide, its potential defences unclear, and its sanctions include prison terms of up to 10 years and unlimited fines,” says Marc Hansen, a partner at Latham & Watkins LLP in London, England.While the legislation overlaps significantly with the U.S. Foreign Corrupt Practices Act, it diverges in several important ways. For example, liability under the British legislation attaches no matter where the offence is committed so long as it’s perpetrated by a British resident, a corporation incorporated there or one that carries on any part of its business there.
“It doesn’t matter if the activities or functions that the bribe seeks to affect have no connection with the U.K.,” says Greg Williams, a partner at Australian firm Clayton Utz. “It’s also no defence that local custom doesn’t require these activities to be performed impartially, unless the practice is enshrined in a written law.”
Otherwise, the British legislation extends to the bribery of private citizens while the U.S. act does not. And unlike the U.S. counterpart, the Bribery Act doesn’t require explicit knowledge of an illegal payment as an element of criminal liability.
Its language also more clearly covers payments made to secure favourable treatment other than the awarding of specific contracts. Finally, the Bribery Act doesn’t provide a defence for reasonable and good-faith business expenses directly related to certain promotional activities and makes no exceptions for “facilitating payments.”
The upshot is that Canadian companies operating in the United States and Britain would be in error in assuming that existing compliance policies related to the U.S. legislation will suffice under the Bribery Act.
Generally speaking, the Bribery Act criminalizes the giving or taking of a bribe by individuals in the public or private sectors.
“The U.K. has become one of the first countries to codify anti-corruption legislation in the private sector,” Hansen says.
But perhaps the most daunting aspect of the legislation is the new strict liability corporate offence of failing to prevent bribery on the part of persons associated with the company. This means that international businesses will have to consider the extent to which they must monitor the activities of subsidiaries or joint-venture partners.
“Traditionally, British law limits corporate criminal liability to circumstances in which a person who is the ‘directing mind’ of the company is guilty of the offence,” says Katherine Addleman, a partner at Haynes and Boone LLP in Dallas.
“The Bribery Act, however, broadens corporate liability by making a company liable to criminal prosecution if anyone associated with it pays a bribe in connection with any aspect of its business.”
Unlike its sister provision in the U.S. act, this strict liability offence attaches not only to large or unusual transactions but also to business as mundane as connecting a telephone line.
However that may be, the U.K. legislation allows companies to avoid liability by demonstrating the existence of adequate procedures to prevent bribery.
“The Bribery Act does not provide detailed guidance concerning what constitutes adequate procedures,” Addleman says. “But key issues likely to factor into the determination are a top-level commitment to anti-corruption efforts and the maintenance and enforcement of suitable policies concerning payments, gifts, due diligence of agents and consultants, and proper monitoring of relevant company activities.”
The upshot is that corporations will need to implement programs to prevent bribery. While the government has indicated it will issue guidance three months before the offence provisions come into force, all appearances are that it won’t be prescriptive.
Rather, Lord Willy Bach, one of the Bribery Act’s sponsors, has stated publicly that the guidelines will “set out relevant principles backed up by illustrative good practice examples.”
Bach also specifically referenced the Organisation for Economic Co-operation and Development’s good practice guidance on internal controls, ethics, and compliance and the anti-bribery strategies published by Transparency International and the Global Infrastructure Anti-Corruption Centre.
Otherwise, the GC100, a group of general counsel from prominent U.K. companies, has already published a draft guidance that sets out its view of the key components of adequate procedures.
A review of these materials reveals an emphasis on an appropriate tone at the top of the corporate hierarchy characterized by a statement of values; a code of conduct including clear policies regarding bribery, gifts, hospitality, political and charitable donations, and facilitation payments; vetting of agents, business partners, and other representatives; the hiring of a compliance officer; training and reporting procedures; disciplinary consequences; individualized risk assessments; appropriate risk management by way of monitoring and reassessment, including adaptation of accounting and financial procedures; and whistleblowing mechanisms.
The indications are, then, that the requirements for adequate procedures will resemble the sentencing guidelines for offences under the U.S. act. Under these guidelines, it’s not enough for companies to attempt to discourage bribery by having policies in place. Rather, companies seeking mitigation of sentence must actively attempt to detect and prevent it throughout the organization.
There are concerns, however, about the significance of the government’s delay in issuing the guidelines.
“There’s definitely a question mark over the content and there is definitely some political concern about them,” says Daniel Smith of Latham & Watkins.
In the meantime, Homer Moyer of Miller & Chevalier believes the adequate procedures defence is a double-edged sword. “On the one hand, there’s nothing in the [U.S. act] that is such an explicit incentive to good compliance,” he says. “But the defence is also potentially a huge loophole for U.K. offenders.”
Despite the breadth of the Bribery Act, then, it is too early to assess its precise impact.
Moyer observes, however, that British regulators have indicated they’ll act reasonably.
“For example, it’s quite clear that the U.K. will not be prosecuting companies for making the type of facilitating payments that are exempt under the [U.S. law],” he says.
Overall, Moyer expects enforcement patterns in Britain to approximate those in the United States. For example, because any domestic or foreign company listed in the United States is subject to prosecution under the U.S. law, authorities could in theory prosecute a British company for paying a bribe in Malaysia.
“But we haven’t done that unless the issuer’s conduct has significant impact on the information provided to U.S. investors or some part of the illegal activity has occurred in the U.S.,” Moyer says.
