Bribery Act : is the world cleaning up its act?

The UK Bribery Act 2010 has been in force for nearly two years and despite a lot of initial anxiety about its anticipated impact on UK competitiveness it remains hard to tell what  effect it has had.  Certainly there have been no high profile corporate prosecutions. An Ernst & Young survey last year reported that over 60% of UK business where still unaware of it. It’s most high profile impact so far appears to have been the placing of unnecessary restrictions by nervous compliance departments on the acceptance by corporates of hospitality tickets to the Olympic Games.

However, even if the Bribery Act has got off to a slow start, the fight against corruption is clearly gaining strength worldwide and anti-bribery compliance (“ABC”) is here to stay. It should be remembered that The Bribery Act only relates to offences commitment after 1 July 2011. The much older US Foreign Corrupt Practices Act has produced serious prosecutions and significant fines: Siemens $800m in 2008, KBR $579m in 2009, BAE Systems $400m in 2010 and now Walmart awaits its fate following events in Mexico. Global businesses of all types need to take ABC seriously.

What does the global employer who has or acquires a “UK business” need to know about the Bribery Act?

First, to whom does it apply? At a corporate level, it applies to any company that is either registered in the UK or does business there (a “UK Business”). If you have a UK subsidiary or a UK based business owned by a non-UK registered entity, it applies to you.  In addition it applies if anyone “associated” with the UK Business does a prohibited act on its behalf or to its advantage.  An  “associated person” is defined as someone who performs services for the UK Business.  It does not matter in what capacity the associate performs those services.  An associate can therefore be an employee, agent, subsidiary, distributor, shareholder or joint venture partner.

Secondly,  what does it catch?  The Act is widely drafted. Simply put, it makes it a criminal offence under English law to offer, promise or give an advantage, financial or otherwise, to induce or reward improper performance of a function or activity. The advantage offered does not have to be directly to the person who will or has improperly performed the function in question.  The function or activity covers both public and private business and both individual and institutional activity.  The criminal activity itself can take place anywhere in the world.

Thirdly, is there any defence?  In the case where an associate is guilty of bribery to the benefit of the UK Business,  it will be a defence if the UK Business can show that it has in place “adequate procedures” designed to prevent such activity.  Adequate procedures fall under 6 headings: proportionality, top level commitment, risk assessment,  due diligence, communication and training and lastly monitoring and review.

Finally,  what are the penalties?  For companies convicted under the Act the penalties will be unlimited fines and considerable adverse publicity as well as possible bans on tendering for future contracts.  For individuals, the maximum penalty is 10 years imprisonment.

Global businesses that own or are acquiring business interests in the UK (whether or not through a UK subsidiary) will need to take ABC seriously both as part of due diligence for the acquisition and thereafter as a major element of continuing compliance.