The Long Arm Of the U.K. Bribery Act
By Laura O'Neill, Lisa Navarro and Kara Bombach
For U.S. companies, particularly those active in foreign countries or engaged in high-profile markets such as the defense industry, maintaining ethical operations and avoiding corruption is essential. Many U.S. companies have in place policies designed to maximize compliance with the Foreign Corrupt Practices Act (FCPA). The expanded breadth of the anticipated U.K. Bribery Act 2010 should trigger a revisit, perhaps even an overhaul, of existing corporate anti-corruption policies and procedures, even by U.S. companies with minimal connections in the United Kingdom.
U.S.-based companies should heed this U.K. legislation because of the Bribery Act’s broad jurisdictional thresholds. In addition to all relevant acts of bribery occurring in the United Kingdom, it also covers acts of bribery, wherever committed, to the extent the offending party has a “close” U.K. connection — for example, a British citizen or corporate entity.
Even broader, however, is the reach of the “corporate offense” provision, which criminalizes “relevant commercial organizations” for failing to prevent acts of bribery by its employees, agents, subsidiaries and joint venture partners. The definition of a relevant commercial organization is widely drafted to catch any company that does business in the United Kingdom, as well as all U.K. incorporated entities. Whilst this might not sound too onerous on its face, to be subject to the Bribery Act, offenses need not be committed in the country, and need not be committed by the part of the U.S. business with connections to the United Kingdom.
As such, a non-British entity could find itself prosecuted under the Bribery Act for acts committed outside of the country by non-U.K. subsidiaries, simply because part of its business takes place in the nation. As a strict liability offense, it will be no defense to claim ignorance, or even negligence. The only defense is to demonstrate that adequate procedures had been put in place to try to prevent the bribery from happening. What is considered adequate, however, will be a matter for the courts to determine.
If the Bribery Act offenses mirrored the FCPA, its impact would merely be to increase the number of potential international prosecutors. The Bribery Act, however, goes much further than the FCPA or any other national equivalent, including the Organization for Economic Cooperation and Development’s Convention against Corruption.
Existing rules criminalize bribery of foreign public officials. The Bribery Act also bars bribery of private individuals and businesses, and bribery involving domestic governmental officials. The FCPA criminalizes offering or paying bribes whereas the Bribery Act also criminalizes receipt of bribes.
These additional offenses require a reassessment of corporate attitudes, market strategies and vulnerabilities. For example, robust due diligence of international partners and payments to and from third parties — already integral to an effective FCPA-compliance program — is now key.
The FCPA exempts so-called “facilitation payments” and allows an affirmative defense for reasonable and bona fide business expenditures directly related to certain promotional activities. The Bribery Act provides neither of these exceptions.
In banning facilitation payments, the U.K. government’s approach is in keeping with recent OECD policy statements. Given that the Bribery Act explicitly renders local custom and practice irrelevant to whether an offense has been committed, how a firm clears customs and renews visas or licenses may require review.
The decision to omit exceptions for corporate promotion expenses is rooted in a belief that the scope of legitimate conduct should be a matter for the courts and prosecutorial discretion. With such a thin dividing line, however, between lavish corporate hospitality and corrupt practices, this uncertainty has not been welcomed by industry.
Corporate and individual penalties for Bribery Act violations can be severe. The FCPA maximum prison term is five years; Bribery Act convictions can be up to 10 years. For companies, monetary fines are unlimited.
Perhaps even more important: entities proven guilty of a Bribery Act offense may be permanently barred from bidding for public contracts anywhere in Europe under European public procurement rules.
One motivation behind the Bribery Act was criticism of the United Kingdom’s record of prosecuting bribery. To further counter this criticism, many anticipate vigorous enforcement under the Bribery Act from designated U.K. prosecutors, including the Serious Fraud Office, and joint enforcement with U.S. officials for actions violating both the Bribery Act and the FCPA.
The Bribery Act comes into force April 2011, which gives companies until then to update their anticorruption compliance policies. On Sept. 14, the U.K. government published draft guidance for developing, implementing and maintaining effective and adequate anti-corruption policies and procedures. Consultation on that draft guidance closed on Nov. 8, with a final version to be published in early 2011.
The degree of change introduced by the Bribery Act means that there is no room for complacency. It raises the bar for global anticorruption standards, whilst making it clear that the risks should be addressed on a pre-emptive basis to avoid liability. All companies with a connection to the United Kingdom should heed that message.Laura O’Neill is a shareholder (firstname.lastname@example.org) and Lisa Navarro (email@example.com) is a senior associate in Greenberg Traurig Maher LLP’s London office. Kara Bombach (firstname.lastname@example.org) is a shareholder in the export controls practice group in Greenberg Traurig LLP’s Washington, D.C. office. The views expressed are solely those of the authors.