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As of 1 July 2011, the UK Bribery Act 2010 (the Bribery Act) comes into effect. It dramatically rewrites the UK's bribery and anti-corruption laws, creates an extra territorial operation for these laws, and upon any conviction being recorded against a company or an individual, may give rise to unlimited fines, disgorgement of profit orders and for an individual, imprisonment.
The director of the UK Serious Fraud Office (SFO) has made it clear that he expects the business community to proactively understand and manage their obligations under the Bribery Act, to self-report any potentially incriminating conduct and to engage in a 'self-reinforcing cycle of behavioural change' to ensure that their business operations, wherever they are conducted, are compliant with the Bribery Act.
Given Australia's lack of any enforcement record in relation to foreign corruption over a decade, and the SFO's desire to aggressively target foreign corporations having a commercial presence in the United Kingdom, it is critical that Australian corporations and senior executives involved in trade with or to the UK (as those most potentially at risk), undertake a review of the Bribery Act, understand its provisions and impact and ensure that their operations are compliant with the Bribery Act.
The jurisdiction of the Bribery Act is likely to extend to corporations and individuals who have a 'close connection with' or a 'demonstrable presence in' the UK. The SFO has indicated it will seek to apply a commonsense approach to the application of these provisions. Merely having a subsidiary or a joint venture entity may avoid liability and hence jurisdiction. However, anything more than a mere presence, with proactive commercial activities being undertaken in the UK, is likely to give rise to jurisdiction.
The bribery offences are divided into three categories:
The SFO and the UK Director of Public Prosecutions (DPP) have issued a Joint Prosecution Guidance in relation to factors which will be taken into account in determining whether or not a prosecution will take place. A public interest test will be applied to determine whether a prosecution will take place, as follows - whether there is sufficient evidence to provide a realistic prospect of conviction and if so, whether a prosecution is in the public interest. The SFO takes the view that bribery is a serious offence and there is an inherent public interest in prosecutions to give practical effect to the criminalisation of bribery and corruption.
The Bribery Act makes no allowance for facilitation payments. They are banned under the Bribery Act. On this point, the UK laws differ substantially from the Foreign Corrupt Practices Act 1977 in the US (the FCPA) and the Criminal Code 1995 (Cth) in Australia. The SFO has made it clear that reasonable payments towards hospitality and entertainment will not give rise to a potential liability. However, where there is lavish or extravagant payments to, or hospitality and entertainment with, public officials or private clients, that may create potential criminal liability.
Corporations would be well advised to review all of their standard policies and procedures to ensure that facilitation payments are banned without exception (except perhaps only for payments made upon a threat to the life or liberty of a person).
A corporation will be guilty of an offence if a person 'associated with' it bribes another person intending to obtain or retain business or an advantage in the conduct of the corporation's business. The definition of an associated person is very broad and includes a whole range of persons connected to an organisation who may be capable of committing bribery on its behalf.
It is a defence for a corporation that it had in place 'adequate procedures designed to prevent a person associated with it from undertaking such conduct'. The question is what constitutes 'adequate procedures'. The SFO has indicated that a corporation should have in place 'proportionate procedures' (to the identified risks) and actively implement those procedures throughout its business.
In March 2011, the UK Ministry of Justice issued a Guidance which set out a number of Guidance Principles which the UK Government and the SFO expect corporations to comply with and which will be taken into account by a Court in assessing whether, in a particular case, a corporation had 'adequate procedures' in place and therefore, a defence to the corporate bribery offence. These Principles are as follows:
The Bribery Act provides that directors, managers or other senior officers will personally be held criminally liable if they have 'consented to or acted in connivance of the commission' of any of the offences set out in the Bribery Act. The corporation must be guilty of an offence before individual liability can be determined. Where conduct or an offence occurs outside the UK, individual liability will only arise where the senior corporate officer has a 'close connection' with the UK. It remains to be seen what will be required to satisfy a 'close connection' in order to give rise to potential criminal liability.
The Bribery Act imposes unlimited fines on offences committed by a corporation or an individual and in addition, an individual faces imprisonment up to 10 years.
The UK Courts have given clear signals, under the pre-existing criminal law, that sentences and fines should be comparable to those imposed in the US, so there is no discrimination between countries on the sanctions imposed on offenders who are convicted of bribery or corruption.
The experience from the US FCPA investigations is that there is likely to be bribery or corrupt behaviour in more than one jurisdiction. The question arises, particularly with any multi-jurisdiction investigation, as to where and with which regulator any negotiation and settlement discussions should properly occur.
These issues in the UKare far from settled. The English Courts have made it clear that it is the Court's function and only the Court's function to impose a settlement or fine. Any settlement agreement which fixes an amount a corporation or an individual may be liable to pay is unacceptable and not recognised under English law.
In late 2010, the United Kingdom Crown Court revisited the issue of global settlements in R v BAE Systems Plc. Despite some judicial misgivings, the Court accepted a global settlement where the primary deal was struck involving the US and UK regulators with the company pleading guilty in the UK to an offence of failing to keep reasonably accurate records concerning its historic activities in Tanzania involving the sale of a radar system for £39.75 million. The settlement was structured so that any fine was to be determined by the UK Courtwith the balance, up to an agreed sum, to be paid to the victim, the Government of Tanzania. The importance of this decision is that any settlement arrangements put in place by a corporation involving bribery or corruption subject to UKjurisdiction must recognise the independence of the UK Courts and any agreement must permit the Court to fix the penalty.
The Bribery Act has been on the UK statute books since late 2010. The Guidance Principles for the business community and the "adequate procedures" defence were published in March 2011. The SFO has been out in the business community working with corporations to highlight what it expects by way of ethical corporate behaviour. As always, ignorance of the law is and will be no excuse.
It is recommended that at the very least, Australian corporations which have a 'close connection with' or a 'demonstrable presence in' the UK should, if not already, consider implementing the following:
The ACCC has released its Compliance and Enforcement Priorities for 2020.
With significant regulatory change coming into effect the spotlight is staying firmly on
culture, ethics and regulatory compliance. An organisation’s social licence to operate
remains a priority...
Updated article: originally published as 'review of the regulatory and tax landscape for foreign investors.'