New UK Bribery Act 2010 and its impact for Australian business

Articles Written by Robert Wyld (Consultant)

International regulation of corruption gathers pace

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.

Critical features of 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

The bribery offences are divided into three categories:

  • first, general offences which are concerned with the conduct of the payee and the payer where there is an offer of, a promise to, or the giving of a financial advantage intending to induce another to perform improperly a relevant function or activity;
  • second, the specific offence concerns the bribery of foreign public officials, where the offence is committed if a defendant offers or pays a bribe with the intention of influencing a foreign public foreign official in his or her official capacity in order to obtain or retain business or any advantage in business; and
  • third, the corporate bribery offence deems a commercial organisation to be guilty of an offence if a person 'associated with' the corporation bribes another person intending to obtain or retain business or any advantage in the conduct of the corporation's business.

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.

Facilitation payments

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).

The corporate bribery offence - strict liability

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:

  • Principle 1 - a corporation must regularly and comprehensively assess the nature and extent of risks relating to bribery to which it is exposed.
  • Principle 2 - a corporation's top level management (board of directors or owners) are committed to preventing bribery and a culture is established where bribery is never acceptable and this is clearly communicated to all levels within the corporation and to third parties.
  • Principle 3 - a corporation has due diligence policies and procedures covering all its operations and in all markets where it does business.
  • Principle 4 - a corporation's policies and procedures to prevent bribery are clear, practical, accessible and enforceable and reflect the role of the entire workforce from the top down.
  • Principle 5 - a corporation effectively implements its anti bribery policies and procedures and ensures they are embedded throughout the business.
  • Principle 6 - a corporation institutes monitoring and review mechanisms to ensure compliance with anti bribery policies and procedures as its business and operations develop.

Individual liability for corporate behaviour

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.

Fines and Penalties

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.

Multi-jurisdiction investigations and prosecutions

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.

Practical steps to implement compliance with the Bribery Act - ACT NOW!

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:

  • review all existing policies and procedures and internal controls (administrative, financial, accounting, audit and operational), particularly if commercial operations are conducted in "high risk" countries (see the Transparency International 2010 Corruption Perceptions Index);
  • review its compliance training programs to cover the impact of the Act;
  • review contractual relationships with third parties (consultants, joint venture parties, agents) to ensure legal obligations are properly reflected in contractual rights;
  • promote and reinforce a culture of compliance and zero tolerance of bribery or corruption;
  • ensure transparency and accuracy in all record-keeping so that what is recorded in writing is what in fact occurred;
  • implement an effective "whistleblower" program to ensure all employees feel confident in reporting suspect conduct;
  • have in place a contingency plan to respond to allegations of bribery or corruption; and
  • lastly, but by no means least, ensure the whole corporation, from the Chairman to the cleaner, understands the importance of ethical conduct and all employees, however important, are subject to and ask themselves the one critical question if they are ever in doubt - IS IT THE RIGHT THING TO DO?
Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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