- New Development in Foreign Anticorruption Law: The United Kingdom's Bribery Act Reaches Far Beyond the British Isles
- April 23, 2010 | Authors: Katherine Smith Addleman; Edward M. Lebow; Brian McKay; Barry F. McNeil
- Law Firms: Haynes and Boone, LLP - Dallas Office ; Haynes and Boone, LLP - Washington Office ; Haynes and Boone, LLP - Dallas Office
On April 8, 2010, the United Kingdom adopted The Bribery Act, and all U.S. companies with operations in the U.K., that employ U.K citizens, or that engage in activities involving U.K. facilities or resources, such as British bank accounts, should take note. In summary, the Bribery Act creates a corporate criminal offense for bribes paid by the company unless the company shows that it had “adequate procedures” in place. The law also increases to ten years the maximum term of imprisonment for bribery.
The reach of the Bribery Act. The new British legislation is similar to the U.S. Foreign Corrupt Practices Act (“FCPA”) in that it reaches far beyond its territory. The Bribery Act applies to the following persons or entities:
- Any person who commits an act or omission forming part of a bribery offense in the United Kingdom, regardless of the person’s nationality,
- Any company or partnership formed in the United Kingdom, regardless where the act occurs,
- Any person who resides in the United Kingdom, regardless of the person’s nationality or where the conduct occurs, and
- Any citizen of the United Kingdom or British Overseas Territories, regardless of the person’s residency or where the conduct occurs.
U.S. companies can come within the scope of the Bribery Act in several different ways. Notably, U.K. subsidiaries of American companies are automatically subject to the Act, and, for example, use of British bank accounts to transfer bribe payments can bring a domestic company under the Act. Additionally, British citizens employed by U.S. companies are subject to the Act, even if the company itself is not.
The new corporate criminal offense. 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 offense. The Bribery Act, however, broadens corporate liability for bribery, making it a criminal offense against companies if an employee, director, or agent pays a bribe in connection with the company’s business. Unlike the FCPA, however, the Bribery Act provides a defense under which the company can avoid liability by demonstrating that it maintained adequate procedures to prevent bribery.
The Bribery Act does not provide detailed guidance concerning what are “adequate procedures” sufficient to avoid criminal liability. Key issues likely to factor into the determination are a top-level commitment to anticorruption 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.
Foreign public officials. Included within the Bribery Act is a provision outlawing direct or indirect payments to foreign public officials to influence the officials in the performance of their duties for the purpose of obtaining or retaining business or obtaining an unfair business advantage. These concepts draw on similar provisions of the FCPA, but there are notable differences from the American counterpart:
- Whereas the FCPA allows payments that are legal under the written local law, the Bribery Act permits such payments only where the foreign official is allowed by law to be influenced by a payment.
- Unlike the FCPA, the Bribery Act does not contain a provision excepting from liability the payment of expenses associated with bona fide promotional activities or with performance of a contract.
- The Bribery Act does not maintain any exception for “facilitation payments,” as that term is used in the FCPA. Under the U.K. legislation, nominal payments made to secure routine, non-discretionary governmental services is illegal.
General bribery provisions. In addition to addressing bribery of foreign officials, the Bribery Act also redefines general anticorruption provisions. Most significant among the changes is the new legislation’s broadening of what can be considered an illicit payment. It is likely that criminal sanctions will apply to anyone in a company who has knowledge—and perhaps even constructive knowledge—of bribery.
Future enforcement. Enactment of the Bribery Act is part of the United Kingdom’s increasing efforts to combat international corruption. British authorities have been active recently in enforcing anticorruption statutes through prosecution, most notably in the case against BAE Systems plc, which was prosecuted by both the U.K.’s Serious Fraud Office (“SFO”) and the U.S. Department of Justice. The SFO has afforded overseas bribery a priority and is applying significant resources to its efforts. The SFO considers imposing only civil fines against companies that self-report violations. But leniency turns on the facts of each case, including whether the company has demonstrated commitment to prevention of corruption and whether senior leaders are personally culpable. The effective date of The Bribery Act is unclear, but it is unlikely to be enforced before October 2010.
Although corporate anticorruption policies and programs focused on compliance with the FCPA might be valuable in preventing corruption prohibited under laws of other countries, domestic companies that might be subject to The Bribery Act should evaluate anticorruption programs in light of the new British legislation. Given the differences between the FCPA and the Bribery Act—for example, in the treatment of facilitating payments—there is a need for companies to review policies to determine whether current compliance programs sufficiently address those areas that fall under the greater scope of the Bribery Act.