European Union: CEE: The UK Bribery Act: Implications For Companies In Central & Eastern Europe

The UK Bribery Act (the "Act"), which has been in force since 1 July 2011, covers bribery in both the private and public sectors. However, unlike many anti-bribery laws in the CEE region, it does not establish any de minimis thresholds. For the purposes of the Act, a bribe is defined as providing someone a financial or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so. This would cover giving some kind of benefit to a decision maker in a tender process.

Bribery is punishable by a prison sentence of up to 10 years and unlimited monetary fines for corporations.

1. Long-arm jurisdiction - extraterritorial application

The Act applies independent from where the bribe took place, if a link with the UK (ie a "close connection") exists. This can be the case, if a CEE company conducted business in the UK, or British citizens, persons with a normal place of residence in the UK, or a company registered under the law of the UK was involved in the bribe. Interpretations of the "close connection" element could even extend to include the use of a British bank account as being covered by the law.

2. The Framework of the Act

The Act covers four offences: the general offences of paying a bribe (Section 1) and receiving a bribe (Section 2); the bribery of foreign officials (Section 6), and the failure of commercial organizations to prevent bribery (section 7).

It is the offence under section 7 which has the greatest relevance for CEE organizations. This offence is committed by a commercial organization if a person associated with it ("associated person") pays a bribe specifically to get business, keep business or gain a business advantage for the organization.

Employees, agents and subsidiaries are understood as "associated persons". Con-tractors, suppliers and joint ventures are also covered.

3. First conviction under the Act

A former magistrates' court clerk has become the first person to be sentenced under the new law. He accepted bribes in exchange for omitting to record a traffic offense on a court database and was consequently prosecuted under Section 2 of the Act for requesting and receiving bribes intending to improperly perform his functions. The clerk was accused of receiving at least GBP 20,000 from 53 persons in the course of his actions. He was sentenced to three years imprisonment under the Bribery act and has been handed a six-year sentence for misconduct in public office.

4. Adequate Procedures

The Act provides a commercial organization with a defense if it is able to prove that at the time of the bribery it had in place adequate (internal) procedures designed to prevent bribery. The Ministry of Justice of the United Kingdom released guidance on the Principles considered to be "adequate procedures":

  • Proportionate procedures: Procedures should be proportionate to the risks the organization faces, taking into account the nature, scale and complexity of the business activities. A larger organization or one that operates in places where corruption is commonplace might thus be required to do more to prevent bribery, compared to smaller organizations operating in places, where bribery is not prevalent. In this regard the Corruption Perception Index 2011, released by Transparency International provides useful guidance for CEE organizations.
  • Top-level commitment: Top-level management in companies, such as the board of directors or owners, are in the best position to safeguard that their company conducts clean business. By way of Codes of Conduct, implemented by the company's heads, the top management shall influence the conduct in the middle and low management levels to foster a culture in which bribery is considered unacceptable.
  • Risk Assessment: Before setting-up a compliance system, an assessment of the specific risks that the company may come to face should be undertaken. The risk assessment includes in particular potential scenarios in which bribery can take place. The risk assessment should consider driving factors such as the organization's size, structure, product line up, processes, including licensing procedures, the nature of the business, and its location.
  • Due diligence: By way of due diligence of those acting on behalf of the company, bribery risks can be reduced significantly. A Due diligence should there-fore affect those persons, as they are considered as "associated persons" with regard to the company.
  • Communication (including training): Anti-bribery policies and procedures shall be communicated and fully implemented throughout the organization. Providing staff with information and training "on the job" further adds to creating a corporate culture with zero-tolerance for corruption.
  • Monitoring and Review: The risks a company faces and the effectiveness of the procedures to address them may undergo changes. An organization should therefore keep an eye on the anti-bribery steps it has taken so that it can effectively adapt processes to reflect changes, such as the company's expansion, its entry into new markets, the introduction of new products, etc.

5. Compliance check

Procedures to prevent bribery are more than just a nice thing to have, but rather represent a prerequisite for doing business in accordance with the new UK legislation. The introduction of the Act thus provides major incentives for commercial organizations in the CEE region to review their current compliance procedures to de-termine whether they meet the benchmark set by the Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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