Gibraltar: It’s Good But It’s Not Quite Right – The OECD And The UK Bribery Act

Last Updated: 8 May 2012
Article by Scott Simmons and Tito Garro

On 30th March 2012, the Organisation for Economic Co-operation & Development ('OECD') released its report evaluating the UK Bribery Act 2010 ('the Act') and its enforcement of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions ('the Convention'). The report, running to 79 pages, took an in-depth look at how the UK had implemented the Act and gave a very positive view on what had been achieved so far, but cautiously reminded the UK that there was still plenty of work to be done.

The working group praised the UK for the significant increase in foreign bribery enforcement since its earlier reports of 2005 and 2008. The UK was commended for publishing its Guidance to Commercial Organisations ('The Guidance') which preceded the Act coming into force and for the heightened awareness of foreign bribery-related issues in the UK. The working group also welcomed the UK's approach of requiring companies to compensate the country of a bribed official.

However, the report highlighted a number of pertinent issues which require consideration. For example, it was concerned that, to settle foreign bribery cases, the Serious Fraud Office ('SFO') is increasingly relying on civil recovery orders which require less judicial oversight and are less transparent than criminal plea agreements, with some cases having confidentiality agreements in place that prevent the disclosure of key information after cases are settled. As less information is made public, there cannot be a proper assessment of whether the sanctions imposed are effective, proportionate and dissuasive. The report suggests that this misses an opportunity for the UK to provide guidance and raise public awareness on foreign bribery-related issues. Many commentators believe that this very point is the reason many companies have yet to implement policies and procedures: a lack of public awareness of the sanctions has meant that businesses have failed to appreciate just how serious the consequences of breaching the Act can be, with many risking the future of their businesses.

The report noted shortcomings with the Act, particularly in respect of what it referred to as the 'identification theory', that being the ability to identify officers that have the 'directing mind' to commit an offence. The Act states that senior officers can be guilty of an offence if an act of bribery takes place with their consent or connivance. However, many corporations have complex structures in place, meaning that if an act was carried out with the consent of, for example, a regional manager or relatively senior manager, they would not be liable under the Act, thus lessening the effect of the offence. Nonetheless, it noted that as the section 7 offence of failure to prevent bribery becomes used by the SFO, concerns over the identification theory may recede.

Most noticeably, the report dealt with the need for the UK to introduce Deferred Prosecution Agreements ('DPAs'). DPAs are commonly used in the US to encourage self-reporting without it necessarily leading to prosecution. Under the terms of a DPA in the US the company may have to pay substantial amounts to those affected by its actions and account for its profits, it may have to agree to working with a corporate monitor and to account to the Department of Justice for its future actions. In return the US prosecution is deferred and, so long as it keeps to the agreement, the prosecution will eventually be dismissed. In the UK, because no such agreements exist, if the crime is serious enough, even a self-report could lead to prosecution as the courts have the ultimate say in these cases, thus inhibiting many companies from seeing the benefits of selfreporting.

The report also looked at the Act in light of Article 5 of the Convention, which states that 'investigation and prosecution of the bribery of a foreign public official shall... not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal person involved.' Earlier reports had noted that Article 5 did not have binding force in the UK and this continues to be the case. The Code for Crown Prosecutors states that one public interest factor that tends against prosecution is where 'a prosecution may require details to be made public that could harm... international relations' and that this could be read as being inconsistent with Article 5.

Interestingly, the report looked at Crown Dependencies ('CDs') and Overseas Territories ('OTs'). The report makes the point of referring to some of these CDs and OTs as 'offshore financial centres, which can be used to facilitate foreign bribery'. It noted that it had been recommending that the UK extend the Convention to its CDs and OTs since 1999, but the UK had left it for the CDs and OTs to decide to which treaties they become a party.

The report further noted that the Convention had been extended to all three CDs – Isle of Man (2001), Guernsey (2009) and Jersey (2009) – but only one OT: Cayman Islands (2010). 'The other OTs have made little progress, if any'. According to the report, Gibraltar had submitted a draft foreign bribery Bill to the UK for review in 2005, but it was not until 2011 that it passed the Crimes Act, (the bribery provisions of which are almost word-for-word the same as the Bribery Act), but this has yet to come into force.

The report recommended that the UK adopt a roadmap setting out specific goals, concrete steps and deadlines for implementing the Convention in the OTs before the UK considers legislating on their behalf. It also noted that the UK had not extended the jurisdiction of the Act to legal persons incorporated in the CDs and OTs unless those companies carried out business or part of their business in the UK, despite the fact that it had made clear in court briefs that 'corporations incorporated under the laws of any of its Overseas Territories are subjects of the United Kingdom'. The UK told the working group that it had not extended the jurisdiction to legal persons because the regulation of commerce and business organisations had devolved to the CDs and OTs. The report recommended that the UK extend the jurisdiction to companies incorporated in the CDs and OTs as soon as possible.

What is equally interesting is what the report says about the bribery laws adopted in the Crown Dependencies. All three have offences that cover foreign bribery, but only the Isle of Man has an offence that applies specifically to foreign bribery. Jersey and Guernsey have offences that are based on the 'problematic' agentprincipal concept similar to the pre-Bribery Act legislation in the UK, which itself was deemed insufficient by earlier reports. Furthermore, none of the CDs and OTs has legislation criminalising a company's failure to prevent bribery. Therefore, when the Gibraltar Crimes Act comes into force, its bribery provisions will be the most OECD-compliant of all the Crown Dependencies and Overseas Territories, enhancing its reputation as an established international finance centre in the European Union.

According to information supplied by the SFO to the working group, it had 11 active bribery/corruption cases and a further 18 cases under consideration as of 31st January 2012. Only time will tell what impact those cases will have in the UK and overseas, but in the meantime, the UK and Gibraltar still have plenty of work to do.

www.gibraltarlaw.com

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