China: The Bribery Act 2010 (United Kingdom) and Compliance with the Written Laws Against Bribery in China

Last Updated: 4 January 2011
Article by Ariel Ye and James Rowland

I. Introduction

The UK Bribery Act 2010 (c.23) (the "Act") received royal assent on 8 April 2010 and will come into force in April 2011.[1]

The Act replaces the offences of bribery at common law and under earlier UK statutes[2] (which received much criticism for their lack of clarity and use of inconsistent terminology[3] ) with two general offences. The first covers the offering, promising or giving of an advantage with an intention to induce or reward improper conduct [4] (active bribery) and the second deals with the requesting, agreeing to receive or accepting of an advantage that is improper or is an inducement or reward for improper conduct[5] (passive bribery). The Act also creates a discrete offence of bribery of a foreign public official and a new offence where a commercial organization fails to prevent bribery. [6] The Act ensures that the law against bribery applies equally to the bribery of persons exercising public and selected private functions without discriminating between the two. [7]

II. Background and Policy Objectives

The Act is the result of public consultation in the UK which began in 1995 in response to concerns about unethical conduct by those in public office[8] and, more recently, extended to concerns about ethical standards in the business community. [9]

The key policy objectives of the Act are: [10]

  • To provide a modern criminal law to address bribery by UK persons or companies which takes place in the UK or abroad;
  • To address the current difficulties in the UK law of prosecuting cases of bribery involving public officials and to establish effective corporate liability for bribery;
  • Specifically, to combat the use of bribery in high value transactions in international markets.

On the third policy objective, the Ministry of Justice states that the focus of the Act is bribery

"in particular in large scale public procurement or similar tendering exercises in which predominantly only the largest businesses operate. The new corporate offence is intended to apply in these cases." [11] and, "In particular we want to encourage UK businesses to establish a credible expectation that they would not offer bribes.12"

The remainder of this article will focus on the offences of bribery of a foreign public official, failure by a commercial organization to prevent bribery and certain elements of the offences of active and passive bribery which may be relevant to UK business that trade or carry on their professions in mainland China.

III. The Offence of Bribery of Foreign Public Officials (Bribery Act 2010, Section 6)

Under Section 6 of the Act, if a Person (P) offers, promises or gives any advantage to a foreign public official (F) with the requisite intention (see below), and the written law applicable to F neither permits nor requires F to be influenced in his or her capacity as a foreign public official by the offer, promise or gift, then P commits an offence. [13]

Under Section 6(5) of the Act:

'"Foreign public official" means an individual who-

  1. holds a legislative, administrative or judicial position of any kind, whether appointed or elected, of a country or territory outside the United Kingdom (or any subdivision of such a country or territory),
  2. exercises a public function-
    1. for or on behalf of a country or territory outside the United Kingdom (or any subdivision of such a country or territory), or
    2. for any public agency or public enterprise of that country or territory (or subdivision), or
  3. is an official or agent of a public international organization.' [14]

Where the performance of F's functions would not be subject to the law of part of the UK, the written law referred to in Section 6(3) of the Act is either the applicable rules of a public international organization, or the law of the country or territory in relation to which F is a foreign public official. Under Section 6(7)(c) of the Act, the "written law" of a country or territory means its written constitution, a provision made by or under its legislation or its judicial decisions that are evidenced in writing. [15]

In order to commit the offence, a person (either a British national or individual ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership) [16] must intend to influence a foreign public official in the performance of his or her functions as a public official. Performance of a function includes any failure to exercise the official's function and any use of the official's position, even if he or she does not have the authority to use the position in the way intended. [17]

In order to commit the offence, a person must also intend to obtain or retain business or an advantage in the conduct of business. [18]

Where a body corporate or a partnership is found guilty of the offence, Section 14 of the Act provides that a director, partner or similar senior manager of the body is guilty of the same offence if he or she has consented to or connived in the commission of the offence. [19] Section 14 of the Act does not apply to the Section 7 offence described below.

IV. The Offence of Failure of Commercial Organizations to Prevent (Bribery Act 2010, Section 7)

Section 7 of the Act creates an offence of failing to prevent bribery which can only be committed by a "relevant commercial organization".

Under the Act, "relevant commercial organization" means a partnership formed or body corporate incorporated under the law of any part of the UK, or a partnership or body corporate wherever formed or incorporated which carries on business in any part of the UK. [20]

The offence is committed where a person (A) who is associated with the commercial organization (C) bribes another person with the intention of obtaining or retaining business or an advantage in the conduct of business for C. [21]

In the context of this offence, "bribery" only relates to the offering, promising or giving of a bribe (the offenses of active bribery (s.1) and bribery of a foreign public official (s.6)). There is no corresponding offence of failure to prevent the taking of bribes. [22]

The prosecution must show that the person who committed the bribery offence (A) would be guilty if prosecuted under the Act but does not need to show that the person has already been successfully prosecuted. Proceedings under Section 7 may be taken against C, even if A does not have a "close connection to the UK" [23] , provided that C falls within the definition of "relevant commercial organization" and that A is associated with C. [24]

The meaning of associated person is defined in Section 8 of the Act as follows:

  1. For the purposes of section 7, a person ("A") is associated with C if (disregarding any bribe under consideration) A is a person who performs services for or on behalf of C.
  2. The capacity in which A performs services for or on behalf of C does not matter.
  3. Accordingly A may (for example) be C's employee, agent or subsidiary.
  4. Whether or not A is a person who performs services for or on behalf of C is to be determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between A and C.
  5. But if A is an employee of C, it is to be presumed unless the contrary is shown that A is a person who performs services for or on behalf of C." [25]

It is a defence for C to show it had adequate procedures in place to prevent persons associated with it from committing bribery offences. [26]

According to the Ministry of Justice, 'The Prosecution must first prove to the criminal standard that a bribe was paid for the benefit of the organization. Where the prosecution can show that an offence has in fact been committed by a person for the benefit of the organization then the organization will be liable unless it can show that despite the instant case of bribery it generally had adequate procedures in place which, on the whole, are successful in preventing bribery'. [27] In accordance with established case law, the standard of proof that C would need to discharge in order to prove the defence is the balance of probabilities. [28]

The Ministry of Justice has stated that the Act does not place an absolute requirement on commercial organizations to prevent bribery.

'Given the adequate procedures defence is not prescriptive then it is open to a defendant organization to adduce evidence which shows that (for example) given the size of the organization, the particular sector or country in which it operated and the foreseeable risks, its procedures employed to prevent bribery being committed on its behalf were adequate." [29]

The Secretary of State is required under Section 9 of the Act to publish guidance on procedures that relevant commercial organizations can put in place to prevent bribery by persons associated with them. [30]

As the Parliamentary Under Secretary of State of the Ministry of Justice wrote following debate of the Bribery Bill in 2009

"It is not our intention to drag well run companies before the courts for every infraction. It would be wrong to leave organizations open to a heavy fine if a rogue element within its ranks bribes on behalf of the organization when those who manage it can show they have put in place procedures designed to prevent bribery on its behalf...it is essential for commercial organizations to have access to guidance on 'adequate procedures'." [31]

These will be published before the section 7 offence comes into force. [32]

V. Penalties and Prosecution

Any offence under the Act committed by an individual is punishable by a fine or imprisonment up to 10 years. An offence committed by a person other than an individual is punishable by a fine (limited by statute to GBP 5000 in England and Wales). If the conviction is on indictment, the amount of the fine is unlimited. The offence of failure by a commercial organization to prevent bribery can only be tried upon indictment. [33]

Proceedings for the offence may only be instituted in England and Wales with the consent of one of the three senior prosecuting authorities -- the Director of Public Prosecutions, the Director of the Serious Fraud Office or the Director of Revenue and Customs. [34]

There were only 10 bribery prosecutions in the UK in 2006 and 2007. [35] In the Ministry of Justice's Impact Assessment, it is estimated that there will be one additional contested Serious Fraud Office and one additional contested Crown Prosecution Service prosecution each year as a result of the introduction of the Act.

VI. Application of the Act to Business in China

When it comes into force in April 2011, the Act will require UK business that trade or carry on their professions in China to have analyzed their exposure to improper business activities in the local market, especially those firms involved in large scale public procurement.

In particular it will be necessary for UK firms to develop an understanding of the extent to which, under its written law, China permits its public officials to be influenced in the performance of their functions by the offer, promise or gift of a financial or other advantage (if at all). [36] For example, the UK Ministry of Justice has made it clear that prosecutors will have the discretion todifferentiate between legitimate and illegitimate corporate hospitality when deciding whether to bring a prosecution on the offence of bribing a foreign public official[37] . Therefore, it will be important for UK firms that host corporate hospitality events in China to know whether their guests include 'public officials' within the meaning of the Act, and if so, the extent to which the distinction between legitimate and illegitimate provision of corporate hospitality to such guests is made under Chinese law.

As the Act aims not to differentiate between bribery in the public and private spheres, UK firms will also need to be sensitive to Chinese laws which regulate the propriety of commercial, corporate and employment practices among private businesses. For example, the Act makes it clear that when testing whether the performance in China of a public function, business, corporate or employment function has been improperly influenced by a bribe 'any local custom or practice is to be disregarded unless it is permitted or required by the written law applicable to the country or territory concerned'. [38]

Before the Act comes into force, the Secretary for State of the United Kingdom will publish guidelines on the 'adequate procedures' defence available to commercial organizations under Section 7(2) of the Act. [39] However, UK firms already engaged in large-scale public procurement in China will be expected to have drawn on the 'wealth' of existing resources[40] and to have already put in place procedures designed to prevent persons associated with them –such as local agents, employees and subsidiaries[41]- from engaging in improper conduct. Time is of the essence if relevant commercial organisations are to comply with this requirement before April 2011.

King & Wood PRC Lawyers is one of the few law firms in China with an established, multi-disciplinary anti-bribery and corporate compliance practice. We have the expertise to advise on all aspects of Chinese criminal, administrative and commercial laws against improper business conduct and we regularly advise large international companies on the Chinese elements of their compliance with the anti-bribery laws in force in their home jurisdictions.

[1] Bribery Act in force next April, The Telegraph, 20 July 2010

[2] Bribery Act 2010 Explanatory Notes (hereafter "Explanatory Notes"), Ministry of Justice of the United Kingdom, p.1

[3] Impact Assessment of Bill of Reform of the law on bribery, Version 2 (hereafter "Impact Assessment"), Ministry of Justice of the United Kingdom, p.5

[4] Bribery Act 2010, s. 1

[5] Bribery Act 2010, s. 2

[6] Bribery Act 2010, s.3; Explanatory Notes, p.1

[7] Explanatory Notes, p. 4

[8] Explanatory Notes, p.1

[9] Impact Assessment, p.1

[10] Impact Assessment, p.9 – Policy Objectives

[11] Impact Assessment, p.9 – Policy Objectives

[12] Impact Assessment, p.10 – Economic Rationale for Intervention

[13] Bribery Act 2010, s.6(1)-(3); Explanatory Notes, p. 5

[14] Bribery Act 2010, s.6(5)

[15] Bribery Act 2010, s.6(7)(c); Explanatory Notes, p.1

[16] Bribery Act 2010, s. 12(4)

[17] Bribery Act 2010, ss. 1& 4; Explanatory Notes, p. 6

[18] Bribery Act 2010, s.6(2)

[19] Bribery Act 2010, s. 14; Explanatory Notes, p.9

[20] Bribery Act 2010, s.7(5); Explanatory Notes, p. 6

[21] Bribery Act 2010, s. 7(2); Explanatory Notes, p. 6

[22] Explanatory Notes, p. 6

[23] Bribery Act 2010, s.12 applies a 'close connection' threshold test to extra-territorial application of the Act to the offences of active bribery (s.1), passive bribery (s.2) and bribery of a foreign public official (s.6)

[24] Explanatory Notes, p. 6

[25] Bribery Act 2010, s.8

[26] Bribery Act 2010, s. 7(2); Explanatory Notes, p. 6

[27] Explanatory Notes, p. 6; Impact Assessment, p. 17

[28] Impact Assessment, p. 17

[29] Impact Assessment, p. 17

[30] Bribery Act 2010, s.9

[31] Letter from Lord Bach to Lord Henley dated December 2009, p.1

[32] Letter from Lord Bach to Lord Henley dated December 2009, p.1

[33] Bribery Act 2010, s. 11; Explanatory Notes, p.7

[34] Bribery Act 2010, s. 10; Explanatory Notes, p.7

[35] Impact Assessment, p. 16

[36] Bribery Act 2010, s.6(3)

[37] Letter from Ministry of Justice spokesman Lord Bach to Lord Henley dated 14 January 2010, p.2

[38] Bribery Act 2010, s.5(2)

[39] Bribery Act 2010, s.9

[40] Letter from Lord Bach to Lord Henley dated December 2009, p.2

[41] Bribery Act 2010, s.8(3)

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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