The UK Bribery Act 2010 (the "Act") came into force on 1 July 2011. Whilst the Act does not have direct application in Guernsey, Guernsey companies can be caught by it and businesses should be aware of its impact.
Guernsey has had its own anti-corruption legislation in place for many years in the form of the Prevention of Corruption (Bailiwick of Guernsey) Law 2003, which creates statutory offences of accepting and offering bribes.
The Act has similar provisions to the law in Guernsey but also has an offence of failing to prevent bribery (which is contained in Section 7 of the Act). In addition, the Act also creates a corporate offence, which will render organisations (companies or partnerships) criminally liable for offences committed by persons acting on behalf of the organisation (referred to in the Act as "associated persons"). Organisations will be liable, even if the senior controllers of the organisation are not aware of the bribery.
Effect on Guernsey Companies
The issue for Guernsey businesses is that all these offences have an extra territorial effect because of two key provisions.
Firstly, an offence can be prosecuted under the Act if committed:
- within the territory of the UK (regardless of the nationality of the person or the jurisdiction of incorporation of the corporate body ); or
- outside of the territory of the UK (provided the conduct would be an offence if committed in the UK) by any person with a "close connection" to the UK.
The Act provides that a "close connection" with the UK will exist if the person committing the act is a British citizen, British overseas citizen, British overseas territories citizen, British National, any person ordinarily resident in the UK, or any body incorporated under the law of the UK (including a Scottish partnership).
Secondly, the corporate offence of failing to prevent bribery can be committed by non-UK based companies and UK-based companies alike. This is irrespective of whether the acts or omissions forming the offence took place in the UK or elsewhere in the world. The offence will be committed by any organisation formed under the laws of the UK or any foreign organisation which "carries on a business, or part of a business" in the UK. A "close connection" to the UK is not required. "Carrying on a business or part of a business" has the potential for wide application. Guidance issued by the Ministry of Justice does, however, indicate that a common sense approach will be taken by prosecutors, in that a demonstrable business presence in the UK would be required.
Issues for Guernsey Companies
Areas where Guernsey companies need to have consideration include:
- Guernsey companies which have UK subsidiaries
The Ministry of Justice has provided guidance, which states that a Guernsey company which has UK subsidiaries does not automatically mean that the Guernsey company is itself carrying on business from the UK, on the basis that the Guernsey company and UK subsidiary can act independently of one another. However, if that subsidiary is seen acting on behalf of the Guernsey company in the UK it may not be regarded as independent. Rather than the companies constantly having to consider their relationship, it may be prudent for the Guernsey company to adopt its own anti-bribery policies.
- Offshore companies with UK activities
An offshore company, wherever located, who carries on operations in the UK will fall under the jurisdiction of the UK criminal courts in relation to the Act. It can therefore be prosecuted under Section 7 of the Act if an associated person pays a bribe on its behalf anywhere in the world. It should therefore minimise the risks of prosecution by putting in place anti-bribery procedures so it can invoke Section 7(2) of the Act, which provides a defence if the relevant commercial organisation can prove that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct.
Such companies may also want to consider altering their legal and operational structure to protect the Guernsey company from the UK operation, for example, running UK operations through an English incorporated subsidiary, rather than using a branch structure.
- Guernsey UK asset holding companies
There is no guidance on whether a Guernsey company holding UK assets would be regarded as having a demonstrable business presence in the UK. Whilst merely holding the assets seems unlikely to fall foul of the Act, it is unclear how a Guernsey company actively involved in managing the assets would be treated.
Pending the testing of the Act in the English courts, Guernsey companies with UK operating companies or other business presence in the UK should consider taking steps to protect themselves against prosecution under the Act, by extending any anti-bribery procedures to the Guernsey holding company and/or ensuring that the Guernsey company is run entirely independently from its operating subsidiaries. For those lending to or acquiring such entities, appropriate warranties and representations should be obtained in respect of steps taken to minimise the risk of prosecution.
As originally appeared in Chamber of Commerce – Contact magazine, August 2011
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.