UK: UK Clarifies Wide-Ranging Bribery Laws and the Impact on Non-UK Companies

On 7 October 2010, the UK Ministry of Justice clarified its draft guidance on the new UK anti-bribery legislation and how it is likely to be enforced. The Bribery Act 2010 (the "Act"), passed through the House of Commons in April 2010, received Royal Assent the same day and is now law. It will come into force in April 2011. The new legislation has been called the "toughest enforcement standard in the world."

Many US and other global companies with UK operations have taken note of the Bribery Act 2010 because the new law applies—not only to UK businesses—but also to the UK subsidiaries of non-UK companies, employees who reside in the UK and others based on actions they take while in the UK.

Bribery Act 2010

The new UK bribery legislation replaces UK legislation stretching back to 1889. It has a number of stringent new features, including:

  • Increased penalties of up to 10 years in jail and unlimited fines for individuals, companies and partnerships (contrasted with five years' maximum jail term under the US's Foreign Corrupt Practices Act, or "FCPA");
  • The banning of bribes to both public and private officials;
  • A new offense of failure to prevent bribery;
  • A ban on facilitation payments; and
  • Two general offenses covering the offering, promising or giving of an advantage, as well as requesting, agreeing to receive or accepting an advantage.

The new UK legislation applies to:

  1. UK corporate entities, even if they are foreign-owned;
  2. British citizens;
  3. Individuals who ordinarily reside in the UK; and
  4. Non-UK nationals and entities if an act or omission forming part of the offense takes place within the UK.

Perhaps the most significant way in which the Act alters the international anticorruption landscape is with the new offense of failure to prevent bribery. This is contained in section 7 of the Act. This is a strict liability offense, although a defense would be available if "adequate procedures" were in place to prevent bribery from happening. The burden of proof is therefore on the defendant, not the prosecution. The consultation process on the defense started in September 2010, with the final guidance expected early in 2011. At the same time, prosecutorial guidelines are also expected to be published. Since the UK financial regulator has had a trial run of similar powers in existing legislation in a recent investigation, it is possible to anticipate how prosecutors are thinking. It appears that, to use the defense, entities may want to have:

  • An anti-bribery policy that deals with the Bribery Act 2010, rather than one that is only FCPA-based;
  • A training regime; and
  • A system of receiving and investigating complaints.

Ministry of Justice Consultation

The Ministry of Justice consultation on the Act, in particular, covers how the defense of taking adequate procedures is likely to look. The draft guidance details six principles that are intended to cover all commercial organizations as a starting point for planning, implementing, monitoring and reviewing their anticorruption program. Those principles are:

  1. Risk assessment
  2. Top-level commitment
  3. Due diligence
  4. Clear, practical and accessible policies and procedures
  5. Effective implementation
  6. Monitoring and review

The deadline for responses to the consultation is 5 p.m. on 8 November 2010. Most of these principles are likely to resonate with those organizations that have implemented FCPA-based policies.

The draft guidance states that the risk-assessment process includes the need to assess both internal and external risks. An assessment of external risks should factor in those locations that are perceived to carry with them a higher risk; and it is likely that corruption league tables, such as those produced by Transparency International, may play a role in that process. The risk assessment would also include how business partners, agents and representatives are selected and engaged. This process could potentially lead to data-privacy challenges, given the potential for candidates who have not passed the test to ask for access to their records and details of the process involved. The risk assessment appears to be intimately linked with the due-diligence procedures set out in principle 3.

The fourth principle (clear, practical and accessible policies and procedures) could, in some cases, pose more of a challenge for many US corporations with FCPA-based policies. Some existing policies drift into technical language that, while it may be understood by the board, might not be so readily comprehensible to employees in the field whose first language is not English. The draft guidance clarifies that the policy should be understood by the whole workforce and other parties who interact with the corporation, and not just senior management, and compliance and legal professionals. The fourth principle includes an obligation that policies are "clear, practical, accessible and enforceable." This may entail organizations redrafting policies to make them clearer, more concise and tailored to their businesses, rather than following standard and lengthy templates. The guidance states that policies should pay particular attention to vulnerable areas of the business, such as procurement and the supply chain. The policy should also include details of how to react to blackmail or extortion—again something which is not found in many FCPA-based policies. At the 7 October meeting, the Ministry of Justice said that, in addition to meeting the standards of the defense, a policy should also be regularly reviewed.

The issue of reporting lines for poor conduct can also be problematic in Europe, with a number of legislative restrictions on the scope of those systems. There have already been cases where the subjects of an internal investigation have tried to use their data-privacy rights to suspend or terminate an investigation into their conduct. In some respects, the new UK legislation may make some of these investigations easier since the investigation can be based on UK rather than US law; but significant challenges are likely to remain.

What Are the Main Issues with Most FCPA-Based Policies?

Pending the guidance, the Bribery Act appears to pose significant challenges for multinational corporations that previously followed an FCPA-focused compliance strategy. Given that the UK Act effectively reverses the burden of proof—making companies show that they took adequate measures to prevent bribery rather than making the prosecution prove that they did not—even the best anticorruption policies may warrant review. There are three key issues:

  • The UK's position on hospitality is likely to be tougher than that of the FCPA. The parliamentary debate indicated that corporate entertaining falls within the ambit of the Act, while many FCPA-based policies permit employees to accept or offer hospitality, sometimes up to maximum financial limits. Pending further UK guidance, this may be risky. The draft guidance states that hospitality is fully within the ambit of the new law, saying "Hospitality and promotional expenditure can be employed improperly and illegally as a bribe." The draft guidance appears to offer some comfort for those hosting "reasonable and proportionate hospitality. . . to improve the image of a commercial organisation, better to present products and services, or establish cordial relations." At the 7 October meeting, the Ministry of Justice said they wanted the new Act to trigger a review within companies of their hospitality standards.
  • Facilitation payments are banned under UK legislation, but are often allowed in existing anti-bribery policies, again sometimes subject to a set monetary limit. Policies may have to recognize this or riders may need to be sent to all employees who might fall under the UK Act.
  • Many FCPA-based policies are designed to cover bribes to foreign public officials, and some repeat the definition given in the FCPA. That policy may be risky, as bribing a US official would be an offense under the UK legislation, and as previously stated, the UK legislation also covers private corruption.

Stepping Up Enforcement

The new legislation in the UK is set against a rising tide of enforcement. UK authorities have already been involved in significant investigations this year, including joint investigations with the US authorities and joint prosecutions of both BAE Systems and Innospec. International enforcement appears to be high on the agenda. The UK Ministry of Justice's introduction to the Bribery Act states, "The Bribery Act reforms the criminal law to provide a new, modern and comprehensive scheme of bribery offences that will enable courts and prosecutors to respond more effectively to bribery at home or abroad."

There is growing public pressure on governments around the world to police the activities of corporations doing business in their countries. Investigations in the last 12 months or so have featured more than 40 countries.

The Future

The next six months are likely to see more of the same. In the United States, an additional 150 investigations are reportedly under way. On 7 October, a Ministry of Justice official confirmed that around 30 UK-based investigations had been set in motion. The number of US Securities and Exchange Commission investigations is likely to increase given new US legislation—the Dodd-Frank Wall Street Reform and Consumer Protection Act—which passed in July 2010 and gives employees, business partners or competitors a share of the penalty when they blow the whistle on a company's corruption. Besides the full effect of the UK legislation, new activity in other countries is anticipated. At a meeting held in London in July 2010, the Indian Minister of Law and Justice, Veerappa Moily, said his government was keen to protect whistleblowers to increase the reporting of corruption and that new anticorruption legislation would be introduced in India "within eight or nine months."

What Steps Should Businesses Consider Taking Now?

In the short term, businesses may want to take a number of steps to improve their compliance. Those steps may include the following:

  1. Review any existing FCPA-based policy and amend it or issue clarifications for employees under the Act—not just UK-based employees. Look especially at hospitality.
  2. Train employees on the new legislation and the steps the corporation is taking to deal with it.
  3. Do proper due diligence on the entities entering into contracts, procuring business, etc., and on the people with whom they work.

When the new guidance takes shape, more long-term measures may be needed to deal with the increased compliance responsibilities. However, it should be possible to build on rather than simply repeat the work already done.

If you have any questions about the UK Bribery Act or would like more information about this Alert, please contact Jonathan P. Armstrong or Jeffrey V. Rodwell in our London office, George D. Niespolo in our San Francisco office, Joseph J. Aronica in our Washington, D.C. office, any member of the White-Collar Criminal Law Practice Group, any member of the Corporate Practice Group or the attorney in the firm with whom you are regularly in contact.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions