Worldwide: Why You Can't Afford To Ignore What's Happening In Europe - EU Regulatory Update

Last Updated: 13 October 2010
Article by Neil Gerrard, Jonathan Pickworth and Mike Pullen

US companies and their subsidiaries with operations in Europe need to take note of two recent landmark developments in corruption and anti-trust law.

1. BRIBERY ACT 2010

The UK Bribery Act 2010 is due to come into force in April 2011 and will have far reaching implications for all companies doing business in the UK.

How does it differ from the FCPA?

  • The Bribery Act makes it an offence to receive, as well as give, a bribe.
  • Bribery of private individuals and companies is criminalised.
  • There is no need to prove corrupt intent.
  • There is a strict liability corporate offence of failing to prevent bribery.
  • There is no exemption for facilitation payments and no defence for promotional expenses.

Penalties can be severe

The maximum penalty for individuals will be 10 years imprisonment and/or a fine; and the maximum penalty for a corporate will be an unlimited fine. There can also be damaging collateral consequences such as director disqualifications, company debarment from public contracts and asset confiscation proceedings.

Implications for US companies

The Bribery Act has a broad extraterritorial reach for companies and individuals. For companies, simply having a UK presence (subsidiary, office or operations) will create jurisdiction. The Bribery Act applies to both UK companies and foreign companies with operations in the UK, even if offences take place in a third country and are unrelated to UK operations. This means that the relevant criminal act can occur outside the UK and persons or companies in the UK can be liable. For example, if a US company has a UK branch and engages in bribery in Asia, that US company has liability under the Bribery Act and could be prosecuted in the UK for failing to prevent bribery.

2. AKZO NOBEL AND LEGAL PRIVILEGE

The Akzo Nobel case has implications for any company subject to investigation by the Competition Commission.

How this will affect your in-house legal team

On 14 September 2010, the European Court of Justice (ECJ) confirmed that the concept of privilege under EU law does not apply to communications with in-house counsel. The basis for this decision is that in-house lawyers are economically dependent on their employers and therefore cannot be regarded as truly independent.

In 2003 the European Commission, with the assistance of the UK's Office of Fair Trading, carried out a dawn raid at the company's premises in the UK. During the raid, discussions took place between Akzo and the Commission about whether legal privilege attached to certain documents, including communications with the in-house legal team.

The usual position in England and Wales (and some other European jurisdictions) is that such advice would be privileged. However, the ECJ has decided to support the Commission's argument that this should not be the case in the context of its investigations.

This decision brings an end to a long-running and highly controversial dispute. It has far reaching consequences for businesses operating across Europe. For the purposes of Competition Commission investigations under EU law, communications with in-house counsel will not be privileged unless they are carefully drafted to demonstrate that they are made exclusively for the purpose of seeking legal advice from an external EU qualified lawyer.

Be aware when selecting external legal advisers

US companies also need to be aware that the Akzo case also affirms previous EU case law which says that only advice from a lawyer who is entitled to practice in an EU Member State can be protected by legal privilege. This means that, in EU Competition Commission cases, companies cannot claim privilege in respect of advice obtained from lawyers who are only qualified to practice in the US.

HOW CAN DLA PIPER HELP YOU TO PROTECT YOUR BUSINESS IN EUROPE?

With our network of lawyers located throughout the major jurisdictions in Europe, many of whom have worked for regulatory and prosecuting agencies, we are able to provide regulatory advice which is tailored to local legislative environments and commercial conditions. We ensure thatour advice reflects your company's approach to regulatory risk as well as meeting the needs of local law, language and conventions. If your operations cross one or many borders we can project manage the input of lawyers across jurisdictions to provide integrated regulatory advice.

Our team of specialist white collar crime and competition lawyers across Europe can provide:

  • advice on the latest legal developments at both EU and national level;
  • stress testing of your existing procedures;
  • risk assessment reviews and compliance programme audits;
  • tailored training programmes for your personnel;
  • advice on the powers and processes of the regulators
  • representation in regulatory or criminal investigations; and
  • 24/7 assistance with managing regulatory crises (such as dawn raids) and protecting your reputation.

For further information, please see our dedicated website at www.dlapiperrapidresponse.com.

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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