UK: Bribery Bill Demands Better Corporate Governance, Or Else...!

Last Updated: 3 April 2009
Article by Omar Qureshi and Simon Chandler

On 25 March the Government published the Bribery Bill, aimed at modernising, clarifying and simplifying the laws on bribery as they apply in England, Wales and Northern Ireland, so that they are contained in a single statute. The Bill largely follows the Law Commission's proposals in its November 2008 Report on bribery: "Reforming Bribery", discussed in our Law-Now dated 1 December 2008 available here link. The present laws are an amalgam of common law and 19th and 20th century Prevention of Corruption Acts.

In its impact assessment on the proposed legislation, the Government noted that reform was necessary: to deal effectively with increasingly sophisticated, cross-border bribery; to enhance the UK's reputation as a commercial centre; to allow UK businesses to compete more effectively in international markets; and to ensure the UK is meeting its commitments under the OECD Convention on Bribery in International Business Transactions and other international anti-corruption treaties.

As well as re-codifying existing laws and increasing the maximum sentence to 10 years' imprisonment, the Bill creates a discreet offence in respect of bribery of foreign public officials and, importantly, a new corporate offence where a commercial entity negligently fails to prevent bribery in connection with its business. The Government's stated aim in creating the corporate offence, aimed mainly at combating bribery in large-scale public procurement and tendering exercises, is to encourage businesses to improve their corporate governance. This is to be achieved by providing a defence where the business can show it had adequate systems in place to prevent bribery. Whether systems will be 'adequate' will be a matter of fact and degree based, for example, on the size of the relevant business and the sectors in which it operates.

Notwithstanding the worthy ideals behind the new Bill, the impact assessment suggests that the new offences will have limited impact in terms of actual prosecutions. The Ministry of Justice expects only 1.3 additional prosecutions a year as a result of the new corporate offence.

Under the Bill:

  • It will be a criminal offence for someone - directly or through a third party - to offer, promise or give a bribe (whether or not financial) – "active" bribery.
  • It will be a criminal offence for someone to request, agree to receive, or accept a bribe – "passive" bribery.
  • It will be a discreet offence to offer, promise or give a bribe (i.e. "active" bribery only) to a foreign public official, including those working for international organisations that have as their members, governments or countries. The existing presumption that any payment to a public official was made corruptly, unless the defendant can prove otherwise, will be repealed in line with Article 6(2) of the European Convention on Human Rights, which requires that any person charged with a criminal offence will be presumed innocent until proven guilty.
  • For "active" or "passive" bribery it does not matter whether the bribery was committed in the UK or abroad – if abroad, it will apply to all British nationals, UK body corporates and anyone ordinarily resident in the UK.
  • If the above offences are committed by a body corporate, then any senior manager of the business will be similarly guilty if they consented to or connived in the bribery.
  • A new corporate offence is introduced for negligent failure to prevent bribery, regardless of where in the world the bribery occurred (see below).
  • The maximum penalty is increased from seven to ten years' imprisonment (and/or an unlimited fine); for corporate offences there will be an unlimited fine.
  • Parliamentary Privilege is removed in connection with the prosecution of an MP or Peer for bribery related matters, perhaps in response to the various "cash for honours" and "cash for questions" scandals.
  • The Attorney General's consent is no longer required to prosecute a bribery offence – the consent of the Director of a relevant prosecuting authority, such as the SFO or DPP, will suffice – perhaps a response to recent criticism of the possible politicisation of such decisions.

The new corporate offence

It will be an offence where a "relevant commercial organisation" negligently fails to prevent bribery in connection with its business. A "relevant commercial organisation" means any body corporate established, or carrying on business, in England, Wales or Northern Ireland, and so extends to foreign businesses operating here.

The offence focuses on the failure to prevent an "active" bribe only. The offence is committed where:

  • a person performing services for a commercial organisation (including its employees, agents and subsidiaries)
  • bribes someone anywhere in the world in connection with the commercial organisation's business and
  • those in the organisation with responsibility for preventing bribery negligently fail to do so.

If there is no person (or persons) with specific responsibility for preventing bribery, the responsibility is deemed to be that of any senior officer in the organisation, including any director, secretary or manager of a company or a partner in a partnership.

However, there is an incentive in ensuring: (1) that someone other than a senior office in the organisation is given such responsibility; and (2) adequate systems are adopted to prevent bribery. This is because a defence is available where the person (deemed) responsible for preventing bribery is not a senior officer and the commercial organisation can show that it had adequate procedures in place (considered in light of the size and nature of the business) to prevent bribery. So the onus is on the organisation to prove its defence on the balance of probabilities.

Comment

It may come as a surprise to learn that Transparency International's 2008 Corruption Perceptions Index ranked the UK only 16th amongst nations as a corruption-free place to do business, below 11 other European nations, but above the US and Japan. These proposals represent a perhaps long overdue updating and codification of our bribery laws and addresses recent strong criticism by OECD regarding the UK's "continued failure" to meet its international obligations in this sphere.

It is perhaps no coincidence that the Bill comes at a time of increased financial instability and lower confidence in the probity of financial institutions, in the wake of scandals such as Madoff and Stanford.

However, businesses operating in jurisdictions and industries with a reputation for corruption should be particularly aware of the proposed new corporate offence. While the need to ensure that adequate procedures are in place is unlikely to cause many ripples for larger commercial organisations, it would also be wise to ensure that those responsible for policing the procedures are clearly identified and do not include "senior officers" of the business – this will at least protect the right to rely on the 'adequate process' defence if necessary.

The Government may not expect the proposals to impact significantly on prosecution rates – not least because they do not carry with them any additional funding for the investigatory authorities. However, once they become law, their impact may prove significant in preventing wrongdoing by increasing the success rate of prosecuted cases and the general deterrent effect of high-profile convictions.

Law:

The Draft Bribery Bill is available here.

An article in the Daily Telegraph where Simon Chandler of our fraud group commented on the proposals can be found here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 27/03/2009.

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