UK: Bribery Bill Heralds Strict Liability For Offending Corporates

Last Updated: 25 November 2009
Article by Omar Qureshi and Joe Smith

After lengthy consultation and consideration of proposed draft legislation published in March (the "Draft Bill") (details of which were reported in previous "Law-Nows" – see our Anti-Corruption Zone for further details, the Bribery Bill (the "Bill") was introduced in the House of Lords on 19 November 2009, where it received its first reading. It contains some important differences from the Draft Bill and will now have to proceed through second and third readings, committee and reporting stages in each House before it can receive Royal Assent.

Whether that can be achieved before the next election is uncertain. However, the Bill is designed to ensure that the UK meets its obligations under the OECD's Anti-Bribery Convention and so, even if there were a change in Government next June, there are good reasons for expecting that legislation at least similar to the Bill will ultimately be enacted.

While substantially similar to the Draft Bill, the Bill does contain several significant changes:

The corporate offence - clause 7 (previously clause 5 of the Draft Bill)

In the Draft Bill, it was proposed that there be an offence where a "responsible person" in a "relevant commercial organisation" "negligently" failed to prevent bribery in connection with its business. The negligence requirement has been removed from the Bill. This is in line with the Joint Committee's recommendation and its criticism that the previous formulation was overly-reliant on whether a "responsible person" within the business was negligent, rather than on the collective failure of the company to ensure adequate systems and controls were in place to prevent bribery. In accepting the Joint Committee's recommendation, the Government concluded that removing the requirement was also likely to encourage commercial organisations to self-report bribery disclosed by internal monitoring. Under the new formulation, a "relevant commercial organisation" ("C") will be guilty of the offence where:

  • A person ("A") associated with C (i.e. a person who performs services for or on behalf of C, irrespective of the capacity in which they do so)
  • Bribes another person (i.e. commits a general bribery offence or the discrete offence of bribing a foreign public official (the "FPO Offence"))
  • Intending to obtain or retain business for C or an advantage in the conduct of business for C.

There is a defence where C can prove that it had in place "adequate procedures designed to prevent persons associated with C from undertaking such conduct".

The Draft Bill required that A's bribery offence had to be committed "in connection with" C's business. The Bill now states that A, in committing the bribery offence, must intend to obtain or retain business for C. This potentially increases the burden on prosecutors in having to prove intention on behalf of A, whereas the original formulation at least allowed for an interpretation that the test was an objective one, based on the circumstances in which the bribe was given.

While the removal of the negligence requirement makes the offence one of "strict liability" (subject to the adequate procedures defence), there will not be an absolute requirement to prevent bribery. As the Government has noted in its Impact Assessment of the Bill: "...a substantial burden remains on the prosecution in establishing the offence. It must first prove to the criminal standard that a bribe was paid for the benefit of the organisation. Only once that direct link to the organisation has been made would the burden (on the civil standard) transfer to the defendant. Given the adequate procedures defence is not prescriptive then it is open to a defendant organisation to adduce evidence which shows that (for example) given the size of the organisation, the particular sector or country in which it operated and foreseeable risks, its procedures employed to prevent bribery being committed on its behalf were likewise adequate."

It is noteworthy that, in its response to the Joint Committee's report, the Government indicated that it will consider whether a conviction for the corporate offence would trigger automatic debarment from tendering for public contracts under the Public Contracts Regulations 2006, suggesting that this consequence is not certain. It is not presently clear why the Government thinks that a conviction under the corporate offence might not have that consequence.

The "general offences" – clauses 1 and 2

In response to the comments of the Joint Committee in their report on the Draft Bill that there was some uncertainty as to the extent to which different cultural practices could be taken into account when determining the expectations of a reasonable person, further clarification has been included in the Bill. The Joint Committee noted that taking into account cultural variations in applying the "relevant expectation" test might routinely result in the need for expert evidence, thereby substantially increasing the cost and complexity of a trial. The Bill now provides that when assessing what a reasonable person would expect, "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".

However, where such local custom is permitted by the relevant written law, this is only a factor to be considered in determining whether a relevant expectation has been breached – it is not a defence to the offence. This may be contrasted with the FPO Offence, where the existence of local written laws permitting or requiring the acceptance of certain advantages would preclude an offence occurring where such advantages were given. The reference to "written law" in the FPO Offence is itself a departure from the Draft Bill which, by only referring to "law" was criticised by the Joint Committee as creating uncertainty. The change to "written law" now more closely models the offence in the OECD Convention.

This difference in approach between the general offences and the FPO Offence leads to an apparent anomaly in that an individual could be convicted under the general offences even where local written law permits or requires the acceptance of the advantage, but this would prevent his conviction under the FPO Offence.

As in the Draft Bill, the Bill provides for follow-on liability where the corporate is guilty of the general bribing offence or FPO Offence and a senior officer consented or connived in its commission. However, the Bill now confirms that a senior officer must have a sufficiently "close connection" with the UK (i.e. that he is either a British national, a national of a British overseas territory or ordinarily resident in the UK) in order to be liable for this offence, if no act or omission forming part of the offence by the corporate occurred in the UK. The Draft Bill contained no such territorial connection to the UK and so apparently provided for such a senior officer to be prosecuted here regardless of nationality or residence. This clarification perhaps pragmatically acknowledges the difficulty in potentially prosecuting individuals who have no substantial connection with this jurisdiction.

Scotland

Finally, it is intended that the Bill will apply to Scotland, although this will require that the Scottish Parliament approve the legislation under the Sewel Convention.

Impact of the Bill

The Government has published a revised Impact Assessment in relation to the Bill (itself a response to criticism by the Joint Committee that the Impact Assessment conducted and published at the time of the Draft Bill was inadequate). This indicates that the Government does not expect the modernisation and clarification of the law to have a material impact on the existing levels of bribery, or enforcement action taken in relation to it: "the change to the law will result in a very small number of additional prosecutions". However, the Impact Assessment notes that the Serious Fraud Office estimate that up to 3 extra civil recovery/monitoring orders will be made on UK business each year, in addition to any criminal prosecutions.

The main financial impact of the Bill is expected to be in compliance costs incurred by business, albeit that the Government considers these costs "should be manageable" since bribery is already a criminal offence.

Guidance

Perhaps of most interest to business, however, is that the Government intends to publish guidance after the new Bill receives Royal Assent (but before the offences come into force) to give business sufficient time to prepare for the changes and to help in understanding what they have to do to comply. In its response to the Joint Committee's report, the Government has said that its guidance would include the Government's policy aims in respect of the Bill as a whole and, in particular, would cover the adequate procedures defence. The Government's intention is that the guidance will be indicative and provide broad principles and illustrative examples of "adequate procedures" as opposed to giving detailed, prescriptive standards. In this regard, the Government has also hinted in its revised Impact Assessment, at the approach they wish to see adopted by business in meeting the "adequate procedures" defence, especially small or medium sized enterprises:

"Small or medium sized enterprises may not have previously addressed the need for anti-bribery measures. However, industry standards increasingly require this, with detailed sector-specific initiatives, in the defence, oil and gas, mining, construction and pharmaceutical sectors. Companies meeting these various standards should already have access to the adequate procedures defence without incurring additional costs. The offence does not prescribe any specific additional measures which a business must adopt and there will be no compliance monitoring process. The defence provided to the offence is such that it would allow a business to adopt a proportionate approach, with small firms in low risk sectors able to argue adequate procedures on 'light touch' grounds, for example demonstrating that anti-bribery principles have been fully communicated to its workforce."

Comment

The changes contained in the Bill are to be welcomed as providing greater clarity concerning the scope and operation of the new offences. The announcement that the Government will be providing guidance on the operation of the adequate procedures defence is a particularly welcome development.

The changes reflect, in part, the recommendations of the Joint Committee, although it is notable that several of their recommendations have not been addressed. These include:

  • A concern that the new legislation may criminalise acts that would otherwise only be treated as civil wrongs. The Joint Committee has stated that it would be unwise to rely on prosecutorial discretion in this area and stated that the Government "must address this issue before introducing the Bill into Parliament". In its response, the Government disagreed, noting: "If a case comes to the attention of the prosecuting authorities in which the circumstances dictate that the facts are more appropriately dealt with as a civil matter the public interest may not lie in favour of a prosecution. Overlap between civil and criminal law is not unusual and does not give rise to any significant difficulties in practice".
  • A recommendation that the Bill include a clause giving the Government power to approve guidance prepared by appropriate industry bodies. The Joint Committee's view was that such a power would build on the growing expertise in the private sector in relation to bribery, while at the same time limiting the burden on Government. However, the Government rejected this proposal on the basis that it would not be appropriate for mainstream criminal offences, such as bribery.

Potential difficulties and uncertainties remain, which, if not dealt with during the passage of the Bill through Parliament, may only be clarified when the legislation is considered by the courts. For example, the corporate offence applies to any body corporate (wherever incorporated) which carries on a business "or part of a business" in any part of the UK. On the face of it, this provision is extremely wide and could catch acts of bribery committed by companies where there is only a tenuous connection with the UK. In its Response to the Joint Committee's report, the Government considered that the courts will interpret the phrase "carries on a business" and "part of a business" in a common sense manner.

Overall, the Bill and the Government's comments on it provide something of a mixed message. On the one hand, the Government is keen to highlight its "zero tolerance" policy in respect of bribery and corruption. Yet at the same time, it is at pains to stress that: (i) the legislation will have only limited impact on prosecutions; (ii) there is no absolute requirement on companies to prevent bribery; and (iii) the corporate offence is mainly aimed at large, multi-nationals seeking large overseas public contracts, rather than small or medium sized enterprises who do not operate in that sphere. The true impact of the Bill and, in particular, the corporate offence, may only become clear when the Government publishes its guidance on the Bill and the first prosecutions under the new law emerge. In the meantime, business would be well advised to ensure their compliance programmes are appropriate for their size and sector, at least meeting any standards recommended by their industry bodies.

Further reading:

The Bribery Bill 2009 and explanatory notes

Revised Impact Assessment

Government Response to Joint Committee Report on the Draft Bribery Bill

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 23/11/2009.

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