After five years in force the real risks to business arising from the UK Bribery Act 2010 are beginning to manifest. This week we have seen the first prosecution under s.7 of the Bribery Act and the first Deferred Prosecution Agreement has been approved.
The outcomes over the past week reinforce the risks posed by the Bribery Act as the Serious Fraud Office (SFO), which is responsible for prosecuting bribery offences in England and Wales, is clearly prepared to pursue those who fail to comply with the Act.
Bribery is a risk that increases the larger a business becomes and is particularly heightened for businesses with an international reach working in countries where local customs may be contrary to international best practice – recent headlines demonstrate that the construction industry is not immune from such risks.
The London arm of Sweett Group Plc is preparing for the consequences of the Bribery Act after it admitted on Wednesday that certain employees had paid bribes in the Middle East following over a year of investigation into the alleged actions of an employee. Although it is not yet clear what activities these admissions relate to, initial investigations centred around the allegation that an employee had offered to award design work on a $100m hospital contract to a firm of New York architects if the firm agreed to pay a bribe to a UAE official in exchange.
This comes as a second warning after the SFO's first application for a Deferred Prosecution Agreement (DPA) was approved on Monday.
Since the beginning of 2014 the SFO has had the option of agreeing a DPA with companies which have failed to comply with the Bribery Act 2010 as an alternative to a criminal prosecution. DPAs are appropriate where the public interest would not be best served by prosecution and require the company to comply with strict conditions (which are not for the faint hearted!). It was intended that DPAs would encourage companies to self-report instances of bribery.
In 2013 Standard Bank reported to the SFO a payment of US$6 million paid by its then sister company, Stanbic Bank Tanzania, to a company in Tanzania with the intention of persuading members of the Government of Tanzania to show favour to Stanbic's tender proposal. The full cooperation of Standard Bank with the SFO's investigation contributed extensively to the SFO's decision to pursue a DPA as opposed to criminal prosecution.
Having avoided criminal prosecution Standard Bank still received over $32.5 million in fines, compensation and costs orders, highlighting the serious risk posed by bribery.
Although there is currently no similar arrangement in Scotland (where the Crown Office and Procurator Fiscal Service has responsibility for prosecutions under the UK Bribery Act), a self-reporting scheme is available whereby a company can self-report to the Crown Office and the matter can, in appropriate circumstances, be settled without criminal prosecution.
Standard Bank is the first company to be prosecuted for an offence under s.7 Bribery Act, and it seems further prosecutions are likely in the near future. A company commits a s.7 offence if a person associated with the company bribes another person in order to obtain or retain business or a business advantage for the company. An associated person could be, for example, a subsidiary or sister company, an employee, an agent or a distributor.
It is not difficult to see the concerns companies may have with this provision of the Bribery Act, particularly where the business utilises a complex network of companies, agents and / or distributors and in particular where it operates in territories where they may be local pressure to depart from ethical business standards.
Every company should have in place appropriate measures to guard against bribery, for example, having in place appropriate policies, training staff on anti-bribery compliance, ensuring the company understands the business and methods of its distributors and agents and places contractual obligations on such parties to comply with the Bribery Act.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
