Bermuda: Bermuda Bribery Act: Waiting in the Wings – Implications for the Insurance Industry

Last Updated: 30 March 2017
Article by Nick Miles

The Bribery Act 2016 received Royal Assent on 6 December 2016. When it comes into operation, it will introduce a number of new offences into Bermuda law, including the corporate offence of failure to prevent bribery. Bermuda insurers, insurance managers and insurance agents and brokers will need to introduce policies and procedures necessary to ensure compliance. The Act will have an unusually extensive extra-territorial reach, making it an offence in Bermuda for certain persons to make or receive bribes anywhere in the world. It is modelled largely on the UK's Bribery Act 2010 and is introduced in readiness for the UK's extension to Bermuda of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the United Nations Convention Against Corruption ('UNCAC'), a development that was originally presaged in an announcement by Governor George Fergusson in 2013. The commencement date of the Act is yet to be appointed.

The UK Act, on which the Act is modelled, created uncertainty in the UK regarding the legality of corporate hospitality events. Guidance published by the UK Ministry for justice clarified that it was not intended to prohibit reasonable and proportionate hospitality and promotional expenditure for the purposes of improving the image of a commercial organisation, presenting its products and services, and establishing cordial relations. The 2016 Act has the same potential to raise questions about the legality of some corporate hospitality. The Minister of Legal Affairs is currently consulting on proposed guidance, which must be published on the coming into force of the Act, and which will, it is expected, clarify the ambit of the Act.

Bribing another person and being bribed

Under the Act, a person commits the offence of bribing another person if they offer, promise or give a financial or other advantage to another person intending to induce the 'improper performance' of a public function, business activity, activity performed in the course of employment or activity performed by or on behalf of a body of persons, that a reasonable person in Bermuda would expect to be performed in good faith or impartially or (where the function or activity places the person performing it in a position of trust) in a particular manner or for particular reasons. The function or activity is 'improperly performed' if it is performed in breach of such expectations. 

'Being bribed', which involves a similar test, but adjusted to apply to the recipient, is also an offence.

Bribery of foreign public officials and other related offences

A person commits the offence of bribing a foreign public official if the person offers, promises or gives any financial or other advantage to a foreign public official intending to influence a public official and to gain a business advantage. No offence is committed if the foreign official is required or permitted by written law to take the advantage on offer.

There is no exception for 'facilitation payments', in contrast to the USA's Foreign Corrupt Practices Act.

The Act will also introduce a new offence committed by public officials who fail to report bribery.  These provisions derive from the Isle of Man's Bribery Act 2013.

Failure to prevent bribery

A major innovation of the Act is the new offence of failure of a commercial organisation to prevent bribery. It is committed by a 'relevant commercial organisation' if a person associated with it bribes another person with the intention of obtaining or retaining business for the commercial organisation or to obtain or retain an advantage in the conduct of business for the commercial organisation. A 'relevant commercial organisation' is

  • A body incorporated or formed, or a partnership formed, under the law of Bermuda which carries on business, whether in Bermuda or anywhere else in the world
  • Any other body corporate or partnership, wherever incorporated or formed, which carries on business in Bermuda

A person is associated with a commercial organisation if the person performs services for or on behalf of it, in whatever capacity. It may include an employee, agent  - such as a cover-holder or third party administrator - or a subsidiary company.

A Bermuda company or partnership carrying on business anywhere, or a company or partnership carrying on business in Bermuda, will therefore be guilty of an offence if anyone associated with it bribes a person with the intention of obtaining or retaining business for the company or partnership, or of obtaining or retaining an advantage in the conduct of business for it.

It is a defence for the commercial organisation to prove that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct. As noted above, the Minister of Legal Affairs is required to publish guidance for relevant commercial organisations on procedures they can put in place to prevent persons associated with them from bribing. A court shall be required to consider whether the organisation followed any such relevant guidance in determining whether it committed the offence of failing to prevent bribery.  The Minister is currently consulting on the proposed guidance, which will no doubt be published in time for the coming into force of the provisions of the Act.  It would be premature to anticipate the content of the guidance, but it seems likely that it will require organisations to take a risk-based approach, to ensure that their procedures are proportionate to the bribery risks they face, having regard to the nature, scale and complexity of their business, that senior management are properly engaged in the establishment and implementation of procedures and are seen to endorse their objective.  Organisations will no doubt need to develop or continue on-boarding due diligence of existing and new service providers, and in many cases to introduce contractual terms in outsourcing agreements by which service providers warrant that they apply anti-corruption procedures internally that are substantially equivalent to those applied by the organisation.

All of which makes it critical that insurers, insurance managers, insurance agents and brokers begin developing policies and procedures as soon as guidance is published.

Senior officer connivance

The Act also introduces the offence of senior officer connivance, which is committed by a senior officer of a body corporate, or a person purporting to act in that capacity, who consents or connives in the commission of an offence under the Act (other than failure to prevent bribery) by the body corporate.

Territorial application

The territorial reach of the Act varies depending on whether any person whose acts or omissions form part of the offence has a 'close connection with Bermuda'. A person has a close connection with Bermuda, if at the time the relevant acts or omissions take place the person:

  • Had Bermudian status or was a permanent resident of Bermuda
  • Was an individual ordinarily resident in Bermuda
  • Was a body corporate or partnership incorporated, formed or registered under the law of Bermuda

Where a person whose acts or omissions form part of the offence has a close connection with Bermuda, an offence is committed even though none of the constitutive acts or omissions take place in Bermuda.

So, a Bermudian-exempted company which, acting through a director or officer overseas, offers a bribe outside Bermuda, commits offence. Potentially, although perhaps less clearly, an overseas company which, through a Bermudian director, offers a bribe outside Bermuda, commits an offence in Bermuda.

Where no person whose acts or omissions form part of the offence has a close connection with Bermuda, an offence is committed only if any of the constitutive acts or omissions takes place in Bermuda. So, an overseas company or a permit company, not acting through a person with a close connection to Bermuda, commits an offence under the Act only if an act or omission constitutive of the offence takes place in Bermuda.

Comparison with previous legal position in Bermuda

There were already offences under Bermuda law overlapping with offences created by the Act, such as official corruption under Section 111 of the Criminal Code Act, extortion by public officers under section 112 of the Act, corrupt practices (section 392) which applies to inducements or rewards of agents for acts in relation to the agent's principal's affairs, corrupting a holder of judicial office or law enforcement official, corrupting witnesses, corrupting jurors, non-judicial official corruption and judicial corruption.  These offences are superseded by the Act.

It is doubtful that any common law offence of bribery would be recognised in Bermuda (even though such a common law offence was recognised under English common law until the UK Bribery Act 2010 came into force on 1 July 2011), as the Privy Council has held that Bermuda's Criminal Code was intended to replace the common law.

National Anti-Corruption and Bribery Committee and other matters

The Act creates a new National Anti-Corruption and Bribery Committee comprising public officials charged with: advising the Minister generally on the detection and prevention of corruption and bribery; reviewing the operation of the Act; and periodically evaluating the existing legislative and administrative measures in place in Bermuda to combat corruption and bribery. The establishment of the Committee is in conformity with Article 6 of UNCAC.

Proceedings under the Act may only be brought with the consent of the Director for Public Prosecutions. Proceedings for summary offences must be brought within three  years of commission.

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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