The Bribery Act 2012 (the "Act") received Royal Assent on 21 May 2013 and is largely based on the Bribery Act 2010 (of Parliament) (the "BA 2010") which came into force on 1 July 2011.
Bribery and corruption is the single largest hindrance to economic and social development around the world. It is estimated by the World Bank that the cost of corruption is 5% of GDP (US$ 2.6 trillion) with over US$1 trillion being paid in bribes each year. It distorts markets, stifles economic growth, undermines democracy and the rule of law and creates an uneven playing field in the international business environment. On an ethical level, bribery also reduces public trust and belief in the fair and transparent operation of business and public services.
Bribery and corruption have become increasingly prominent in the media in recent times. During the run up to the London Olympics last year, it was widely reported that many companies were unnecessarily refusing to accept offers of Olympic tickets amid fears of bribery allegations being levelled against them. A bribery and corruption slur, even if unfounded, can damage business reputation, brand and share price.
As an international business centre, the Isle of Man prides itself on being an open, transparent and well regulated jurisdiction which is responsive to the evolving standards of the international community. Robust measures to counter the risk of bribery and corruption are seen as increasingly crucial by the international community and the OECD encourages all countries to enact domestic legislation to make bribery and corruption serious criminal offences. After all, bribery is not a victimless crime - illicit financial payments aid terrorism and organised crime. By introducing the Act, the Isle of Man Government is playing its part in what needs to be a global effort to eliminate corruption and bribery.
The Isle of Man has had anti-bribery and corruption legislation on its statute books since the nineteenth century. Under the Criminal Code 1872 it continues to be an offence to bribe or attempt to bribe a person connected with the administration of justice or a juror, (or indeed to accept a bribe). The Prevention of Corruption Act was introduced in 1908 which made it a criminal offence for any agent to accept, obtain or agree to accept or obtain for himself or any other person any gift or consideration as an inducement or reward for doing any act or for showing favour or disfavour to any person in relation to his principal's affairs or business. It was repealed by the Corruption Act 1986 which retained the provisions above and also introduced a presumption of corruption if money, a gift or some other consideration was given or received by a person (being in the employment of, or serving under, or who was appointed by or who was acting by a public body) by or from a person or agent who held or sought to obtain a public body contract. In February 2006, the United Kingdom ratified the United Nations Convention against Corruption (the "Convention") and it was agreed that the Convention should be extended to the Isle of Man. The Corruption Act 2008 (the "CA 2008"), which complied with the Convention, came into operation on 1 September 2008 and repealed the Corruption Act 1986.
The CA 2008 makes it an offence for a person:
- to give to or to procure an advantage for any person; or
- to offer to or to agree to give an advantage or to procure an advantage for any person, with the intention of influencing that person or another person to exercise a function improperly or as a reward for exercising a function improperly.
It is also an offence if a person:
- obtains an advantage for themselves or another person; or
- solicits or agrees to obtain an advantage for themselves or another person, on the basis that it will or may influence them or another person to exercise a function improperly or as a reward for so exercising a function.
In a similar vein to the Corruption Act 1986, the CA 2008 also contains provisions concerning the offer of, or the receipt of, an advantage if a person exercises a function on behalf of a public body. Public body is defined as the Crown, Tynwald, government department or statutory board, local authority, a body whose members are appointed with the consent or approval of Tynwald and any such equivalent body in a country or territory outside of the Isle of Man.
To date there have been no prosecutions under the CA 2008.
Bribery Act 2010
Described as the toughest anti-corruption legislation in the world, the BA 2010 (of the United Kingdom) is the result of an amalgamation of the previous statutory and common law offences relating to bribery and corruption. As the BA 2010 has a long extra territorial reach, Isle of Man bodies corporate and partnerships ("Relevant Commercial Organisations") who conduct business in the UK ought to be aware of the BA 2010 and have implemented the necessary measures to ensure compliance. It was therefore decided it was more straightforward to introduce a comparable piece of legislation in the Isle of Man rather than amend the CA 2008.
To a large extent the Act replicates many of the provisions of the BA 2010. As with the BA 2010, there are four core bribery offences under the Act:
- offering, promising or giving a bribe;
- requesting, agreeing to receive or accepting a bribe;
- bribing a foreign public official; and
- a corporate offence of failing to prevent bribery.
However, the Isle of Man has not merely blindly followed the BA 2010 word for word and there are notable differences between the two. For example, the Act has a limitation period of 21 years for bringing proceedings for an offence under the Act and the maximum fine payable on summary conviction is £10,000 compared to £5,000 under the BA 2010. The Act also retains 3 provisions from the CA 2008 (which it otherwise repeals and replaces) which, in essence, concern whistleblowing:
- the requirement for any person who exercises a function on behalf of a public body who is offered or who receives an advantage in circumstances which may constitute an offence to disclose as soon as reasonably practical:
- the existence and nature of the advantage or offer; and
- the name (if known) of the person by whom it was given or procured or offered or who agreed to give or procure it;
- failure to make such a disclosure is an offence; and
- it is an offence for any person to intentionally take any harmful action, including interference with a person's employment or occupation, on the ground that the person has or will make a disclosure.
A relevant commercial organisation (being (1) a body incorporated in the Isle of Man (2) a partnership formed under the law of the Isle of Man (3) a body incorporated or a partnership formed elsewhere but which carries on a business (or part of a business) in the Isle of Man) (an "Organisation") is guilty of an offence if a person associated with it bribes another person with the intention of obtaining or retaining business or an advantage in the conduct of business for the Organisation. The expression "associated" person is given a wide meaning and means a person who performs services for or on behalf of someone else, determined by reference to all the relevant circumstances and not merely by the nature of the relationship between the two parties.
It is a strict liability offence and it makes no difference if the Organisation had no knowledge of the bribe, where in the world the bribery takes place, nor if it occurs in a foreign jurisdiction where such behaviour constitutes accepted practice. For example, there is no exemption for facilitation payments (small payments to facilitate routine government action) although in the guidance issued by the Ministry of Justice (the "UK Guidance") it is acknowledged that the eradication of facilitation payments is a long term objective requiring economic and social advancement and commitment to the rule of law by the countries where facilitation payments are customary.
The offence is triable on information and punishable with an unlimited fine. The only defence available is, can the Organisation prove it had adequate procedures in place to prevent persons associated with it from bribing? However, neither in the BA 2010 nor in the Act is there a definition of "adequate procedures".
The UK Guidance does not define adequate procedures either. It does provide clarification by stating that the question of whether an Organisation has adequate procedures in place to prevent bribery is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case. What would represent adequate procedures for a global business operating in a high risk industry in multiple jurisdictions will vary from what would be adequate procedures for a small local business conducting face to face transactions. The core thread in the UK Guidance is that of proportionality and taking a risk based approach. The Isle of Man Government will also publish guidance, following discussions with interested parties, prior to the Act coming into operation.
Impact on businesses
The main change for Organisations is the new corporate offence of failing to prevent bribery. Organisations will need to do their utmost to ensure they do not engage in bribery, inadvertently or otherwise and be able to prove their anti-bribery procedures were adequate in the context of their business. The UK Guidance considers the following six non-prescriptive principles should inform the anti-bribery procedures implemented.
- Proportionate procedures
Procedures should be clear, practical, accessible and proportionate to the Organisation's activities and the bribery risks it faces depending on both the industry and geographical locations of the markets in which the Organisation operates.
Anti-bribery covenants could be inserted into contractual agreements and an agreement reached that any party who subcontracts inserts a similar anti-bribery covenant into their subcontract.
- Top level commitment
Top level management should have an appropriate degree of involvement in developing bribery prevention procedures and should promote a culture of integrity where bribery is never acceptable.
An Organisation's anti-bribery procedures should be effectively implemented and enforced and the anti-bribery stance successfully communicated to all employees and business associates, duly translated to the local language of their markets if necessary.
- Risk assessment
Periodic risk assessments of the nature and extent of exposure to internal and external risks of bribery by persons associated with the Organisation should be undertaken and documented.
Clear policies on gifts, hospitality, promotional expenditure and charitable donations should be communicated to employees and business associates.
Financial and audit controls should be adequate so to identify any unusual payments and their origin.
- Due diligence
Organisations ought to take a proportionate and risk based approach and have a clear policy on the selection of all employees and third party representatives who could be considered an associated person.
Bribery policies and procedures need to be understood throughout an Organisation at all levels. This can be achieved by internal and external communication and through tailored training to all employees and third party representatives on a regular basis and not just as a one off.
- Monitoring and review
Organisations should monitor, review and improve their anti-bribery procedures to ensure they work effectively and are being consistently followed. If appropriate, external verification of their procedures should be sought.
One cost effective way of helping to achieve some of the principles and show a demonstrable commitment to preventing bribery is issuing a statement of ethics which is, broadly, an anti-corruption statement made by the senior management of an Organisation. This should set out the ethical basis on which the Organisation does business, its zero tolerance approach to dealing with bribery and corruption and what the consequences of bribery and corruption are, both for individuals and for the Organisation.
A short, simply drafted statement could be printed and displayed prominently within the working environment as a reminder, produced in the form of a short booklet (being easier to read and digest then a full staff handbook and or code of conduct) and also made available to all via the Organisation's website.
- A whistleblowing procedure is also an important tool for Organisations to detect corruption and other failures in their anti-bribery procedures.
The Bribery Act 2012 ensures the Isle of Man adopts the standards which are expected by the international community in tackling bribery and corruption. As the Isle of Man already has anti-bribery and corruption legislation in the form of the CA 2008, the main practical implication for Organisations is the new corporate offence of failing to prevent bribery, which is a replication of section 7 of the UK's BA 2010. Organisations will need to be able to prove that they have adequate procedures (determined by the context) in place to prevent bribery. Arguably, by being required to examine all areas of their operations, Organisations may improve their overall operating efficiency which could reduce their costs in the longer term.
It has been argued that the competiveness of Organisations is reduced as the domestic implementation of international anti-bribery and corruption standards remains incomplete in the world's leading economies. The Fraud, Investigations and Dispute Services team at Ernst & Young undertook research in 2012 which suggests that nearly 1 in 4 believe that the BA 2010 is adversely affecting the UK's competiveness, with 78% citing the effects of losing out to competitors (who are incorporated in countries with a more laissez-faire attitude to bribery) who pay bribes and 20% citing the cost of additional compliance placed on companies. There has also been criticism of the cost of devising and incorporating adequate procedures for small and new businesses in what are already challenging economic times. These arguments are cogent but the same arguments would apply in the implementation of anti-money laundering precautions and are not worthy of consideration in the fight against the plague that is bribery and corruption.
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.