The Isle of Man is an unusual place. Constitutionally it is a dependency of the British Crown and depends on Britain in matters of defence and foreign affairs. But it isn't part of the United Kingdom and has a separate legal system. The island has made the most of its differences by creating an investor-friendly company-law trust and taxation regime similar to that of Jersey or Guernsey. In such places, there is often a tension between conformity with the important international standards and being "investor friendly". The islands continuously debate how close they should get to the mainland.
When it comes to anti-corruption law, the Isle of Man has now cosied up to the UK. Its new legislation is modelled on "the toughest anti-bribery legislation in the world", i.e., the UK Bribery Act 2010 (UKBA).
The Isle of Man law has a familiar title: the Bribery Act 2013 (BA 2013). It came into force 16 December 2013, replacing the Corruption Act 2008. While the UK Act's considerable territorial reach meant that some organisations based in the Isle of Man have already implemented measures to comply with the UKBA, many others will now need to reconsider their anti-corruption efforts.
Mirroring the UKBA, BA 2013 introduces four distinct offences:
- Offering, promising or giving a bribe
- Requesting, agreeing to receive or accepting a bribe
- Bribing a foreign public official
- A corporate offence of failing to prevent bribery
It is the fourth offence, known as the corporate offence, which requires the most attention from the majority of organisations. It applies to all Isle of Man companies, as well as their subsidiaries, intermediaries, joint ventures and agents anywhere in the world. In practice, while continuing to avoid engaging in direct bribery, they will now need to focus on bolstering their anti-bribery procedures and policies.
The biggest concern with the corporate offence is the scope of its application. Section 10 of the BA 2013 (which is a replication of section 7 of the UKBA) specifies that the corporate offence is committed by company "C" when a person associated with C bribes another person to get business for C or an advantage in the conduct of business for C. It is a strict liability offence and C's knowledge is irrelevant, as is the location of the actual bribery. "Associated person" is defined widely and includes any person who performs services for or on behalf of C.
However, a defence is available to organisations that have adequate anti-bribery procedures in place. The Isle of Man Department of Home Affairs has published guidance on what 'adequate procedures' should include, which reflects the UK's guidance relating to the UKBA. It sets out six broad principles for organisations to consider:
- Adopting proportionate, clear, practical, accessible, effectively implemented and enforced procedures
- Engagement from top-level management
- Carrying out periodic, informed and documented assessments of the bribery risks
- Carrying out due diligence of "associated persons"
- Communicating and explaining the procedures throughout the organisation
- Monitoring and reviewing the procedures
So the BA 2013 brings the anti-bribery laws of the Isle of Man in line with the UK. The measure is likely to have come about through some gentle pressure from its neighbour. However, as with the FCPA, UKBA and other such laws, the true nature of their effectiveness will be in how they affect corporate conduct and, ultimately, enforcement actions. We can expect the local authorities to liaise closely with the UK and other authorities, and for large investigations to be carried out jointly.
We believe the Isle of Man's decision to adopt the UK model of anti-corruption legislation is significant. As an independent jurisdiction, it could have chosen the U.S. model, limiting the law to foreign officials and specifically excluding facilitation payments. It could have considered the German model, where corporate penalties are administrative only.
However, improving the Isle of Man's reputation for financial probity and corporate ethics was clearly an important factor. When it comes to bribery laws, we can expect other offshore territories within the UK's sphere of influence to edge closer to the homeland in the next few years.
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