Bribery Bill set to raise liability issues

After some wrangling, the Bribery Bill that received Royal Assent in April is set to modernise and consolidate existing offences, making what is a general offence of active or passive bribery into specific offences – bribery of a foreign public official, or a corporate offence of failure to prevent bribery.

Companies registered in the UK, with a UK branch office, or that are otherwise doing work here are liable for instances of bribery overseas, under a bill that will extend the geographical range of prosecution.

The bill defines what constitutes bribery as anything that causes a corporate to gain commercially by giving advantage to a third party. The advantage does not have to be money, but could be the offer of an internship, or extravagant entertainment in exchange for a contract.

“The bill does not seek to stop companies from marketing themselves, but they should take a common-sense approach,” says Neill Blundell, head of fraud for law firm Eversheds. “Very extravagant entertaining during a procurement process could be seen as an attempt to win that contract.”

A company will be liable if it offers or gives a bribe and if it agrees to receive, or actually receives, a bribe. And where an organisation bribes a foreign public official, “it captures the active bribery, but not the foreign public official”, says Blundell.

Burden of proof
Currently, prosecutors must prove there is a controlling mind – for example, that a senior person is involved – and that bribery is part of the company’s business plan, which is difficult. With the new bill, it is enough to prove that someone paid a bribe or gave benefit to receive commercial advantage.

“Then it is for the company to prove it had adequate controls and procedures to prevent bribery and, if it did not, it will be prosecuted,” says Bill Waite, chief executive of The Risk Advisory Group. ‘Adequate’ has yet to be defined. “The government has agreed not to implement the bill until it has been given guidance on this.”

There will be a cost attached to putting necessary measures in place. “There are significant procedural and contractual – and therefore financial – burdens,” says Waite.

“Company policy must be housed at senior level – the chief executive – and will need to include educational screening of staff, to ensure they will comply, as well as due diligence of third parties, to ensure they are not in breach of UK domestic law.”

Prevention and control
There are key things that companies must bear in mind:
• Penalties are severe. In a recent case against chemical company Innospec, Lord Justice Thomas ruled that bribery cases are more serious than cartel cases, where fines reach millions of pounds. He also ruled that there should be no room for arbitrage between different criminal justice systems, in the hope of getting a lighter judgment.

“This is a massive driver to put in place adequate controls and procedures,” says Waite. There is an upside: “A growing body of research in the US shows that companies with the right procedures have better price-to-earnings ratios.”

• Organisations that operate in “red flag” jurisdictions, such as Russia, Iraq and

Afghanistan, where corporate bribery is more prevalent, need to ensure that systems and controls work properly.

The new legislation is not about targeting businesses that practise bribery.

“It is about preventing it in the first place,” says Blundell. “It gives a tool to the Serious Fraud Office, HM Revenue and Customs and Crown Prosecution Service to prosecute more easily.”

So companies that practise bribery as part of their day-to-day work not only risk being debarred from participation in public contracts in the US and the European Union, but also risk having to announce that to shareholders.

Recommendations
Source: BDO
Defence against bribery prosecution requires you to prove that your company has ‘adequate procedures’ in place to prevent bribery and that you did everything reasonably possible to try to prevent the occurrence. “You then shouldn’t be liable for the actions of an errant employee or agent acting on your behalf,” says BDO.

1 The new Corporate Liability offence in the bill means you can be prosecuted for the actions of anyone under your authority in any jurisdiction.
All employees, agents, intermediaries, joint ventures and foreign subsidiaries fall under UK law, as do foreign companies with UK operations.

2 Educate all directors and senior officers throughout the business across the world about the bill. They will now be personally criminally liable if it can be shown their company committed a bribery offence with their consent or connivance, or through their failure to check the actions of staff.