Over Taylor Biggs

The intention is to allow for more effective prosecution of bribery and related offences and to provide appropriate remedies for situations where there is a breach of these rules. 

One of the key messages to come out of the proposed new legislation is that it will not be a defence to claim in the case of companies that they were not aware of the relevant offence.  It will be very important for companies to show that they have adequate business ethics policies and anti-bribery safeguards in place.  If they fail to do so there are hefty criminal penalties.

Proposed Legislation

A summary of the proposed key offences to be introduced by the Bribery Bill are as follows :-

• giving, promising or offering a bribe (defined as "financial or other advantage" made with the intention to both obtain or retain "business" or "an advantage in the conduct of business"; induce or reward improper conduct).
• requesting, agreeing to receive or accepting a bribe.
• bribing a foreign public official.
• a strict liability corporate offence of "failure by a relevant commercial organisation" to prevent bribery by persons working on behalf of a business (including employees, agents and subsidiaries).  There is no longer a requirement for the prosecution to prove negligence on the part of the organisation itself.  The business could avoid conviction if it can demonstrate that it had adequate systems in place to prevent bribery.
• increasing the maximum penalty for bribery from 7 to 10 years imprisonment, with an unlimited fine.

The other main provisions of the Bill are :-

• extra territorial jurisdiction to prosecute bribery committed abroad by persons who are ordinarily resident in the UK, as well as UK nationals and UK corporate bodies
• replacing the existing requirement for the Attorney General's consent to prosecute a bribery offence so that proceedings for the offences in the Bill may only be instituted by, or with the consent of, the Director of the relevant prosecuting authority
• a maximum penalty of 10 years imprisonment for all new offences except for the new corporate offence, which will carry an unlimited fine
• provision for Secretary of State authorisation of conduct that would constitute a bribery offence by the Intelligence Agencies
• setting aside Parliamentary Privilege to make evidence from proceedings in Parliament admissible in prosecution of a Member of the House of Commons or the House of Lords for a bribery offence or in related proceedings.

Comment

One area where companies need to take particular note in connection with the Bill is the new corporate offence of "failure to prevent bribery".  This will be committed if a relevant commercial company commits the offence of bribery where it fails to prevent bribery being committed in connection with its business.  The offence, as currently envisaged, can only be committed by companies and LLPs that carry on business in England, Wales or Northern Ireland.  A company / LLP will be guilty of this offence if :-

• someone acting on behalf of that company bribes another person
• the bribe was in connection with that relevant company's business, and
• another person connected with or employed by the relevant company, with the responsibility for preventing bribery being committed failed to do so.  If there is no person specifically tasked with preventing bribery, then the responsibility applies to any senior officer in the company.

The capacity in which the relevant person was performing services for and on behalf of the company does not matter.  Not only that, but it also includes any employees, agents or subsidiaries of the company. 

Providing the other requirements are satisfied, liability will arise under the corporate offence even when the bribe was paid by a foreign agent or a subsidiary in a foreign jurisdiction.

The offence is aimed at companies that fail to make continuing and systematic efforts to ensure that active bribery is not committed.  A company may have a defence if it can show that there were adequate procedures in place designed to prevent such a person as the agent committing bribery.  What is adequate will depend on the facts.  There has been little published guidance on what is meant by "adequate procedures".  The Ministry of Justice has said defendants can adduce evidence which shows that given the size of the organization, the particular sector or country in which it operated and foreseeable risks, the resources available to the company in question and its procedures employed to prevent bribery being committed on its behalf were adequate despite the fact of the bribe.   There is no defence or carve out for so called facilitation or grease payments e.g. small payments of a routine nature to expedite performance of routine administrative functions.

There is still considerable doubt and uncertainty as to whether or not a parent will be liable for its subsidiary's acts.  However, where a subsidiary is acting on behalf of its parent, the parent may be held liable for failure to prevent bribery from being committed by employees of its subsidiary.  The test to determine whether a subsidiary is acting on behalf of its parent is subjective rather than formal and would depend upon the relevant circumstances.

The overall message is that it is important to ensure that a company / LLP and its subsidiaries and its officers and employees are fully conversant with all of its relevant bribery and ethics policies and procedures, and that their employees, agents and the like are adequately trained, the policies and procedures are actually implemented and checked on a regular basis and effective procedures for vetting third parties are in place.  If they are not there can be fairly draconian repercussions both for the relevant entity in breach of its obligations and the officer responsible for ensuring compliance by senior officers of the entity.

This briefing note is not intended to be a comprehensive guide and does not cover every aspect of the topic and is not intended to provide legal or other advice.

Over Taylor Biggs February 2010