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The Act 2010 – a corporate perspective

Inside Bribery offences Penalties and other consequences Adequate procedures guidance Hospitality, facilitation payments and other risks Practical guidance inbrief

Introduction What are the main issues? If an Individual Offence is committed by a This guide summarises the main corporate body, with the consent or connivance • The Act’s criminal offences are very broadly provisions and practical issues arising of one of its senior officers, that senior officer is defined and the Act has significant extra- also guilty of the Individual Offence, alongside the from the new UK anti- law territorial reach; effected by the Bribery Act 2010 corporate body. A “senior officer” is a director, • it creates a new strict liability offence for a (the “Act”) in the context of a manager, or other officer of the corporate body, commercial organisation of failure to prevent or a member of an LLP. If the Individual Offence corporate body (the “Company”) or bribery; is committed outside the UK, the senior officer group (the “Group”) that carries on • it extends to private sector transactions will not be guilty unless he himself has a close business in the UK or overseas, from (previously UK bribery offences were confined connection with the UK. Omitting to act might be 1 July 2011, the Act’s implementation to transactions involving public officials and regarded as consent or connivance. date. agents); and

• the Act’s penalties are unlimited fines for Corporate Offence organisations and individuals and up to 10 A company or partnership will commit the years’ imprisonment for individuals. Corporate Offence if an “associated person” (see below) bribes another in order to obtain or retain business, or an advantage in the conduct of What are the Bribery offences? business, for the company or partnership. There The “Individual Offences”: is no need to prove that any individual within the • bribing another: offering, promising or organisation intended to commit the offence. giving a bribe; There is a defence if the organisation can show • being bribed: requesting, agreeing to receive that it has in place adequate procedures designed or accepting a bribe; and to prevent such bribery by its associated persons.

• bribing a foreign public official to obtain or It is irrelevant where the bribe took place. retain business. The organisation just has to be a “relevant commercial organisation”. This is:

The “Corporate Offence”: • a company or partnership incorporated or • failure of commercial organisation to formed in any part of the UK, and carrying prevent bribery by someone acting on its on a business anywhere in the world; or behalf. • a company or partnership incorporated or formed anywhere else in the world and carrying on any part of its business in any Individual Offences part of the UK. If part of an Individual Offence takes place in the The Act does not define carrying“ on a business UK, the offence has been committed, even if the in the UK”. The Ministry of Justice has stated offender has no connection with the UK. that, while it is for the courts to make the final If no part of an Individual Offence takes place in decision, it would not expect the mere fact that the UK, the offence will still be committed if the a company’s securities have been admitted to offender has a “close connection with the UK”. trading on the London Stock Exchange, in itself, An “individual” has a close connection with the to qualify that company as carrying on a business UK if he or she is a British citizen or is ordinarily in the UK. Likewise, simply having a UK subsidiary resident in the UK. A “body corporate” has a will not, in itself, mean that the parent company is close connection with the UK if it is incorporated carrying on business in the UK, since the subsidiary in any part of the UK. may act independently of its parent. However, the A corporate body will be liable for one of head of the Serious Fraud Office takes a contrary the Individual Offences where the offence is view. committed by an individual who is the directing mind or will of the organisation. inbrief

Therefore, until the courts have clarified these A commercial organisation which is the subject • due diligence; issues, it would be prudent to assume that the of a regulatory investigation will typically incur • communication (including training); and Company could be liable for the offence of failure significant financial and management time costs. If to prevent bribery, if its only connection with the an independent monitor is appointed, this too can • monitoring and reviewing. UK is that its shares are admitted to trading on the have substantial cost implications. Furthermore, a London Stock Exchange, or even that it has a UK commercial organisation may have the proceeds subsidiary. of its criminal conduct confiscated under the UK What would carry risk of Proceeds of Crime Act 2002. An “associated person” is one who performs conviction for the Company and services for or on behalf of the organisation. A commercial organisation convicted of the the Group? Corporate Offence won’t be automatically barred Employees are presumed to be associated with The following is a brief overview of some of from participating in tenders for public contracts. their employer organisation. A commercial commercial activities and operations that may But public authorities will have the discretion to organisation’s agents and subsidiaries and, where expose a corporate entity to particular risks of exclude them. Public procurement laws elsewhere it has the requisite degree of control or influence, being involved in corruption and suggests how in the world may include similar restrictions. joint venture vehicles may also be associated some of the risks may be avoided: persons. Distributors, joint venture partners and, Other potential consequences involve private • Corporate hospitality and gifts. Some potentially, suppliers could also be caught. claims from competitors, shareholders and other types of corporate hospitality, such as affected third parties who have incurred loss The organisation may be found guilty of this customer or supplier entertainment and as a result of corrupt practices. Any asset that offence, even if the associated person itself is not, the giving or receiving of gifts, might be was obtained through bribery is also at risk of or cannot be, prosecuted for the bribe. seen as bribery, especially in dealings with being lost because there is a general principle of foreign public officials. Lavish hospitality or For example, if the associated person is international law, followed in most jurisdictions, gifts should be avoided; both the giving and incorporated, and performs the bribe, outside the that a contract, licence or award obtained through receiving of them. UK, it cannot be prosecuted. But that wouldn’t fraud or corruption is void or voidable. hinder the organisation from being prosecuted for • Facilitation payments. These are payments The reputational damage, which could result the Corporate Offence. demanded by officials (or others) simply to from such criminal convictions, should also not be secure or expedite the performance of their This may be the offence most likely to lead to the underestimated. normal duties (for example, granting a licence majority of convictions of corporate bodies under Senior officers can also be convicted alongside or allowing goods to cross a border). These are the Act. On the other hand, defendants may be their corporate body. commonplace in some jurisdictions, but the able to use the defence of having “adequate making of such payments, regardless of how procedures” in place without difficulty. We explain A director is also likely to be disqualified from small, will be an offence under the Act, if they “adequate procedures” in more detail below, holding a director position in a company are not permitted by the written local law. We but the vagueness of this expression may help incorporated in the UK for up to 15 years. understand that the equivalent US legislation defendants to prevent such convictions. Time will currently exempts such payments but the Act tell as to how the courts will test this. does not. Adequate procedures guidance • High risk countries. If the Group operates The Ministry of Justice has published guidance (on Criminal penalties and other in countries where corruption is perceived to the link below) on what procedures commercial be commonplace, particular care needs to be consequences organisations can put in place to prevent their taken. If convicted, the potential criminal penalties are: authorised persons from bribing, and thus take advantage of the defence to the Corporate • High risk transactions. If the Group’s • individuals: imprisonment for up to 10 Offence. business involves interactions with public years and/or liable for an unlimited fine for officials, charities, or multi-party transactions, any of the Individual Offences. http://www.justice.gov.uk/guidance/docs/ especially in high risk countries, care is needed. bribery-act-2010-guidance.pdf • organisations: unlimited fines for any of the • High risk business partners. The Group offences. The guidance includes the following principles: should be alert to, and perhaps investigate, Fines for commercial organisations are likely to • risk assessment; whether any of its agents, intermediaries, joint venture partners, customers or suppliers has a be substantial. Fines of over US$100 million for • proportionate procedures; similar offences in the United States would be a reputation for corruption. suitable benchmark. • top-level commitment; inbrief

Is there a need for immediate • adopt a robust anti-corruption stance at action? the highest level, including making a public statement of the Group’s zero tolerance to UK and international companies are reviewing corruption both internally and externally; their anti-corruption policies and procedures to ensure that they are sufficiently robust to prevent • institute disciplinary measures and remedial corruption and to mitigate the risk of committing action to deal with unethical behaviour; an offence under the Act. Even if the Group • publish and make accessible, internally already complies, or has policies and procedures and externally, the Group’s anti-corruption designed to ensure it complies, with the anti- statement and code of conduct; and corruption laws of any other jurisdiction, the Act goes further than any of those regimes. • provide adequate budget for the implementation of the revised policy (for The following indicates the initial actions that the example, extensive training and monitoring Group could take. These follow the Ministry of of staff in key risk areas and establishing Justice’s guidance for commercial organisations’ disciplinary mechanisms). procedures to prevent bribery, referred to above:

• conduct a comprehensive Group-wide risk assessment; For further information • conduct an immediate review of existing anti- on this subject please contact: corruption policies and procedures, especially taking into consideration corporate hospitality, Jo Evans donations and facilitation payments; Partner • prepare and publish a global code of conduct T + 44 (0) 20 7074 8087 across the Group which addresses, amongst [email protected] other things, a clear policy on corporate hospitality, donations and facilitation payments and which is continually monitored and reviewed;

• conduct due diligence on all “associated persons”, especially third parties in high risk jurisdictions or sectors. In particular, perform tailored, ethical and anti-corruption due diligence on any proposed mergers and acquisitions, joint ventures or consortiums or when appointing agents, contractors and other third party service providers;

• appoint a compliance officer either at Company board level or reporting directly to the board or the Company’s CEO;

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