vol. 25 no. 1 Fall 2010

The UK’s Act and Pricing Processing in the FCPA Compared E-Discovery: Keep the By Richard C. Rosalez, Weston C. Loegering, Invoice from Being a Surprise and Harriet Territt By Seth Eichenholtz, Esq.

fter much deliberation, the United Kingdom’s (UK) -discovery continues to confound law firms and clients Bribery Bill received Royal Assent on April 8, 2010, and with a lack of consistency in pricing. This lack of con- A became the Bribery Act. Now set to become effective Esistency may have many reasons, likely due to various in April 2011, the Bribery Act is the UK’s effort to modernize vendors having very different internal costs owing to the wide its anti- laws and potentially take a lead role along- range of core competencies and services that vendors in the side, if not an outright attempt to step ahead of, enforcement e-discovery space purport to offer. But perhaps the most criti- efforts of the United States.1 The Bribery Act is far reaching cal reason for the lack of consistency in pricing is that vendors and signals a significant shift in the criminalization of corrup- have been able to take advantage of the fact that both law firms tion as another major economic power seeks to police graft and clients are all over the map in defining specifically what around the world. “processing” means in the e-discovery lexicon. Processing data in e-discovery means different things to different people and Background pricing for processing has followed suit. The previous statutory criminal law of bribery was “functional,” Of all the major hurdles in any e-discovery engagement, but “old and anachronistic” with “inconsistencies of language perhaps the biggest challenge is being able to foresee the costs and concepts” resulting in a bribery law, which was “difficult to of processing the data. Processing can also become the most understand for the public and difficult to apply for prosecutors expensive component of litigation, short of a long and drawn- and the courts.” The foreword to the Bribery Bill noted the UK’s out document review. The reason for this is that there has been reputation as “one of the least corrupt countries in the world” no uniformity amongst e-discovery vendors regarding how to as well as the perils of bribery: “Bribery is by its nature insidi- categorize the various elements and issues inherent in process- ous; if it is not kept in check it will have potentially devastating ing data in e-discovery nor what those costs should be. And it consequences.”2 The UK has long been a party to international is very easy to envision a case with current market processing treaties that combat corruption and emphasize the seriousness costs where the processing costs alone can quickly reach six- of the problems that corruption poses, such as the United Nations figure sums. So to the extent that one can police, lower, and Convention Against Corruption, the Organization of Economic perhaps best of all, predict that pricing, this is a critical issue (Continued on page 13) (Continued on page 18)

Highlights

Third-Party Financing of Commercial Litigation, Part Two By Holly E. Loiseau, Eric C. Lyttle, and Brianna N. Benfield ...... 3 Jurors’ Perceptions of Ethnic Minority Attorneys: Are We in a Post-Racial Era? By Mark R. Phillips Ph.D...... 8 Practice Tip Jean Walker Tucker...... 19 The In-House Litigator Spotlight: Cathy Lamboley’s Five Keys to Success By Haley Maple and Jacqueline Taylor...... 22

Published by the American Bar Association Section of Litigation • 321 N. Clark Street • Chicago, IL 60654 The UK’s Bribery Act and the FCPA Compared (Continued from page 1)

Cooperation and Development (the OECD) Anti-Bribery Convention, and the Council Bribery Act Basics of Europe Criminal Law Convention on Corruption. However, the UK’s patchwork The Bribery Act is noteworthy and even groundbreaking in a number of respects. of antiquated legislation simply did not First, the Bribery Act crimianalizes private, commercial bribery. Second, it states reflect the modern commercial world. This, that it is a crime to accept a bribe—extending beyond the traditional anti-bribery paradigm—by targeting the bribed in addition to the briber. Third, it prohibits brib- together with a number of failed prosecu- ery of foreign public officials, akin to the United States Foreign Corrupt Practices tions and the high-profile discontinuance of Act (FCPA). For commercial bribery, paying or receiving bribes is illegal when there an investigation into a British corporation’s is an intention that it induces or rewards for “improper performance.” There is no dealings in the Middle East, led the OECD intent requirement for bribery of foreign officials; any attempt to influence the offi- to openly criticize the UK for its failure to cial is prohibited. As a result, the Bribery Act covers an extensive amount of exist- bring its anti-bribery laws into line with its ing business practices as any payment, gift, or benefit that may be categorized as a international obligations. Clearly, there was bribe. need for reform. The Act also establishes strict liability for corporations for failing to prevent acts of According to the UK’s Ministry of bribery unless a corporation can demonstrate that it had “adequate procedures [to Justice, “[t]he Bribery Act reforms the prevent bribery]” in place. Effective implementation and regular review of corpo- criminal law to provide a new, modern and rate compliance programs is essential as a result. Equally important, counsel should comprehensive scheme of bribery offenses understand the scope of the Bribery Act’s territorial reach. The provisions vary as to to equip prosecutors and courts to deal how they apply to conduct in the UK or those doing business in the UK. effectively with bribery at home or abroad.”3 Further, the Bribery Act will “provide a more conduct in the UK or relatively strong Requesting, Agreeing to Receive, or effective legal framework to combat bribery ties to the UK. Specifically, the three Accepting a Bribe in the public or private sectors,” “replace the general offenses apply (a) if any Section 2 of the Bribery Act criminalizes fragmented and complex offences at com- parts of the acts or omissions take the acceptance of a bribe. Specifically, it is mon law and in the Prevention of Corruption place in the UK, or (b) if any person a violation where a person “requests, agrees Act 1889–1916,” and “help tackle the threat committing the act or omission has a to receive or accepts a financial or other that bribery poses to economic progress and “close connection” with the UK. The advantage . . .” development around the world.” Act generally defines those with a The British government’s goals for the “close connection” as British citizens, • “intending that . . . a relevant func- impact of the new law are admirable, but residents of the UK, and companies tion or activity should be performed surely, government officials also recognized incorporated in the UK.4 improperly” the growing trend of American authorities • “the request, agreement or acceptance extracting significant fines from corpora- Offering, Promising or Giving a itself constitutes the improper perfor- tions for corruption around the globe. Many Bribe mance . . . of a relevant function or of these corporations also do business in Section 1 of the Bribery Act pro- activity” the UK, and penalties have been levied hibits commercial bribery. The Act • “as a reward for the improper perfor- against British corporations and executives. proscribes conduct where a person mance . . . of a relevant function or It is not difficult to imagine officials in “offers, promises or gives a financial activity” the UK government appreciating that they or other advantage to another” (includ- could continue to cooperate with American ing through a third party) and • “in anticipation of” the person “requesting, agreeing to receive or enforcement efforts or engage in the pro- accepting a financial or other advan- cess more fully by modernizing the UK’s • the person “intends the advan- tage, a relevant function or activity is anti-bribery laws and advancing the goals tage to induce a person to performed improperly”6 of such laws through promotion of an anti- perform improperly a relevant corruption agenda, all while collecting hefty function or activity, or to reward Section 2 also covers scenarios where sums through fines and confiscation orders a person for the improper per- the person “requests, agrees to receive against those guilty of bribery in the public formance of such a function or or accepts . . . the advantage directly or and private sector. activity” through a third party” and where the advan- • the person “knows or believes tage benefits the person or another. Key Provisions of the Bribery Act that the acceptance of the advan- There are three general offenses and one tage would itself constitute the Bribing a Foreign Public Official corporate offense in the Bribery Act. The improper performance of a rel- Under Section 6 of the Act, a person who three general offenses require either evant function or activity”5 bribes a foreign public official commits

Section of Litigation 13 Fall 2010 an offense if the person’s “intention is to “senior officer” with a “close connection” but not limited to, employees, agents, and influence” the oficial in their “capacity as a to the UK can be liable for any violation subsidiaries. foreign public official.” The person “must of Sections 1, 2, or 6 by a corporation The scope of the corporate offense is also intend to obtain or retain business, or an (bribing, accepting a bribe, or bribing considerable. Under the Act, the corporate advantage in the conduct of business.”7 There a foreign official) committed with their offense applies regardless of where the is no requirement of intending an improper, “consent or connivance.”9 A senior officer acts or omissions take place. To be clear, illegal, or corrupt influence. means “a director, manager, secretary or the corporate offense of the Bribery Act Further, a person bribes an official “if, other similar officer” of the corporation. has no jurisdictional limitation—failure and only if, directly, or through a third party, Section 7 of the Act imposes strict to prevent bribery anywhere in the world [the person] offers, promises or gives any liability on corporations for failing to may result in corporate criminal liability financial or other advantage” prevent bribery. Under this section, a for companies doing business in the UK. “Commercial Organization” is guilty of • to an official an offense if a person “associated with the Penalties • to another “at [the official’s] request [Commercial Organization] bribes another A conviction carries penalties of impris- or with [the official’s] assent or person intending onment for a maximum term of 10 years, acquiescence” a fine, or both for individuals, and a • “to obtain or retain business for [the potentially unlimited fine and/or confis- • the official “is neither permitted nor Commercial Organization]” cation orders (of proceeds or profit) for required by the written law applicable • “to obtain or retain an advantage corporations. As well as the obvious repu- to [the official] to be influenced in [the tational impact, convicted organizations official’s] capacity as a foreign public in the conduct of business for [the Commercial Organization]”10 may face other serious consequences. For official by the offer, promise or gift.” example, under the UK Public Contracts It is a defense for the commercial orga- Regulations 2006, organizations will be Influencing an official in his or her capacity nization to “prove that [it] had in place permanently debarred from competing for as a foreign public official means “influenc- adequate procedures designed to prevent UK public contracts where convicted of ing [the official] in the performance of [his or persons associated with [it] from under- bribery.14 her] functions as such an official,” including taking such conduct.” Under the Act, the Secretary of State The Bribery Act Compared with • “any omissions to exercise those must publish guidance about procedures the FCPA functions” that commercial organizations can put in Generally speaking, the anti-bribery pro- • “any use of [the official’s] position place to prevent bribery. The UK govern- vision of the FCPA states that a covered as such an official, even if not within ment is scheduled to consult the public person may not corruptly pay, promise [the official’s] authority” regarding guidance in September 2010 and to pay, or offer anything of value to a publish detailed guidance in early 2011. foreign official to obtain or retain busi- A “foreign public official” is an individual Establishing procedures according to the ness.15 Covered persons include U.S. who guidance, however, will not be prescrip- issuers, including foreign subsidiaries; tive, as the intention is to allow organiza- private U.S. corporate entities; employees, • “holds a legislative, administrative or tions to develop procedures appropriate agents, officers, and directors of either of judicial position of any kind, whether to their own circumstances and business the above; U.S. nationals, citizens, and appointed or elected, of a country or sectors.11 In the interim, the UK’s Serious residents; third-party consultants, agents, territory outside the United Kingdom” Fraud Office (SFO), which is responsible and joint venture partners. (or any subdivision) for investigating and prosecuting allega- The FCPA also requires that issuers • “exercises a public function” (a) “for tions of corruption offences by UK nation- maintain accurate books and records and or on behalf of a country or territory als or corporations overseas, has given its adequate internal controls to prevent an outside the United Kingdom” (or any own basic guidance on what would con- improper accounting of corrupt payments subdivision), or (b) “for any public stitute “adequate procedures” in its more and ensure the accuracy of financial state- 16 agency or public enterprise of that general guidance for corporations on self- ments. The Department of Justice (DOJ) 12 country or territory (or subdivision)” reporting foreign corruption. and Securities and Exchange Commission A commercial organization is defined (SEC) are responsible for enforcement of • “is an official or agent of a public as a UK corporation or partnership or any the FCPA. 8 international organisation” other corporation or partnership that “car- ries on a business, or part of a business, Jurisdiction Liability of Corporate Officers in any part of the United Kingdom.”13 U.S. jurisdiction is expansive, cover- The Act also establishes liability for senior Associated persons include any person ing individuals and U.S. companies, corporate officers who are involved in who performs services for or on behalf of and virtually all persons affiliated with bribery schemes. Pursuant to Section 14, a the commercial organization, including, U.S. companies for illegal conduct that

In-House LItigator 14 American Bar Association happens anywhere. Illegal conduct may self-reporting and cooperation when cal- foreign officials, the Bribery Act covers be entirely outside of the U.S., but regula- culating a culpability score to determine a any attempt to influence the official. It is tors may seek any connection to the U.S. fine or sentence.18 not limited to “improper” performance to assert U.S. jurisdiction. or influence. The FCPA requires corrupt Jurisdiction of British authorities Commercial Bribery intent in offering, promising, or paying under the Bribery Act is more limited for The Bribery Act prohibits offering, prom- a bribe to a foreign official. Specifically, individuals under the general anti-bribery ising, or giving a bribe to private citizens the FCPA prohibits “corruptly” giving, offenses, where liability is limited to acts in addition to bribery of a foreign official. offering, or promising anything of value or omissions within the UK or for conduct The FCPA does not cover foreign com- for the purposes of “(i) influencing any anywhere for individuals who are closely mercial bribery, though prosecutors have act or decision of that person, (ii) induc- connected to the UK. The jurisdictional pursued such conduct through the Travel ing such person to do or omit any action reach of the corporate offense is much Act and state laws where defendants in violation of his lawful duty, or (iii) broader, as it covers conduct anywhere if bribed both foreign public officials and securing an improper advantage.”20 the company is incorporated in the UK private individuals.19 or does any business in the UK. Because Conduct of Third Parties bribery that happens anywhere may put Accepting a Bribe It is illegal under the Bribery Act to corporations at risk, corporations must The Bribery Act makes it unlawful to make payments through third parties ensure that those acting on its behalf make or take a bribe. It is a crime to to the official or to make payments to and its business partners are FCPA and request, agree to receive, or accept a bribe. another person at the official’s request Bribery Act compliant, especially in The FCPA is more limited, as the statute or with the official’s assent or acqui- regions and industries with reputations for does not extend to acceptance of a bribe. escence. Similarly, the FCPA makes it corruption. unlawful to know that the bribe will be Foreign Officials offered, given, or promised—directly Books and Records and Internal The Bribery Act defines a foreign public or indirectly—to any foreign official. Controls official as an elected or appointed offi- Knowledge also includes conscious Books and records and internal controls cial who exercises a public function in avoidance. provisions apply only to U.S. issuers, a legislative, administrative, or judicial their officers, and employees, though con- position of any kind. The FCPA is simi- Facilitating Payments duct anywhere is covered. The Bribery lar in scope, broadly defining a foreign Following the OECD Convention, the Act does not include books and records or official as any officer or employee of a Bribery Act provides no facilitating pay- internal controls violations. At the same foreign government or any subdivision. ments exception. The FCPA does not time, the “adequate procedures” defense The FCPA also applies to foreign political apply to facilitating payments to offi- may be absolute, and strong internal con- parties, party officials, and candidates for cials to expedite or secure performance trols and a commitment to anti-corruption foreign political offices, while the Bribery of a routine governmental action.21 In may be mitigating factors to avoid or limit Act does not address such persons. November 2009, the OECD, instrumental liability. in the international effort to combat cor- Intended Benefit ruption, issued recommendations that its Scope of Corporate Liability The Bribery Act follows the OECD members eliminate facilitating payment Under the Bribery Act, commercial orga- Convention as it prohibits bribes to for- exceptions due to their “corrosive effect” nizations are strictly liable for failing to eign public officials where the person on “sustainable development and the rule prevent bribery by associated persons. As intends to obtain or retain business or of law.”22 The influential OECD went fur- noted above, corporations with “adequate an advantage in the conduct of business. ther, encouraging companies to prohibit procedures” may be entitled to a complete The FCPA’s prohibition is slightly more or discourage the use of facilitation pay- defense. The FCPA has no “adequate pro- limited, as it proscribes bribes to obtain ments in internal controls and ethics and cedures” defense, but authorities consider or retain business or direct business to compliance programs. the adequacy of internal controls, corpo- any person; however, recent enforcement The recommendations are commend- rate culture, and policies in various con- trends suggest authorities may consider a able and their implementation would texts. The SEC and DOJ have policies to broader standard, including bribery where essentially establish a zero tolerance consider corporate culture, remediation, the intention is to gain any commercial policy for bribery, creating consistency cooperation, and effectiveness of controls advantage. for how corporations account for and and compliance programs when determin- prosecutors regard such payments, and ing whether to give credit for self-policing Intent eliminating the mixed message that some or self-reporting or to charge a business For commercial bribery, the Bribery Act corrupt payments are permissible. Until organization.17 Similarly, courts may con- prohibits paying or receiving bribes with Congress acts, however, the exception sider the effectiveness of a corporation’s the intention that it induce or reward for is in place and at odds with the OECD compliance and ethics program as well as “improper performance.” For bribery of Recommendations.

Section of Litigation 15 Fall 2010 No Amount Too Small is well advised. The further consultation Under Secretary of State, to Lord Henley, entitled There is no de minimis exception; a bribe appears to be a response to some of the Bribery Bill—Adequate Procedures Guidance, of any value may be a violation under the concerns expressed by businesses regard- December 2009, www.justice.gov.uk/publica- Bribery Act and the FCPA. ing the wide-ranging impact of the Act and tions/docs/bach-letter-adequate-procedures-guid- the uncertainty it introduces to a range of ance.pdf; Government Response to the conclusions Local Law normal business activities, such as corpo- and recommendations of the Joint Committee Under the Bribery Act, one bribes a for- rate hospitality, and previously exempted Report on the Draft Bribery Bill, November 2009, eign official only if the official is neither practices, such as facilitating payments. It www.justice.gov.uk/publications/docs/draft- permitted nor required by the written law may well signal that the UK government bribery-joint-cttee-govt-response.pdf. applicable to the official to be influenced recognizes that more detailed guidance is 12. Approach of the Serious Fraud Office by the offer, promise, or gift. The FCPA required than originally envisaged, which to Dealing With Overseas Corruption, July 21, provides an affirmative defense where the is likely to be welcomed by those who will 2009, http://www.sfo.gov.uk/media/112491/ payment or promise was lawful under the be affected when the Act comes into force. approach%20of%20the%20serious%20fraud%20 written laws and regulations of the rel- office%20v5.pdf. evant country.23 This defense is essentially Conclusion 13. Bribery Act, § 9. nonexistent, because even countries with As global anti-corruption enforcement 14. Public Contracts Regulations 2006, 2006 widespread corruption typically enact anti- increases, U.S. corporations must have No. 5 § 23(1)(c) (Eng.). bribery laws. Bribery remains pervasive strong compliance programs in place if 15.15 U.S.C. § 78dd-1 et seq. because governments choose not to enforce they operate in foreign markets or con- 16. 15 U.S.C. § 78m(b). the law. template entering them. If these foreign 17. See Principles of Federal Prosecution markets include the UK, or if key person- of Business Organizations—Title 9, Chapter Bona Fide Business Expenses nel include British nationals, counsel must 9-28.000 (August 28, 2008); Report of The Bribery Act provides no exception consider whether company policies and Investigation Pursuant to Section 21(a) of or affirmative defense for legitimate busi- programs satisfy the Bribery Act where it the Securities Exchange Act of 1934 and ness expenses on the basis that legitimate is more stringent than the FCPA or where Commission Statement on the Relationship of business expenses will not be paid with it covers conduct outside the scope of the Cooperation to Agency Enforcement Decisions, the necessary corrupt intent to fall within FCPA. Counsel must further consider Exch. Act Rel. No. 34-44969; Accounting and the Act. An affirmative defense under the what other anti-corruption laws the com- Auditing Enforcement Rel. No. 1470 (October FCPA includes reasonable and bona fide pany’s operations are subject to and care- 23, 2001). expenditures, such as travel and lodg- fully develop, implement, and monitor 18. U.S. Sentencing Guidelines Manual § 8B2.1 ing expenses, incurred by officials when robust ethics and compliance programs to (2007). directly related to promotion, demonstra- minimize risk and promote a culture of 19. The Travel Act prohibits travel in or use of tion or explanation of products or services, compliance. the mail or any facility in interstate or foreign com- or execution or performance of a contract merce to further or facilitate any unlawful activity. with a foreign government.24 Richard C. Rosalez and Weston C. Loegering are 18 U.S.C. § 1952. with Jones Day in Dallas, Texas. Harriet Territt is with Jones Day in London. 20. 15 U.S.C. § 78dd-1 et seq. Government Review Procedures 21. 15 U.S.C. §§ 78dd-1(b), 78dd-2(b), The Bribery Act does not set forth a formal Endnotes 78dd-3(b). process by which corporations can seek the 1. Ministry of Justice, News Releases, 22. Organisation of Economic Co-operation and SFO’s opinion on proposed activities. The Bribery Act implementation, available at www. Development, Recommendation of the Council SFO’s Self Reporting Overseas Corruption justice.gov.uk/news/newsrelease200710a.htm. for Further Combating Bribery of Foreign Public Guidance states that companies and the 2. , Foreword to Bribery Draft Officials in International Business Transactions SFO may have a dialogue about conduct, Legislation Presented to Parliament by the Lord (November 26, 2009) (with amendments adopted compliance, and enforcement, so infor- Chancellor and Secretary of State for Justice by Council February 18, 2010 to reflect the inclu- mal consultation is available, but there is (Mar. 2009). sion of Annex II, Good Practice Guidance on no possibility of a guaranteed outcome.25 3. Ministry of Justice, Bribery Act 2010, Internal Controls, Ethics and Compliance). The FCPA established a DOJ opinion pro- www.justice.gov.uk/publications/bribery-act. 23. 15 U.S.C. §§ 78dd-1(c)(1), 78dd-2(c)(1), cedure to respond to corporate inquiries htm. 78dd-3(c)(1). about prospective conduct.26 4. Bribery Act 2010, c. 23, § 12 (Eng.). 24. 15 U.S.C. §§ 78dd-1(c)(2), 78dd-2(c)(2), 5. Id. at § 1. 78dd-3(c)(2). Recent Developments 6. Id. at § 2. 25. Approach of the Serious Fraud Office The Bribery Act is the result of lengthy 7. Id. at § 6. to Dealing With Overseas Corruption, July 21, and careful deliberation. The announced 8. Id. 2009, http://www.sfo.gov.uk/media/112491/ delay to the implementation of the Act and 9. Id. at § 14. approach%20of%20the%20serious%20fraud%20 production of the guidance so that another 10. Id. at § 7. office%20v5.pdf. consultation with the public can take place 11. Letter from Lord Bach, Parliamentary 26. 15 U.S.C. §§ 78dd-1(e), 78dd-2(f).

In-House LItigator 16 American Bar Association