I have previously written on the U.S. Federal Corrupt Practices Act (FCPA), which prohibits bribes and corrupt payments to foreign officials, and which imposes strict accounting requirements on U.S. businesses (see http://www.worldwideerc.org/gov-relations/us-tax-legal-resources/tax-legal-updates/Documents/gr-update-0310.html ). In fact, the Worldwide ERC® Government Relations Council will very soon release a series of whitepapers on that law, and its application to the employee mobility industry.
Many other countries have similar laws. For companies doing business in the U.K., knowledge of the new Bribery Act 2010 (Act) will become especially important when it becomes effective sometime in April 2011. I will examine its provisions in more detail in future publications, but the overview presented in this blog is intended to alert industry members to the law, so that its provisions can begin to be blended into every covered company’s risk management and compliance programs.
In 1997, the Organization for Economic Cooperation and Development (OECD) and five non-member nations, including the U.S., adopted the "Convention on Combating Bribery of Foreign Public Officials in International Business Transactions" a treaty which sets forth the essential elements of a foreign corrupt practices statute that each signatory county was obligated to enact into law. Both the U.S. and the U.K. are signatories to this agreement, and both had existing anti corruption laws – the FCPA in the case of the U.S. The Bribery Act of 2010 is an enhancement and an expansion of the OECD Convention and the U.K.’s prior anti corruption laws. It is likely the most stringent national anti bribery law currently in force among all of the nations in the world.
What makes compliance with this law so daunting is that it is a “strict liability” law, it covers any type of bribery – it is not limited to bribery of government officials – and, similar to the U.S. FCPA, it requires clear anti bribery policies and procedures, and effective due diligence of relationships with business partners, to include careful review of their activities. In this latter regard, the Act requires companies to put in place “adequate procedures” to prevent bribery. Guidelines will be published by regulation prior to the effective date of the Act.
What does the Act outlaw? The easy answer, of course, is bribery. But for the purposes of this law, the term is defined very broadly; it requires only that the person giving the bribe intends to induce the person being bribed to improperly perform his or her duties, and that the person receiving the bribe agrees. The key here is that there is no need to show any dishonesty or illegal intent. The fact that something of value is given to a person in the context of a business transaction is enough, so long as the prosecutor can show that the resulting action was improperly performed. This is a very difficult standard to manage against.
The Act also has a separate section prohibiting bribery of a foreign government official, which reflects much of the previous laws, but removes the requirement to show intent on the part of the person giving the bribe. That is, previous law generally required that the prosecutor show that the bribing person intended the bribe to induce the officials to improperly perform their duties. The new law only requires a showing that the payment intended to influence the official. No necessity to show that the bribe was intended to have the official act improperly is now required. This is a very low standard, and will likely require many companies to modify what had heretofore been standard business practices, or at least carefully review their practices, especially regarding entertainment and similar sales tools. There is no exemption for facilitation payments as is found in the FCPA.
Like the FCPA, the Act extends to “associated persons” of a company. That means that agents, contractors and subcontractors, distributors, sales agents, etc., are covered, and that the liability for their actions is attributed to the employing company. Thus strict supervision and auditing of suppliers is also required, similar to the FCPA, but broader in scope since the act criminalizes a broader range of conduct.
Also like the FCPA, the Act is extra territorial in scope. It covers any company that does business in the U,K, and also to conduct which takes place in the U.K. Since the Act also applies to the contractors of a company doing business in the U.K., the liability extends to other actions by the employing company worldwide, and a company can therefore be prosecuted in the U.K. for bribes given anywhere in the world.
The penalties under the Act are very severe, and are primarily criminal. The maximum penalty for an individual convicted of an offense is 10 years imprisonment and a fine of an amount yet to be fixed. For a company, the fine is unlimited by the statute, and other consequences, such as debarment are provided for. In addition, senior officers and directors can be found personally liable if they consented or participated in the illegal activities, where any part of the offense occurred in the U.K. If the offense was totally outside of the U.K., senior officials can be liable only if they have a “close connection” with the U.K.
The bottom line for the employee mobility industry is that a new level of compliance and risk management needs to be implemented for any company which does business in the U.K. It would be a good time for all companies to review both their exposure to the Act as well as to the FCPA.