by Michael Connor
A sweeping new United Kingdom anti-bribery law – perhaps the toughest of its type in the world – could have implications for anti-bribery and corruption enforcement on a global basis.
The UK’s Bribery Act 2010, set to take effect in April, goes much further than the U.S. Foreign Corrupt Practices Act, which has been used aggressively by American prosecutors against multinational companies in bribery cases worldwide.
The UK Bribery Act applies to bribery and corruption in the private sector, not just bribery to “foreign officials,” as is the case with the FCPA. It also calls for penalties of up to 10 years in jail (compared with five years under the FCPA) and unlimited fines for individuals and companies. And unlike the FCPA, the UK law does not permit “facilitation” payments designed to assure that otherwise legitimate services are delivered in a timely manner.
Importantly for multinational companies, the UK law also extends the “extraterritorial” reach of UK law enforcement because it applies to all U.K. companies, citizens and residents wherever the bribery occurs, and to non-U.K. nationals or companies if an act or omission forming part of the offense takes place in the U.K.
The law also contains a “failure to prevent bribery” offense which applies “irrespective” of whether conduct forming part of the offense took place in the U.K.
The law’s language “seems to mean that a non-U.K. company could be held liable for bribery where no part of the conduct constituting the bribery took place in the U.K., so long as the company does at least part of its business in the U.K. This would be broader than the reach of the FCPA,” says an analysis by the law firm Jenner & Block.
“The critical point is that it has been very difficult to prosecute a company [in the UK] for corruption if it is taking place a big distance from head office,” Lord (Peter) Goldsmith, a former UK Attorney General and now head of the European litigation department at Debevoise & Plimpton LLP, told the Telegraph. “You couldn’t demonstrate that people at the centre knew about it, or prove it.”
“You cannot understate how significant this new corporate offence is – it is the thing that companies need to be most worried about,” Lord Goldsmith added.
While legal analysts expect aggressive prosecutions by the UK’s Serious Fraud Office, which has responsibility for enforcement of the act, some say that companies that already have aggressive anti-bribery mechanisms in place should be able to adapt.
“On paper, it’s very draconian and drastic, but in practice I think it’s going to be applied in a very reasonable and rational way; it’s not going to be a game-changer for most companies that have been subject to the FCPA,” says Aaron Murphy, an attorney with Latham & Watkins and author of a new book, Foreign Corrupt Practices Act – A Practical Resource for Managers and Executives.
Multinational companies that have been lax in anti-bribery compliance may have more cause for worry, however. “Now you’re subject to two acts that govern the same behavior; if one doesn’t get you, the other will,” Mr. Murphy says.
The Bribery Act offers a defense of “adequate procedures,” whereby a company will not be subject to prosecution if it had in place adequate procedures designed to prevent persons associated with it from undertaking the conduct that gave rise to the prosecution.
“Public statements by U.K. officials suggest that this adequate procedures defense will be a meaningful defense and that any company that puts into place a system of adequate procedures ‘has nothing to fear’ when an employee or agent ‘goes off the rails’ and makes a bribe payment,” says Mike Koehler, a professor at Butler University and author of the FCPA Professor blog.
The new law, Mr. Koehler says, follows decades in which the UK “has had a hodgepodge of antiquated bribery and corruption laws that have proven ineffective.” In the past, he notes, the Serious Fraud Office has had to prove the existence of a “controlling mind” within a company for the company to be charged with a bribery or corruption offense. “In practice, this meant active board or top executive participation in a bribery scheme,” he says. Under U.S. law, by contrast, a company can be subject to criminal exposure based on the acts of its employees and agents to the extent the conduct was “within the scope of employment and intended to benefit, at least in part, the company.”