If your company is based in the United States and does business in any foreign market, you are likely familiar with the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”). The anti-bribery provisions of the FCPA generally prohibit any payments to foreign government officials for the purpose of obtaining or retaining business. Violations of the FCPA can result in criminal and civil penalties, including fines and imprisonment for individuals and substantial fines for corporate entities. Most U.S. companies doing business abroad have an understanding of the FCPA and have policies and procedures in place to prevent their employees and agents from committing bribery. However, the United Kingdom Parliament recently enacted the Bribery Act 2010, c. 23 (Eng.) (“UK Bribery Act” or “the Act”) that has the potential also to affect U.S. companies and their employees and agents.
In recent years, the UK government has been subject to a firestorm of criticism over its handling of investigations of alleged bribery of foreign officials by UK firms, particularly the controversial 2006 decision of then-Prime Minister Tony Blair’s government to halt the Serious Fraud Office’s investigation of BAE Systems’ dealings with Saudi Arabia. The new UK Bribery Act, however, is one of the most restrictive and far-reaching anti-bribery laws in the world.
The UK Bribery Act creates four new offenses under UK law: two general bribery offenses (one related to bribing another person and the other related to accepting bribes), a discrete offense of bribing a foreign government official, and an offense related to the failure of a commercial organization to prevent bribery.
Giving and Receiving Bribes
The first new offense covers offering, promising, or giving a financial or other advantage, or bribe, to another person intended to bring about improper performance of a relevant function or activity by that person. The second new offense deals with a person who requests, agrees to receive, or accepts an advantage for an improper performance of a relevant function or activity.
The UK Bribery Act defines a “relevant function or activity” extremely broadly, making it an offense to provide or receive bribes in connection with any public (i.e., governmental) function or virtually any business activity. Any person offering or accepting bribes in a private business transaction may be in violation of the UK Bribery Act. The reach of the Act is equally broad: The UK Bribery Act specifically includes in the definition of “relevant function or activity” activities taking place outside the UK and which need not have any connection with the UK.
Bribing a Foreign Public Official
Similar to the FCPA, the third new offense under the UK Bribery Act involves bribing a foreign public official with the intent of influencing that official for the purpose of obtaining or retaining business. But unlike the FCPA, the UK Bribery Act does not provide an exception for “facilitating” or “grease” payments for routine governmental actions, and any such facilitating payment, no matter how small, can be deemed an offense. The definition of “foreign public official” under the UK Bribery Act includes both foreign government officials and persons working for public international organizations.
The first three new offenses of the UK Bribery Act are implicated if any part of the act constituting the offense takes place anywhere within the UK. Additionally, the UK Bribery Act provides for jurisdiction over offenses committed outside the UK by UK citizens, UK nationals, UK corporate entities, and individuals ordinarily residing in the UK.
Failure of a Commercial Organization to Prevent Bribery
The final new offense of the UK Bribery Act, the failure of a commercial organization to prevent bribery, will likely be of most concern to U.S. companies. Under the Act, a commercial organization is guilty of an offense if a person associated with the organization bribes another person to obtain or retain business. The Act provides that the offense covers any business or partnership formed under UK law or any corporate body or partnership, wherever formed, which carries on business in any part of the UK, regardless of where the offense occurs. As with the individual bribery offenses discussed earlier, this offense pertains to bribery in connection with either public functions or private business activity. A person will be deemed to be “associated” with a commercial organization if the person performs services for the organization, and this definition includes employees, agents, and subsidiaries.
The Act does provide an affirmative defense if the commercial organization can prove that it had in place “adequate procedures” designed to prevent associated persons from committing bribery offenses. The Act directs the UK Secretary of State to publish guidance regarding procedures commercial organizations may use to prevent associated persons from engaging in bribery offenses. The UK Secretary of State has advised Parliament that this guidance will be principles-based and will set out illustrative good practices rather than specific standards.
The fourth offense has the potential to increase the risk for U.S. companies doing business abroad. For example, under the terms of the UK Bribery Act, a U.S. company that does business in the UK will potentially be criminally liable if its agent operating in a third country bribes an official at a private company to obtain business with that company unless the U.S. company can prove that it had adequate procedures in place designed to prevent the prohibited activity.
The penalties set forth in the UK Bribery Act are severe. Individuals guilty of any of the first three new offenses are subject to up to 10 years imprisonment and a fine, while corporate organizations guilty of the fourth new offense are subject to an unlimited fine.
To protect themselves, U.S. companies doing business in the UK should do at least the following:
Internal Evaluation: A company should do an internal assessment of its level of exposure under the new law. Factors may include whether the type of business conducted by the company requires significant contact with government officials, the number of employees and agents of the company seeking to secure business in foreign countries, and the concentration of the company’s business in countries where bribery may be an accepted part of the culture, particularly developing countries.
Education: Companies should immediately begin educating all employees about the new offenses and potential severe penalties under the UK Bribery Act. Employees engaged with procuring business from foreign governments or foreign businesses should receive adequate education and training regarding the UK Bribery Act.
Policies and Procedures: The UK Bribery Act provides an affirmative defense to a commercial organization if the organization can prove it had in place adequate procedures designed to prevent associated persons from committing bribery offenses. Companies should review current anti-bribery policies and procedures and revise such policies and procedures to ensure they are compliant with the UK Bribery Act.
Compliance and Enforcement: The best policies and procedures are useless unless a company takes affirmative steps to ensure that its employees and agents are adhering to such policies and procedures. Companies should establish strong monitoring procedures directed toward discovering illegal bribery activity. Companies should also establish and enforce stringent penalties for bribery, including termination of any employee or agent engaged in illegal behavior.