Bribery Legal Analysis and Regulations

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LEGAL ANALYSISAND REGULATIONS

LAR-503 March 2011

U.K. Bribery Act ImplementationDelayed: Respite or Reprieve?

By:Frederick T. StockerVice President, General Counseland Secretary

[email protected]

The Alliance promotes the technological and economic progress of the United States through studies and seminars on changing economic, legal,and regulatory conditions affecting industry. Copyright 2011 Manufacturers Alliance/MAPI, All rights reserved.

1600 Wilson Boulevard, Suite 1100, Arlington, Virginia 22209-2594 Phone: 703.841.9000 Fax: 703.841.9514 www.mapi.net


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U.K. Bribery Act Implementation Delayed:Respite or Reprieve?

Bribery, if left unchecked, destroys the integrity of all institutions, public and private. Economic globalization means that the

damaging impact of commercial bribery that seeks tosubvert open competition in business transactions

has now moved beyond unilateral, nationalpolicies and has become a global problem.

Kenneth ClarkLord Chancellor and Secretary of State

September 14, 2010

Introduction

On January 31, 2011 the U.K. Ministry of Justice

announced that implementation of the U.K. BriberyAct (the Act)1which was expected to go into effectthis coming April, would be indefinitely delayed. Thisnew law has been a cause of consternation in theglobal business community and among complianceprofessionals. The Acts anti-bribery reach isexpansive. In some key respects, its briberyprohibitions are broader than those contained in U.S.Foreign Corrupt Practices Act (FCPA)2whichheretofore has been considered the gold standard ofsuch measures. This expansive reach has promptedone hyperbolic commentator to describe the new lawas [t]he FCPA on steroids,3and another to opine that[w]hen the U.K. legislation is enacted, it will be one of

the most draconian anti-corruption measures in theworld.4Although there are significant differencesbetween these two anti-bribery legal schemes, thelegislative history of the U.K. law and interpretivestatements by enforcement officials in that countrysuggest that it is likely to be applied in a mannersimilar to its U.S. counterpart. Moreover, while on its

1The U.K. Bribery Act dictates were explained in an earlier MAPI

publication. Reexamining Corporate Compliance Programs in Lightof Recent U.S. FCPA Enforcement and the New U.K. Anti-briberyLaw, LAR-501, July 2010. The Act is available for download athttp://www.legislation.gov.uk/ukpga/2010/23215 U.S.C. 78dd-1, et seq. Available for download at

http://www.justice.gov/criminal/fraud/fcpa/statutes/regulations.html3 Edward M. Joffee of Joffee & Joffee, LLC monitors global customsand trade issues and reports on them in a blog. UK NEWBRIBERY ACT CALLED FCPA ON STEROIDS, January 1, 2011.Available for download athttp://www.trendsininternationallitigation.com/2011/01/articles/foreign-corrupt-practices-act/uk-new-bribery-act-called-fcpa-on-steroids/4A statement attributed to Mr. Nic Carrington, a partner in the for-

ensic and dispute services practice of business advisors Deloitte.Michael Dempsey, Bribery Act is set to bare its teeth, Raconteuron BUSINESS ETHICS, May 18, 2010, p. 8. Available athttp://www.goodcorporation.com/documents/TheTimes_businessethics_final.pdf

face the new Bribery Act reaches a broader range ofconduct than does the FCPA, other U.S. laws areincreasingly being used to narrow this perceived gap.

Regardless of similarities/differences in the twocountries legal frameworks, U.S. companies shouldnot be lulled into complacency thinking that theirFCPA compliance programs are entirely adequate toprotect them against potential violations of the U.K.Bribery Act. The delay in implementation of the newlaw affords companies additional time to refine theircompliance practices to ensure that the nuances ofthe new law are identified and addressed.

After providing a brief overview of the new law andthe draft guidance as to interpretation of its keyprovisions issued by the U.K. Ministry of Justice, thisreport will provide a more detailed analysis of thelaws specific dictates. Those provisions will be

compared to, and contrasted with, the FCPAs legalregimen. Also reviewed in detail are provisions of thelaw which pose the most troubling questions whichwere the focus of the earlier draft guidance. Finally,thoughts on the eventual implementation of the Act, itsenforcement, and suggestions for compliancepreparations will be offered.

The New Law in a Nutshell

The U.K. Bribery Act was published in draft form onMarch 25, 2009 for pre-legislative scrutiny by a JointCommittee of both Houses of Parliament. It waspassed on April 8, 2010, and received Royal Assent

that same day. The purpose of the Act is to reformthe U.K. criminal law of bribery by providing a newconsolidated scheme of bribery offenses coveringsuch activity both in that country and abroad. The Actrepeals the pre-existing criminal anti-bribery/corruption laws in the United Kingdom,including the common law offense of bribery, thePublic Bodies Corrupt Practices Act of 1889, the 1906and 1916 Prevention of Corruption Acts, and relatedmeasures. The laws being replaced were generallyacknowledged as being antiquated and lacking clarity
http://www.legislation.gov.uk/ukpga/2010/23http://www.legislation.gov.uk/ukpga/2010/23http://www.justice.gov/criminal/fraud/fcpa/statutes/regulations.htmlhttp://www.justice.gov/criminal/fraud/fcpa/statutes/regulations.htmlhttp://www.trendsininternationallitigation.com/2011/01/articles/foreign-corrupt-practices-act/uk-new-bribery-act-called-fcpa-on-steroids/http://www.trendsininternationallitigation.com/2011/01/articles/foreign-corrupt-practices-act/uk-new-bribery-act-called-fcpa-on-steroids/http://www.trendsininternationallitigation.com/2011/01/articles/foreign-corrupt-practices-act/uk-new-bribery-act-called-fcpa-on-steroids/http://www.goodcorporation.com/documents/TheTimes_businessethics_final.pdfhttp://www.goodcorporation.com/documents/TheTimes_businessethics_final.pdfhttp://www.goodcorporation.com/documents/TheTimes_businessethics_final.pdfhttp://www.goodcorporation.com/documents/TheTimes_businessethics_final.pdfhttp://www.goodcorporation.com/documents/TheTimes_businessethics_final.pdfhttp://www.trendsininternationallitigation.com/2011/01/articles/foreign-corrupt-practices-act/uk-new-bribery-act-called-fcpa-on-steroids/http://www.trendsininternationallitigation.com/2011/01/articles/foreign-corrupt-practices-act/uk-new-bribery-act-called-fcpa-on-steroids/http://www.justice.gov/criminal/fraud/fcpa/statutes/regulations.htmlhttp://www.legislation.gov.uk/ukpga/2010/23


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and scope. Once the Act comes into force it willreplace old fragmented offenses with a more coherentlegal framework of offenses with broad scope andextraterritorial reach.

In most basic terms, the Bribery Act creates twogeneral offenses: the offering, promising, or giving abribe and the requesting, agreeing to receive, oraccepting a bribe. The Act also creates a discreteoffense of bribery with a foreign government official inorder to obtain or retain business or an advantage inthe conduct of business. These offenses apply to anyacts which take place in the U.K., and to acts carriedout anywhere in the world by a person with a closeconnection with the U.K. (including but not limited toU.K. citizens, residents, and companies). There isalso a specific offense for senior corporate officers. Ifany of the offenses mentioned above are committed(under the usual rules of attribution of knowledge) bya corporate body with the consent or connivance of

such a person, that senior official may also be liablefor the underlying offense. When such an offense iscommitted entirely outside of the U.K., the seniorofficer will be guilty only if he or she has a closeconnection with the U.K.

Of particular concern to corporations andpartnerships is the Acts new strict liability offense offailing to prevent bribery. This offense applies to anycommercial organization that carries on any part of itsbusiness in the U.K., which fails to prevent briberybeing committed by anyone associated with it(including but not limited to employees, agents, orsubsidiaries) in order to gain a business advantage. Itwill not matter where in the world the bribery takes

place. The only defense to this crime is for thecommercial organization to establish that it had inplace adequate procedures designed to prevent thebribery from taking place. The Act does not definesuch adequate procedures but does require theSecretary of State to promulgate guidance on theprocedures that commercial entities could put in placeto prevent bribery.

The features of the U.K. Bribery Act that are usuallycited when it is described as being broader in scopethan the FCPA, include the fact that it applies to bothcommercial bribery as well as to bribery of foreignpublic officials. The FCPA only covers the latter formof bribes. Moreover, while the FCPA focuses

exclusively on the payment of bribes, the new Actcovers both the payment and receipt of such financialor other advantage. Unlike the FCPA, the Bribery Actdoes not include an explicit defense for so-calledfacilitating payments to secure the performance ofroutine governmental action or an affirmative defensefor bona fide and reasonable expenditures relating tothe promotion, demonstration, or explanation ofproducts or services. Furthermore, the Act does notrequire that improper offer, promise, or payment bemade with corrupt intent as does the FCPA in the

case of bribes to foreign officials. Finally, on thispoint, with regard to territorial reach, the Act ispotentially broader than the FCPA. For purposes ofjurisdiction the FCPA requires acts in furtherance ofthe bribery scheme to occur within the territorialUnited States. The new strict liability corporateoffense in the Act has no such territorial nexusrequirement. That is to say, while the commercialorganization has to be organized, or carry on at leastpart of its business, in the U.K., no act in furtheranceof the underlying offense needs to transpire in theUnited Kingdom.

Originally, the Act was expected to come into forcein late 2010. In July of last year, however, the newlyelected coalition government in Great Britainannounced that implementation would be delayeduntil April 2011. This delay was intended to affordbusinesses sufficient time to prepare for the new lawand to give the Secretary of State time to publish the

statutorily required guidance as to what wouldconstitute adequate procedures to prevent the newcorporate offense of failure to prevent a bribe. OnSeptember 14, 2010, the U.K. Ministry of Justicepublished its Consultation on guidance aboutcommercial organizations preventing bribery, (draftguidance)5which included draft guidance on whatconstitutes adequate procedures. The draft guidanceis principles-based and not prescriptive. Thedocument notes that the question of whether anorganization has adequate procedures in place toprevent bribery in the context of a particularprosecution is a matter that can only be resolved bythe courts taking into account the particular facts and

circumstances of the case. In other words, there is noone-size-fits-all answer to the question of whatconstitutes adequate procedures. An organizationsubject to prosecution will have the burden of provingthat preventive measures are adequate. The draft setout six general principles (each followed bycommentary and explanation) which commercialorganizations should consider when establishing andmaintaining bribery prevention programs. Those sixprinciples, which will be elaborated on later in thisreport, are as follows:

Risk assessment;

Top-level commitment;

Due diligence; Clear, practical, and accessible policies and

procedures;

Effective implementation; and

Monitoring and review.

5 Available for download athttp://www.justice.gov.uk/consultations/docs/bribery-act-guidance-consultation1.pdf
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The draft guidance also commented in general termson other issues of concern about the Bribery Act,including its impact on corporate spending onhospitality/entertainment and on facilitation payments.

It was anticipated that this consultation processwould lead to the publication of final guidance onadequate procedures by the end of January 2011.During this period the U.K. Ministry of Justice alsoannounced it would be publishing a circular on the Actas a whole to assist those seeking a betterunderstanding of its provisions. Moreover, theSerious Fraud Office (SFOan independent U.K.government department that investigates andprosecutes serious or complex fraud and corruptionand is likely to have enforcement responsibility for theBribery Act) is expected to follow with specificguidance on what constitutes reasonable corporatehospitality.

As this past January progressed, there were signs

that formal guidance on, and implementation of, theAct might not be on schedule. On January 13, PrimeMinister David Cameron ordered a review of theBribery Act, as a result of strong concerns expressedby the business community in his country that the newlaw could have an adverse impact on the Britisheconomy by hampering U.K. companies ability tocompete abroad. As part of the so-called GrowthReview, the Act will be scrutinized by a committeechaired by the U.K.s Chancellor of the Exchequer andthe governments Business Secretary. Their charge isto review regulations with an eye towards reducingred tape that impedes business growth.

As previously noted, while it is less than clear what

impact the Growth Review will have on final guidanceon, and implementation of the Act, on January 31 theMinistry of Justice announced an indefinite delay. Atthis time it is uncertain when finalized guidance on theActs adequate procedures provisions and otherissues will be published. Once published it will befollowed by a three-moth notice period beforeimplementation of the Act.

A Detailed Examination of theActs Focus and Reach6

As alluded to previously, the Bribery Act creates fivedistinct criminal offenses in the area of

bribery/corruption; that is, bribing another person,being bribed, bribing a foreign public official, seniorofficial liability for persons who consented toorconnivedin their corporations bribery or receipt ofbribes, and the strict liability offense for commercialorganizations that fail to prevent bribery by associatedpersons. All of these offenses apply not only tobehavior in the U.K., but also potentially to behavior of

6The Appendix to this report outlines the Acts focus and reach in a

convenient chart.

individuals and corporate bodies all over the world.These offenses will be examined in turn.

General Bribery OffensesBrib ing another person.Section 1 of the Act

creates a new general bribery offense where a person(P) offers, promises or gives a financial advantageto another person [either directly or through a third-party intermediary] and P either:

(1) Intends the advantage to induce that person (orsomeone else) to perform improperly a relevantfunction or activity or to reward that person (orsomeone else) forimproper performance of arelevant function or activity, or

(2) Knows or believes that the acceptance of theadvantage would itself constitute the improperperformance by that person (or someone else)of a function or an activity.

As indicated, it does not matter if the person to whomthe advantage is offered, promised, or given is thesame person who is to perform, or has performed, theinvolved function or activity.Receiving a bribe.Section 2 of the Acts offense

of being bribed is largely complementary to theSection 1 of offense of bribing. A person (R) is guiltyof this offense when they either request, agree toreceive, or accept a financial or other advantage(directly or through a third party):

(1) Intending that, in consequence, a relevantfunction or activity should be performedimproperly;

(2) Where the request, agreement, or acceptance

itself constitutes an improper performance; or(3) Where the advantage is an award for such

improper performance.

Person R would also violate Section 2 of the Act:

(4) Where a relevant function or activity isperformed improperly in anticipation of, or inconsequence of, R requesting, agreeing toreceive, or accepting a financial or otheradvantage.

In the scenarios set forth in 2-4 immediately above, itdoes not matter whether R knows or believes theperformance is improper.Defining key terms in th e Section 1 and 2

general offenses.

For the purposes of thesegeneral bribery offenses the Act provides somedefinitional assistance. Section 3 sets forth anexpansive definition of what constitutes a relevantfunction or activity. Covered are virtually all activitiesassociated with businesses, trades, or professions,even if it is entirely within the private sector. Theexplanatory notes to the Act7 make it clear that the

7BRIBERY ACT 2010, Explanatory Notes, p.5, paragraph 28.

Available for download at


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purpose of the definition is to ensure that the law ofbribery applies equally to public and selected privatefunctions without discriminating between the two.This factor is often cited as one of the key differencesbetween the Act and FCPA since the latter onlyapplies to bribery of foreign officials to obtain or retainbusiness. While the Bribery Act does indeed prohibita broader range of conduct it should be noted thatU.S. statutes other than FCPA can serve as the basisof commercial bribery charges. For example, U.S.prosecutors are increasingly relying on the U.S. TravelAct,8which prohibits travelling between states orcountries or using the mail or interstate facilities in aidof any crime (state or federal), to target commercialbribery abroad. As such, from an overall perspective,the laws of the two countries are not so different.

Section 3 of the Act does limit the general briberyoffenses to those cases where the person performingthe function or activity meets at least one of the

following conditions: is expected to perform in good faith;

is expected to perform impartially; and/or

by virtue of such performance holds a positionof trust.

What constitutes an improper performance of afunction or activity is defined in Section 4 of the Act asconduct that is in breach of a relevant expectation thatthe target of the bribe is expected to perform in goodfaith or impartially, or where the target holds a positionof trust with regard to such performance. Moreover,what constitutes a reasonable expectation in thesecircumstances is defined by the Expectation Test

found in Section 5 of the Act. That objective test iswhat a reasonable person in the United Kingdomwould expect in relation to the performance of the typeof function oractivity concerned. Also, Section 5specifically notes that this expectations test is to beapplied without regard to any local custom or practiceunless it is permitted or required by the written law[either judicial or legislative] applicable to the countryor territory concerned.

A general bribery offense is committed if theproscribed conduct takes place in the United Kingdom(Section 12 (1) of the Act). As such, the new law willapply to foreign entities and individuals. Moreover, ageneral bribery offense is committed if the proscribedconduct takes place anywhere in the world, providedsuch act or omission is done or made by a personwith a close connection to the U.K. (Section 12(2)-(4) of the Act). In these circumstances, a person witha close connection is defined as a British citizen orresident (or a person falling into similarly defined

http://www.banksr.com/statutes/Bribery_Act_2010_Explanatory_Note.pdf818 U.S.C. 1952. One such case is United States v. Commercial

Components, Inc., No. 8:09-cr-00162-JVS (C.D. Cal. July 22, 2009).

categoriese.g., a person who under the BritishNationality Act of 1981 was a British subject), or aU.K. corporation or partnership.Import ant features of bribery offenses.

An actual advantage need not be conferredit

is sufficient that an offer, promise, or anagreement is made or reached to satisfy thiselement of the offense.

Improper performance of a relevant function oractivity need not happen. Also, if it does takeplace, the perpetrators need not believe thatthey are acting improperly.

It is not necessary for prosecuting authorities toprove dishonesty or corrupt intent, instead theyonly need to meet a less stringent standardthat is, the intent to reward improperperformance.

The advantage conferred need not exceed any

minimum threshold. The U.K. government has acknowledged the

broad scope of these offenses, but has said itwill rely on the appropriate exercise ofprosecutorial discretion to establish those exactparameters.

Bribery of a fore ign publ ic o f f ic ial .Section 6 ofthe Act contains a specific stand-alone offense forbribing foreign government officials. This section isincluded in order to ensure that the Act complies withthe United Kingdoms commitments under theOrganization for Economic Cooperation andDevelopment (OECD) Anti-Bribery Convention (the

OECD Convention).9

Section 6 largely mirrors thesubstantive standards of the FCPA, on which theOECD Convention is basically modeled. U.K.prosecutors have the option to target such acts offoreign bribery under either Section 1 of the Act of orthe Section 6 foreign official bribery offense.

In essence this offense applies where a personoffers, promises, or gives any financial or otheradvantage to a foreign public official, either directlyor indirectly to influence that official in his/her officialcapacity and to obtain or retain. . . business, or. . . anadvantage in the conduct of business. Importantly,

9 CONVENTION ON COMBATING BRIBERY OF FOREIGN

PUBLIC OFFICIALS IN INTERNATIONAL BUSINESSTRANSACTIONS, available for download athttp://www.oecd.org/document/21/0,3746,en_2649_34859_2017813_1_1_1_1,00&&en-USS_01DBC.html While the Act would bringthe United Kingdom into line with the OECD Convention, critics whosay it would place the country at a disadvantage in comparison withinternational competitors note that only 7 of the 36 signatories to theconvention are currently enforcing it. Jonathan Russell, FearsBribery Act will harm UK plc, The Telegraph, January 21, 2011.Available athttp://www.telegraph.co.uk/finance/yourbusiness/bribery-act/8272140/Fears-Bribery-Act-will-harm-UK-plc.html
http://www.banksr.com/statutes/Bribery_Act_2010_Explanatory_Note.pdfhttp://www.banksr.com/statutes/Bribery_Act_2010_Explanatory_Note.pdfhttp://www.banksr.com/statutes/Bribery_Act_2010_Explanatory_Note.pdfhttp://www.oecd.org/document/21/0,3746,en_2649_34859_2017813_1_1_1_1,00&&en-USS_01DBC.htmlhttp://www.oecd.org/document/21/0,3746,en_2649_34859_2017813_1_1_1_1,00&&en-USS_01DBC.htmlhttp://www.oecd.org/document/21/0,3746,en_2649_34859_2017813_1_1_1_1,00&&en-USS_01DBC.htmlhttp://www.telegraph.co.uk/finance/yourbusiness/bribery-act/8272140/Fears-Bribery-Act-will-harm-UK-plc.htmlhttp://www.telegraph.co.uk/finance/yourbusiness/bribery-act/8272140/Fears-Bribery-Act-will-harm-UK-plc.htmlhttp://www.telegraph.co.uk/finance/yourbusiness/bribery-act/8272140/Fears-Bribery-Act-will-harm-UK-plc.htmlhttp://www.telegraph.co.uk/finance/yourbusiness/bribery-act/8272140/Fears-Bribery-Act-will-harm-UK-plc.htmlhttp://www.telegraph.co.uk/finance/yourbusiness/bribery-act/8272140/Fears-Bribery-Act-will-harm-UK-plc.htmlhttp://www.oecd.org/document/21/0,3746,en_2649_34859_2017813_1_1_1_1,00&&en-USS_01DBC.htmlhttp://www.oecd.org/document/21/0,3746,en_2649_34859_2017813_1_1_1_1,00&&en-USS_01DBC.htmlhttp://www.banksr.com/statutes/Bribery_Act_2010_Explanatory_Note.pdfhttp://www.banksr.com/statutes/Bribery_Act_2010_Explanatory_Note.pdf


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unlike the FCPA, this offer, promise, or payment neednot be made corruptly.

Similar to both the OECD Convention and theFCPA, the Act defines the term foreign public officialto include individuals who (1) hold a legislative,administrative, or judicial position (whether elected orappointed); (2) exercises a public function for or onbehalf of a foreign government or public agency orenterprise; or (3) is an official or agent of a publicinternational organization. In contrast to the FCPA,but consistent with the OECD Convention, the Actdoes not include in this definition of foreign officials,foreign political parties, party officials, or candidatesfor foreign political office. Conceivably, however, theAct could bring these parties and their officials andcandidates within its purview as the exerciseof apublic function. The Act does not specify whatdegree of government ownership or control is requiredfor an organization to qualify as a public enterprise

for the purposes of Section 6 of the Act. Existingguidelines on ownership/control issued by the OECDin reference to its Anti-Bribery Convention, however,might well assist U.K. regulators, prosecutors, andcourts in such interpretive efforts.10

Section 6 of the Act provides a specific exception toits reach in cases where the recipient of an advantageis permitted or required by the written law of thatpersons country to be influenced in his/her officialcapacity by the offer, promise, or gift. This exceptioncorresponds to the seldom-invoked affirmativedefense in the FCPA that the payment was lawfulunder the written laws of the country of the recipient.

Section 6s foreign official bribery offense basically

has the same jurisdictional scope as the generalbribery offenses previously described.Senior off icial offense.Section 14 of the Act

provides that if any of the three offenses examinedpreviously (i.e., the general offenses of bribery andreceiving a bribe and the offense of bribing foreignpublic officials) is committed by a covered corporationor a partnership, and the offense occurs with theconsent or connivance of a senior officer of theorganization. Both those persons and the bodycorporate will be guilty of the same offense as theperpetrators. A senior officer includes a director,manager, secretary, or other similar officer (or aperson purporting to act in such capacity).

Notably, criminal liability under the new strict liabilitycorporate offense of failure to prevent bribery (Section7, which will be detailed in the next segment of thisreport) does not trigger senior officer liability. Assuch, failure to meet the standards for an adequateprocedures defense to that new corporate offensewill not, in itself, serve as a basis for criminal liabilityof corporate management.

10 Available for download athttp://www.oecd.org/dataoecd/4/18/38028044.pdf

The Act does not clarify whether the organizationitself must be charged with violations of Sections 1(bribery), 2 (receiving a bribe), or 3 (bribing a foreigngovernment official) in order to support a senior officerviolation under Section 14. Conceivably, current orformer senior officers could be the subject ofprosecution, while their organizations escape such afate (e.g., through a negotiated civil settlement).

It should be noted that the SFO already has shown,in recent cases, a readiness to target seniormanagement in egregious bribery-related cases. Thistrend is even more pronounced in recent FCPAenforcement actions in the United States.Corporate fai lure to prevent a bribe.Section 7

of the Bribery Act is perhaps its greatest cause ofconsternation for global companies. It provides a newoffense, specifically applicable to commercialorganizations, for their failure to prevent bribery by anassociated person.

For the most part, an organization can only beconvicted of a crime in the United Kingdom if a seniormanager (i.e., someone who can be viewed aspossessing the direct mind of the organization) ispersonally responsible for an element of the crime.This U.K. legal precept, known as the identificationdoctrine, has posed a difficult hurdle for prosecutors inbribery cases where such transgressions are oftenperpetrated by relatively junior personnel in anorganization without senior management involvement.Section 7 creates a new offense that clears this hurdleby rendering organizations criminally liable, on arespondeat superiorbasis, for conduct by personsacting on their behalf.

Under this new corporate offense, a relevantcommercial organization can be found guilty if anyperson associated with it commits bribery with anintent to obtain or retain business or obtain or retainan advantage in the conduct of business for theorganization. The term relevant commercialorganization is defined (Section 7(5)) to include allU.K. corporate bodies and partnerships no matterwhere in the world they conduct their business. Mostsignificantly for global companies, Section 7 of the Actapplies to corporations (wherever incorporated) andpartnerships (wherever formed) which carry onbusiness, or part of a business, in any part of theUnited Kingdom. The term carry on business or part

of a business is not defined. SFO officials, however,have stated publicly that whether a company carrieson business in the United Kingdom will be a fact-specific question, unique to each case.Commentators have suggested that, for the purposesof this aspect of Section 7 of the Act, a sufficientnexus would exist if a commercial organization had arepresentative or sales office in the United Kingdomor was listed on the London Stock Exchange orAlternative Investment Market. A reasonable personcould ask whether purchasing commercial insurance
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in the London market or engaging a U.K. law,accounting, or consulting firm would be deemedcarrying on business in that country? Suffice it to saythat the phrase part of a business is quite broad andwill be left to the courts to construe.

Section 8 of the Act attempts to clarify the termassociated person as used in Section 7s newcorporate offense. A person who commits bribery isassociated with a commercial organization if heperforms service for or on behalf of that entity. Thepersons exact capacity is not relevant. The Act givesnon-exclusive examples of such persons to includeemployees, agents, and subsidiaries. It goes on tosay that whether there is a sufficient connectionbetween the person and the organization to satisfythis provision of the Act will be evaluated by referenceto all the relevant circumstances and not merely byreference to the nature of the relationship betweenthe organization and the partnership.

This potentially open-ended concept does notrequire a contractual relationship between thecommercial organization and the associated person.The standard is sufficiently broad to apply to foreignaffiliates, partners, and consortia over which thecommercial organization does not have direct control.

It is not necessary that the associated persons havebeen convicted of bribery for the new corporateoffense to be brought into play. The governmentmust, however, establish beyond a reasonable doubtthat the associated person engaged in misconductwould constitute bribery under Section 1 of the Act orbribery of a government official under Section 6 of theAct. In making its case, the government need not

establish that the associated person or themisconduct in question had any connection to theUnited Kingdom as is required when prosecutingcases under Section 1 and 6 of the Act.

To reiterate, the Section 7 corporate offense appliesto any commercial organization that is establishedunder United Kingdom law or any foreign corporationthat carries on business, or part of a business, in theU.K. The strict-liability offense applies to any acts ofbribery, anywhere in the world that can be linked tothose organizationseven if the bribery itselftranspires outside the United Kingdom.

There is no direct correlation in the FCPA to thestrict-liability corporate offense set forth in Section 7 of

the Bribery Act. The breadth of the U.S. statute,however, is broad enough to reach much of theconduct targeted by the latter law. First of all,companies that fall within the purview of the FCPA aregenerally responsible for the criminal acts ofemployees, agents, or other intermediaries under therespondeat superiorprinciple. Secondly, the FCPAprovides that it is unlawful to make a payment to athird party, while knowing that all or a portion of thatpayment will go directly or indirectly to a third party.The term knowing, however, includes a conscious

disregard and deliberate ignorance standard underwhich a company can be held liable for an FCPAviolation without actual knowledge or direct complicityin the criminal acts of third parties such as agents. Inother words, knowledge of illegal acts can be imputedto a company when evidence shows that it was awareof red flags that could have alerted it to corrupt activityand that it failed to investigate further or act to preventthe illegal conduct or transaction. Although this doesnot constitute a strict liability offense, the standard isbroader than the face of the FCPA would seem toindicate. Also with regard to this new corporateoffense, as mentioned above, Section 7 of the Actcontains an affirmative defense wherebyorganizations can avoid criminal liability if they canestablish that they have adequate procedures in placeto prevent bribery. It will be the organizationsobligation to present evidence and establish by abalance of probabilities, that its anti-bribery

compliance efforts are adequate.Since Section 7 requires the Secretary of State toprovide guidance on adequate procedures more willbe said on the meaning of this term in the segment ofthis report below which examines the draft guidelinespublished by the U.K. Ministry of Justice.

Finally, with regard to Section 7 of the Act, theFCPA has no such affirmative defense. Showing thatan entity has an effective FCPA compliance programin place, however, would go a long way towardblunting a willful blindness charge in such aprosecution. Moreover, proof of such a complianceeffort would be considered a mitigating factor inprosecutorial decisions and by a court in sentencing

determinations. Conversely, the absence of aneffective anti-bribery compliance program andadequate related internal controls could expose acompany to civil liability from charges of violating thestatutes accounting provisions. In thesecircumstances, a strong argument can be made thatthe inducements for creating, implementing, andcontinuously improving a strong anti-briberycompliance program, which includes thoroughintermediary/third-party due diligence policies andprocedures, are the same under both the FCPA (tocounter charges of deliberate ignorance or willfulblindness) and the Bribery Act (to meet therequirements of an adequate procedures defense).

Penalties.

Penalties for offenses under theBribery Act are up to 10 years imprisonment forindividuals and unlimited monetary fines. The U.K.government has yet to issue guidance as to how toweigh these fines, but may do so (as recommendedby the Parliamentary Joint Committee on the BriberyBill). Recent SFO enforcement actions under pre-existing bribery law suggest that penalties in themillions of pounds can be expected in significantcases. By comparison, pursuant to the statutesterms, criminal penalties under the anti-bribery


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provisions of the FCPA can be as high as $2 millionfor corporations and other business entities and up to$100 thousand for covered individuals. Moreover,such individuals can be imprisoned for up to fiveyears. Under the Alternative Fines Act11these finescould climb significantly higherthe actual fine maybe up to twice the benefit that the defendant sought toobtain by making the corrupt payment. Additionally,the U.S. Attorney General or the U.S. Securities andExchange Commission (SEC) could bring a civilaction against corporations and/or individuals forthese violations for amounts up to $500 thousand. Interms of the magnitude of total financial exposure acompany can face in these kinds of cases, suffice it tonote that in 2009 Siemens AG entered into a pleaagreement with the U.S. Department of Justice andthe SEC in an FCPA case for $800 million. This waspart of $1.6 billion the company paid in fines,penalties, and disgorgement of profits to U.S. and

German authorities for bribery-related offenses. Theprevious record FCPA penalty was the $44 millionsettlement that Baker Hughes Inc. entered into withthe DOJ and the SEC. That settlement was made upof over $23 million in disgorgement and a $10 millionpenalty to the SEC along with an $11 million criminalfine imposed by the DOJ.

As alluded to previously, unlike the FCPA whichpermits both civil and criminal penalties, the BriberyAct is strictly a criminal statute. It should be notedthat criminal penalties under the Act would result inmandatory debarment under the U.K. PublicContracts Regulation 2006, which implements theEuropean Union (EU) Procurement Directive. The

U.K. government has indicated that it will seekguidance from the EU as to how the Directivesmandatory debarment feature should apply inconnection with the Acts corporate offense and EUguidance on the matter is expected to be forthcoming.This debarment possibility tracks closely with potentialFCPA penalties. Under guidelines issued by the U.S.Office of Management and Budget, a person or firmfound in violation of the FCPA may be barred fromdoing business with the federal government.Indictment alone can lead to a suspension of the rightto do business with the U.S. government.

The SFO, the U.K. government body that has beenmost involved in bribery prosecutions, has recently

sought to emulate the U.S. Department of Justice andthe SEC in the practices of encouraging defendants tovoluntarily disclose criminal acts, often agreeing toplea bargains and financial settlements with potentialdefendants who come forward on their own. Similarly,SFO has offered immunity and reduced sentences towhistleblowers and others providing useful informationand engaged in practices similar to those in theUnited States such as non-, or deferred-, prosecution

11 18 U.S.C. 3571.

agreements with the use of monitors and agreed tocompliance program improvements. It has alsosigned off on press releases of defendants whoagreed to penalties. The SFO has also stated that itwould be amenable to settlements in bribery casesthat result in civil penalties under other relatedstatutes for parties that voluntarily disclose infractions.

The United States and the United Kingdom havealso regularly cooperated with one another bothformally and informally on anti-corruption mattersincluding those which were brought to light throughvoluntary disclosures. Two recent U.K. court casescast doubt on the continuation of these practices. Theseparate casesone involving the corporationInnospec Limited,12and the other cooperatingindividual13question the use of plea-bargains. Thejudge in the Innospeccase indicated that it wasproper for the courts, not prosecutors, to imposesentences. He added that it was improper for a party

accused of corruption to be treated in a mannerdifferent from those accused of other serious crimessuch as rape or murder. He went on to castigate theSFO for agreeing to press statements and monitoringagreements, indicating that it is inappropriate for theSFO to engage in global settlements which, in effect,deprive the courts of sentencing discretion. The judgestated in no uncertain terms that the Director of theSFO had no power to enter into the arrangementsmade and no such arrangements should be madeagain.14

These developments inject a measure of uncertaintyinto the negotiating process for parties seeking toresolve these matters in the United Kingdom and

could have an impact on related matters in the UnitedStates. While this issue of international cooperationmay resolve itself over time, the present uncertaintycreates a strong disincentive for defendants toconstructively engage with the enforcementauthorities of either or both countries. Theseuncertainties will be exacerbated by questionsconcerning interpretation of the provisions of theBribery Act.

Adding to these complications, the relatively newcoalition government in the U.K. announced last yearthat it planned to create a single new agency to tackleserious economic crimework that is currently

12

Regina v. Innospec Limited[2010] EW Misc 7 (EWCC) (18 March2010), available for download athttp://www.sfo.gov.uk/media/105634/opening%20note%2018.03.10.pdf Comments noted in the sentencing remarks of Lord JusticeThomas from the sentencing hearing of March 26, 2010, availablefor download athttp://www.judiciary.gov.uk/NR/rdonlyres/5343F038-A6E5-448B-BB2D-7CA31F9E2DDA/0/sentencingremarksthomasljinnospec.pdf13Regina v. Dougall[2010] EWCA Crim 1048, available fordownload athttp://www.bailii.org/ew/cases/EWCA/Crim/2010/1048.html14Op. cit., footnote 12. Sentencing remarks of Lord JusticeThomas, p. 13.
http://www.sfo.gov.uk/media/105634/opening%20note%2018.03.10.pdfhttp://www.sfo.gov.uk/media/105634/opening%20note%2018.03.10.pdfhttp://www.sfo.gov.uk/media/105634/opening%20note%2018.03.10.pdfhttp://www.judiciary.gov.uk/NR/rdonlyres/5343F038-A6E5-448B-BB2D-7CA31F9E2DDA/0/sentencingremarksthomasljinnospec.pdfhttp://www.judiciary.gov.uk/NR/rdonlyres/5343F038-A6E5-448B-BB2D-7CA31F9E2DDA/0/sentencingremarksthomasljinnospec.pdfhttp://www.judiciary.gov.uk/NR/rdonlyres/5343F038-A6E5-448B-BB2D-7CA31F9E2DDA/0/sentencingremarksthomasljinnospec.pdfhttp://www.bailii.org/ew/cases/EWCA/Crim/2010/1048.htmlhttp://www.bailii.org/ew/cases/EWCA/Crim/2010/1048.htmlhttp://www.bailii.org/ew/cases/EWCA/Crim/2010/1048.htmlhttp://www.judiciary.gov.uk/NR/rdonlyres/5343F038-A6E5-448B-BB2D-7CA31F9E2DDA/0/sentencingremarksthomasljinnospec.pdfhttp://www.judiciary.gov.uk/NR/rdonlyres/5343F038-A6E5-448B-BB2D-7CA31F9E2DDA/0/sentencingremarksthomasljinnospec.pdfhttp://www.sfo.gov.uk/media/105634/opening%20note%2018.03.10.pdfhttp://www.sfo.gov.uk/media/105634/opening%20note%2018.03.10.pdf


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handled by the SFO and other government entities(e.g., the Financial Services Authority and the Officeof Fair Trading). Uncertainties regarding the newentitys mission and practices will further influencecorporations decisions to interact with enforcementauthorities.

Consultation on Guidance AboutCommercial Organizations

Preventing Bribery

Adequate procedures.As described above,Section 7 of the U.K. Bribery Act introduces a newstrict liability offense for the failure to prevent briberyfor commercial organizations. Commercialorganizations, such as corporations and partnerships,can commit this offense if persons or entitiesproviding services on their behalf pay bribes that areintended to get or retain business for the organization

or secure it as a business advantage. By showingthat it has in place adequate procedures to preventbribery, however, the commercial organization canescape liability under this new offense. While the Actsets forth no specifics as to what might constitutesuch adequate procedures, organizations that wouldbe subject to new laws held out some hope forenlightenment on the issue by the Acts requirementthat the U.K. Secretary of State would issue guidanceon this critical point prior to the new law beingimplemented. Moreover, even prior to such formalguidance, there was a wealth of information availablethat concerned organizations could turn to for help toposition themselves for future compliance. These

resources setting forth international best practicecompliance standards include, but are not limited to,the following:

Guidance on compliance standards outlined bythe SFO in its July 2009 guidelines on self-reporting.15

Chapter Eight of the U.S. Federal SentencingGuidelines Manual, which governs FCPApenalties, and sets forth standards for aneffective ethics and compliance program.16

The OECD Good Practices Guidance on InternalControls, Ethics, and Compliance.17

15 APPROACH OF THE SERIOUS FRAUD OFFICE TO DEALINGWITH OVERSEAS CORRUPTION, July 21, 2009. Available fordownload athttp://www.sfo.gov.uk/media/28313/approach%20of%20the%20sfo%20to%20dealing%20with%20overseas%20corruption.pdf16 2010 Federal Sentencing Guideline and Manual and Supplement,Chapter Eight, Sentencing of Organizations. Available for downloadathttp://www.ussc.gov/Guidelines/2010_guidelines/index.cfm17 Good Practice Guidance on Internal Controls, Ethics, andCompliance (OECD Council, February 18, 2010). Available fordownload atwww.oecd.org/dataoecd/5/51/44884389.pdf

The May 2008 Woolf Committee independentreport on the BAE Systems anti-corruptioncompliance program prepared after therelatively recent bribery scandal involving thatcompany.18

Other compliance benchmarking material is availablefrom such organizations as TransparencyInternational19 and the World Economic Forum.20There are some common themes that run throughthese various best practice benchmarks. Forexample, organizations are expected to: (1) publishclear policy statements and anti-corruption guidance(including specific procedures, where appropriate,covering issues such as dealing with intermediaries,processes for securing regulatory approvals fromforeign governments, facilitating payments, travel andentertainment expenditures, and political andcharitable contributions); (2) have visible involvementand support for anti-corruption efforts from the highest

levels in the organization (i.e., senior managementand the board of directors); (3) have a code of ethicsand anti-corruption principles that are to be adhered toregardless of whether local laws prohibit bribery andwhether there is cultural acceptance of improperpayments; (4) conduct and oversee specific training ofemployees and third-party representatives on theorganizations anti-corruption code, policies, andpractices; (5) hold individuals accountable throughappropriate disciplinary and incentive programs; (6) interms of dealings with intermediaries, have a specificpolicy on outside agents, consultants, advisers, andother third parties, including appropriate due diligencepolicies and procedures; (7) implement transparent

books and records procedures to ensure thatcompany funds are properly accounted for and notdiverted for the purpose of making improperpayments; and (8) conduct ongoing risk assessmentand auditing and continuously work to improve theanti-corruption compliance program.

In anticipation of prospective implementation of theAct, the Ministry of Justice issued its draft guidance onSeptember 14, 2010. The guidance was split into fourparts: a summary of the law; five questions about theguidance (plus a general request for public comment);six key principles for ensuring bribery prevention (i.e.,adequate procedures guidance); and illustrations setagainst the backdrop of the six key principles.

Concerning the adequate procedures guidance, thedraft does not contain prescriptive rules nor does itpropose to introduce any direct obligations oncommercial organizations. Instead, it envisagesas

18 WOOLF COMMITTEE REPORTBusiness ethics, globalcompliance and the defense industry, May 2008. Available fordownload athttp://ir.baesystems.com/investors/storage/woolf_report_2008.pdf19http://www.transparency.org/20www.weforum.org
http://www.sfo.gov.uk/media/28313/approach%20of%20the%20sfo%20to%20dealing%20with%20overseas%20corruption.pdfhttp://www.sfo.gov.uk/media/28313/approach%20of%20the%20sfo%20to%20dealing%20with%20overseas%20corruption.pdfhttp://www.sfo.gov.uk/media/28313/approach%20of%20the%20sfo%20to%20dealing%20with%20overseas%20corruption.pdfhttp://www.ussc.gov/Guidelines/2010_guidelines/index.cfmhttp://www.ussc.gov/Guidelines/2010_guidelines/index.cfmhttp://www.ussc.gov/Guidelines/2010_guidelines/index.cfmhttp://www.oecd.org/dataoecd/5/51/44884389.pdfhttp://www.oecd.org/dataoecd/5/51/44884389.pdfhttp://www.oecd.org/dataoecd/5/51/44884389.pdfhttp://ir.baesystems.com/investors/storage/woolf_report_2008.pdfhttp://ir.baesystems.com/investors/storage/woolf_report_2008.pdfhttp://www.transparency.org/http://www.transparency.org/http://www.transparency.org/http://www.weforum.org/http://www.weforum.org/http://www.weforum.org/http://www.weforum.org/http://www.transparency.org/http://ir.baesystems.com/investors/storage/woolf_report_2008.pdfhttp://www.oecd.org/dataoecd/5/51/44884389.pdfhttp://www.ussc.gov/Guidelines/2010_guidelines/index.cfmhttp://www.sfo.gov.uk/media/28313/approach%20of%20the%20sfo%20to%20dealing%20with%20overseas%20corruption.pdfhttp://www.sfo.gov.uk/media/28313/approach%20of%20the%20sfo%20to%20dealing%20with%20overseas%20corruption.pdf


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is evident from the illustrative scenarios set againstthe backdrop of the six principlesthat whatconstitutes adequate procedures will depend on theunique facts and circumstances of a particular case.Influencing factors as to adequacy considerations arethe size of the organization and the nature of itsactivities. Clearly, there was reliance on the above-mentioned, and likely other, compliance best practicebenchmarks in developing the six principles. Thedraft guidance suggests that organizations may wishto consider putting into place procedures relating tothe general principles. It is entirely likely that the finalguidance, whenever it might be issued, will notprovide a detailed compliance format thatorganizations can model after without the need forrigorous self-assessment. While this might disappointpotentially affected organizations, final guidance willstill constitute a useful template and necessaryscheme of reference.

Concerning the draft guidances six key principlesfor ensuring bribery prevention, they are examined inturn.

(1) Risk AssessmentCommercial organizations should know and keep

up-to-date with the bribery risks they face in theirsectors and markets. The adequate nature of any riskassessment procedure is dependent upon suchfactors as the organizations size, the nature of itsbusiness, who its customers are, and where it doesbusiness. Regardless of these factors, the draftguidance advises organizations to consider whetherthose performing the assessments have adequate

skills and what data sources they rely on forinformation. The draft suggests that both internal data(e.g., annual audit and internal investigations reports,client/customer complaints, and input from staff andfocus groups) and external data (e.g., publiclyavailable data on bribery/corruption in particularsectors and markets) should be analyzed.

Global entities that are subject to the FCPA andother international anti-bribery regimes should not besurprised by this compliance requirement. ChapterEight of the U.S. Sentencing Guidelines includesperiodic risk assessments as an element of aneffective compliance program. Similarly, OECD goodpractice guidance advises use of risk assessment

techniques. Common sense dictates thatidentification, and understanding, of the risks anorganization faces is a necessary starting point forany viable compliance program.

(2) Top-Level CommitmentTop-level management (normally senior executive

management and the board of directors) must set acultural tone within an organization that bribery issimply unacceptable. These same senior people areresponsible for clearly communicating this message to

all levels of management, the general workforce, andany relevant external actors. The draft guidanceoffers some examples of what top-level commitmentshould include: a zero tolerance policycommunicated throughout the organization; definedconsequences for breaching the provisions of thepolicy; the personal involvement of top-levelmanagement in developing a code of conduct and inensuring that anti-bribery policies are published andcommunicated to employees, subsidiaries, andbusiness partners; and the appointment of a seniormanager to oversee the development of anti-briberyprograms and to ensure their effective implementationthroughout the organization.

Top-level commitment is another commonlyrecognized element of an effective complianceprogram. This tone at the top message is includedin virtually every guide to compliance activity includingthe Committee ofSponsoring Organizations of the

Treadway Commission (COSO, the framework uponwhich most U.S. corporations Enterprise RiskManagement Activities are based) and the DOJ.

(3) Due DiligenceCommercial organizations should develop due

diligence policies and procedures which cover allparties to a business relationship, including theorganizations supply chain, agents andintermediaries, all forms of joint ventures and similarrelationships, and all markets in which it doesbusiness.

The types of enquiries which should be madeinclude:

Locationthe bribery risks unique to aparticular country where an organization intendsto do business. This may include informationabout the relevant civil, administrative, andcriminal law and the existence of anyprocedures for reporting bribery to localauthorities.

Business opportunitythe bribery risks inherentin a particular business opportunity (e.g.,examining whether the project is to beundertaken at market prices as well as whetherit has defined legitimate specifications andobjectives).

Business partnerswhether involvedindividuals or entities (e.g., intermediaries,partners, contractors, suppliers, etc.) have areputation for bribery. Also, whether suchparties or their associates have beeninvestigated, prosecuted, convicted, and/ordebarred for bribery or related offenses shouldbe examined. Additionally, organizations maywish to enquire as to whether partners haveanti-corruption measures in place.


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Anti-bribery enforcement authorities throughout theworld have focused on counterparty due diligence intheir investigations. Largely as a result of FCPAenforcement activity in recent years, global companieshave heightened awareness of the risks they face asa result of activities by partners, agents, and otherintermediaries. Indeed, a relatively new industry ofinvestigative firms such as Trace International, whichspecialize in this type of due diligence, has developedto fill this pressing need. Notwithstanding theincreased awareness of the importance of duediligence on what the Bribery Act refers to asassociated persons, this requirement poses adaunting task for many organizations. Understandingeverything that one needs to know about myriad thirdparties located all over the globe poses monumentalchallenges. Satisfying the thrust of this principle willbe expensive and can only serve to increase thereliance on outside organizations.

(4) Clear, Practical, and Accessible Policies andProcedures

Commercial organizations should develop andmaintain clear, practical, accessible, and enforceableanti-bribery policies and procedures which take intoaccount the roles of their entire ownership andworkforce as well as all people and entities over whichthey have control. Some aspects of appropriatepolicies and procedures which the draft guidanceidentifies include the following:

A clear prohibition of all forms of briberyincluding a strategy for building this prohibitioninto the decision-making processes of the

organization; Guidance on making, directly or indirectly,

political and charitable contributions, gifts, andappropriate levels and manner of provision ofbona fide hospitality or promotional expenses toensure that the purposes of such expenditureare ethically sound and transparent;

Advice on relevant laws and regulations;

Guidance on what action should be taken whenfaced with blackmail or extortion;

The organizations level of commitment to theU.K. Public Interest Disclosure Act of 1998(employment law protection for whistleblowers)21

and an explanation of the process; and

Information on anti-corruption programsrelevant to the sector.

Organizations may also wish to consider issuing acode of conduct, which sets out expected standards ofbehavior for employees that is included in their

21 Available for download athttp://www.legislation.gov.uk/ukpga/1998/23/contents

employment contracts. Additionally, organizationsmight consider:

How existing procedures may be used forbribery prevention purposes (e.g., financial andauditing controls, disciplinary procedures,

performance appraisals, anonymouswhistleblower hotlines, etc.);

Modifying sales incentives to give credit fororders refused where bribery is suspected;

The vulnerability and ability to resist bribery ofparticularly exposed functions or operations ofthe entity (e.g., procurement, supply chainmanagement, etc.); and

Implementation of procedures to deal withincidents of bribery, should they arise, in aprompt, consistent, and appropriate manner.

This principle seems to be the most substantiverecommendation in the draft guidance. The need toprovide clear anti-bribery standards and procedures isan integral part of an effective ethics and complianceprogram under the U.S. Sentencing Guidelines forOrganizations and the COSO framework among othercompliance program guidelines.

(5) Effective ImplementationCommercial organizations must implement their

anti-bribery policies and procedures throughout thebusiness entity. Effective implementation requires theallocation of roles and responsibilities and the settingof milestones for delivery and review.

Large organizations should establish an

implementation strategy specifically detailing howpolicies and procedures are to be put into placethroughout the business entity, including, for example:

Who will be responsible for implementation;

How the policies and procedures will becommunicated internally and externally;

The nature of training and how it will be rolledout;

The internal reporting of progress to topmanagement;

The extent to which external assuranceprocesses will be engaged;

The arrangements for monitoring compliance; The timetable for implementation;

A clear statement of the penalties for breachesof agreed policies and procedures; and

The date of the next review of these policiesand procedures.

If enforcement authorities such as the DOJ or theSOF instigate a bribery investigation and find that anorganization has not fully implemented a relevantcompliance program, the extent to which that entity is
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able to produce a well-conceived implementation planagainst which it has made reasonable progress willundoubtedly improve the targets situation.

The notion that paper compliance is a potentialpitfall that organizations should be wary of has been amantra of U.S. enforcement authorities. By way ofexample, one can look to the changes made in 2008to the Principles of Federal Prosecution of BusinessOrganizations22directed by then U.S. Deputy AttorneyGeneral Mark Filip, that cautions prosecutors todistinguish between mere paper programs and thosecompliance programs that are designed,implemented, reviewed, and revised, as appropriate,in an effective manner. Those latter effectivecompliance programs, the prosecutorial principlesprovided, may well result in a decision to charge onlythe corporations employees and agents or to mitigatecharges or sanctions against the corporation.23

(6) Monitoring and ReviewCommercial organizations must put into placemechanisms to monitor and review compliance withtheir anti-bribery policies and implementimprovements when appropriate. Among other things,along these lines organizations may wish to:

Consider what internal checks and balances arenecessary for effective monitoring and review ofthese policies and procedures. The draftguidance suggests that larger organizationsmight include financial monitoring and reviewsof bribery reporting mechanism and incidentmanagement procedures;

Larger organizations might also considerperiodically reporting the results of theirmonitoring/review efforts to the AuditCommittees of their Boards of Directors, fullBoards, or equivalent bodies;

Identify appropriate trip-wires for mandatorybribery risk assessments and anti-corruptionprogram reviews; and

Utilize external tools for assurance andverification of the continuing effectiveness oftheir anti-bribery policies, or join one of severalindependently verified bodies or associationsthat evaluate anti-corruption complianceprograms.

As is the case with most of the other five principles,monitoring and review of anti-bribery policies andprocedures is a widely recognized element of effectivecompliance efforts by government and privateorganizations alike. Indeed, Article 12 of the OECDsWorking Group on Briberys February 18, 2010 Good

22 Available for download athttp://www.usdoj.gov/opa/documents/corp-charging-guidelines.pdf23Ibid., Section 9-28.800, p.16.

Practices Guidance on Internal Controls, Ethics andCompliance calls forperiodic reviews of ethics andcompliance programmes or measures, designed toevaluate and improve their effectiveness in preventingand detecting foreign bribery, taking into accountrelevant developments in the field, and evolvinginternational and industry standards.24 Of course, itwould behoove organizations to keep abreast ofrelated statutory and regulatory changes and trends inprosecutions and convictions. These events shouldbe tracked both in their home countries and abroad.

* * *

All in all, the draft guidance, while offering somedirection, does not go a long way toward calming thefears of potentially affected organizations concernedwith developing and implementing adequateprocedures to prevent bribery. It does not relieve the

uncertainty posed by the breadth of the Act, inasmuchas it is incomplete and drafted in terms as general asthe statutory language itself. It simply does notprovide a great deal of practical assistance or realhelp in understanding an organizations obligationsunder the Act. Again, in large part, the guidance justreiterates the Acts language. Moreover, itsprinciples-based approach leaves much to be desiredin terms of instruction about compliance proceduresthat prosecutors will deem adequate in any particularcase. By being purposefully non-prescriptive andintentionally indefinite, the Secretary of State issending a message that companies should aspire tomaximum compliance efforts and consistent, clear,

and ethical decision making. That is to say,organizations should exercise an abundance ofcaution in these matters and err on the conservativeside in interpreting the Act. Most commentators arenot predicting a departure from this principles-basedexamination of the adequate procedures standard inthe forthcoming final guidance. Unfortunately, it willbe left to the U.K. courts to provide guidance on thesematters in the context of actual bribery cases.Faci l i tat ing paym ents.The draft guidance also

explores the issue of facilitating payments in the mostgeneral terms. Consistent with pre-existing law in theUnited Kingdom, the Act does not provide an explicitdefense or exception for small, routine,

nondiscretionary payments to foreign officials whichare commonly referred to as grease or facilitatingpayments. In fact, such an exception was proposedduring the legislative process and rejected byParliament. In this respect, the Bribery Act isconsistent with the OECD Convention and morestringent than the FCPA. Under the FCPA thesepayments are described as being for routinegovernmental actions. Routine governmental action

24Op. cit., footnote 17.
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in turn, is defined to include only an action which isordinary and commonly performed by a foreignofficial, such as: obtaining permits, licenses, or otherofficial documents to qualify a person to do businessin a foreign country; processing governmental papers(e.g., visas and work orders); providing policeprotection, mail pick-up and delivery, or schedulinginspections associated with contract performance orinspections related to the transit of goods acrosscountry; providing phone service, power and watersupply, loading and unloading cargo, or protectingperishable products or commodities fromdeterioration; or actions of a similar nature. The termspecifically does not include decisions by suchofficials to award new business to or continuebusiness with a particular party.

In contract, as previously mentioned, the Bribery Actcontains no exception for nondiscretionary facilitatingpayments. Nonetheless, U.K. enforcement authorities

have been quoted as saying that they do not intend tofocus their efforts on the prosecution of such matters.In that regard, on September 23, 2010, the head ofanti-corruption enforcement at the SFO said: Wecertainly dont condone facilitating payments andnever will. But whether we prosecute depends onwhether it falls within our criteria. Is it significantlyserious?25 While admitting that facilitating paymentsare likely to fall under the Acts proscriptions, theMinistry of Justice anticipates that prosecutors willconsider the public interest in bringing charges and . ..[t]he more serious the offense, the more likely it isthat a prosecution will be required in the publicinterest.26 As such, the decision as to whether a case

should be brought involving facilitating payments is amatter left to prosecutorial discretion and it is notexpected that many cases involving only smallfacilitation payments will be pursued.

Moreover, this distinction between the Act and theFCPA is not as dramatic as it might appear on theface of the two laws since the FCPA exception hasbeen narrowly construed and companies subject to itsjurisdiction are increasingly discouraging the use offacilitating payments. This discouragement is fosteredby the U.S. government enforcement authorities andtypically is finding its way into corporate complianceprograms as well as those entities standards ofconduct. As alluded to above, signatories to the

OECD Conventionwhich includes the UnitedStateshave agreed to a set of resolutions that,among other things, discourage the practice offacilitating payments. To further document thisundeniable development, a 2009 survey on this

25Richard Tyler, SFO to prosecute serious overseas bribes, TheTelegraph, September 23, 2010. The article, quoting Mr. RobertAmall is available for download athttp://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8019024/SFO-to-prosecute-serious-overseas-bribes.html#26 Draft Guidance, op. cit.

subject by the antibribery compliance/due diligencespecialist Trace International27found a clear trend inwhich companies are banning or severely limiting theuse of facilitating payments in their anti-briberycompliance programs. This trend has been furtherconfirmed by informal polls taken at a recent meetingof the MAPI Law and Ethics and ComplianceCouncils.

In these circumstances, because most jurisdictionstend to be critical of the facilitating payment exceptionto the FCPA, global organizations would be welladvised to be sure that their anti-bribery complianceprograms and related training materials address thematter specifically.Hospital i ty.The FCPA, unlike the Act, provides

an affirmative defense for reasonable and bona fideexpenditures (such as travel and lodging expenses,incurred by or on behalf of a foreign official), directlyrelating to the promotion, demonstration, or

explanation of products or services or the execution orperformance of a contract with a foreign governmentor agency. A person charged with a violation of theFCPAs anti-bribery provisions can assert as adefense that the payments made were a reasonableand bona fide expenditure as part of demonstrating aproduct or performing a contractual obligation. Thisaffirmative defense allows individuals or entitiessubject to the FCPAs jurisdiction to incur reasonableexpenses for legitimate business hospitality orentertainment of foreign officials that might otherwiseviolate the letter of the law. With regard to the Act, onthe other hand, considerable concern has beenexpressed that what would be seen by most

commercial organizations as a legitimate hospitality orentertainment expense would constitute a criminaloffenseparticularly when the expenditures involve agovernment official. The Act, on its face, takes abroad-brush approach, making criminal acts ofcorporate hospitality or entertainment where there isan intention either to induce a person to perform anact improperly or to influence an official for thepurpose of obtaining business or an advantage in theconduct of business. Furthermore, because theBribery Act does not require that an improper offer,promise, or payment made to a foreign governmentofficial be made corruptly, as does the FCPA, theplain language of the Act would seem to criminalize all

promotional gratuities and hospitality expenses.Arguably, by definition, such gifts and promotionalexpenditures are extended with the intent to influencethe recipient in order to obtain or retain business.

Once again, the legislative history of the Act, thedraft guidance, and statements by the U.K.enforcement authorities help, to a degree, to allay

27 TRACE FACILITATION PAYMENTS BENCHMARKING SURVEY(October 2009, Trace International). Available for download athttps://www.traceinternational.org/documents/FacilitationPaymentsSurveyResults.pdf
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8019024/SFO-to-prosecute-serious-overseas-bribes.htmlhttp://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8019024/SFO-to-prosecute-serious-overseas-bribes.htmlhttp://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8019024/SFO-to-prosecute-serious-overseas-bribes.htmlhttps://www.traceinternational.org/documents/FacilitationPaymentsSurveyResults.pdfhttps://www.traceinternational.org/documents/FacilitationPaymentsSurveyResults.pdfhttps://www.traceinternational.org/documents/FacilitationPaymentsSurveyResults.pdfhttps://www.traceinternational.org/documents/FacilitationPaymentsSurveyResults.pdfhttps://www.traceinternational.org/documents/FacilitationPaymentsSurveyResults.pdfhttp://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8019024/SFO-to-prosecute-serious-overseas-bribes.htmlhttp://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8019024/SFO-to-prosecute-serious-overseas-bribes.html


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these concerns. The Joint Committee on the DraftBribery Bill in Parliament, on July 28, 2009, issued areport on the bill28in which it recognized that, in certaincircumstances, legitimate and modest hospitalityexpenditures might satisfy the constituent elements ofbribery of a foreign government official. The reportwent on to affirm that corporate hospitality is alegitimate part of doing business at home and abroad.The Joint Committee expressed confidence thatenforcement authorities would not exercise theirprosecutorial discretion in a way that would makelegitimate and proportionate hospitality criminal.

This moderate take was reinforced in the draftguidance which suggests that reasonable andproportionate expenditures which seek to improve theimage of a commercial organization, better presentproducts and services, or establish cordial relations,are recognized as an established and important partof doing business. The guidance indicated that not all

such business expenditures would constitutebriberyeven though the clear language of the Actwould suggest otherwiseand the question ofwhether a particular expenditure is a bribe would haveto be determined by the totality of the circumstances.The draft pointed out that it is unlikely that a routineand incidental business courtesy of small value wouldhave an impact on decision making in the context of ahigh value business opportunity. Again, the guidancenoted that the standard to be applied by a commercialorganization making hospitality or promotionalexpenditures is whether they are making suchexpenditures to induce a person to perform a functionimproperly. In the eyes of the Ministry of Justice,

reasonable and proportional hospitality is unlikely totrigger the offense of giving or receiving a bribe.Commercial organizations should be wary, however,that the more expensive or lavish the gift or hospitalityis, the closer to the less-than-specifically-defined lineof impropriety they may be straying.

Finally on this point, at an October 7, 2010industry/governmental consultation session on theAct, a Ministry of Justice spokesperson stated that theconcern over the hospitality and business expenditureissue is misplaced. Only hospitality that is lavish orclearly a sham, he added, is likely to be the target ofprosecution.

In response to the draft guidances request for

public comment, the Financial Markets LawCommittee (FMLC),29submitted a report that

28 Joint Committee on the Draft Bribery Bill-First Report, July 28,2009. Available for download athttp://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/115/11502.htm29 The FMLC is an independent United Kingdom legal expert,sponsored by the Bank of England, whose role is to identify issuesof legal uncertainty or misunderstanding in the framework ofwholesale financial markets that give rise to material risks, and toconsider how such issues should be addressed. The report the

expressed continued concern over this hospitalityissue. Reflecting on the proper exercise ofprosecutorial discretion in these matters, the FMLCsuggested it would be preferable to set approvallimits for such expenditures. These limits, the FMLCsuggested, could be graduated to reflect varyingcircumstances. For example, tighter limits onexpenditures or even a zero tolerance approachcould be taken where public officials are the focus ofthe promotional activity. Less restrictive standards,however, might be applicable for commercial entities,taking into account existing practices in particularindustries. It was further suggested that even anexpress statutory affirmative defense, similar to theFCPA approach, would put companies in a morecomfortable position regarding hospitalityexpenditures for foreign officials.

While concerns remain over the hospitality issueifone takes the U.K. government at its wordit would

appear that enforcement of the Act, at least regardingforeign government officials, will not be much differentthan that currently associated with the FCPA.

Conclusion

What should a commercial organization that ispotentially subject to the provisions of the U.K. BriberyAct make of the delay in the issuance of finalguidance on the new law and the corresponding delayin its implementation? Whether final guidance will bemore specific and, thus, have the effect of allayingconcerns over the Acts harsher aspects remains tobe seen. Clearly, the delay coupled with the Growth

Review of the Act ordered by Prime Minister DavidCamerons office, means that the U.K. government isconcerned about the Acts potential as an obstacle toinvestment in the country and a weight on itseconomic growth. Despite these concerns it must beremembered that the U.K. government continues todenounce commercial corruption and voice its supportof OECD efforts regarding the criminalization offoreign bribery.

When trying to predict what will happen with the Actit is important to remember the circumstances that ledup to its development. The United Kingdom had beenthe subject of vigorous criticism from its EU partnersover its handling of certain high profile commercial

bribery cases, including the notorious matter involvingBAE Systems. In that particular case an SFOinvestigation was halted on government orders.Looking at this history and the debate which precededParliaments enactment of the Actalong with theworldwide publicity attendant to its passageit isdifficult to imagine that the Growth Review will resultin any transformational changes to the Act. Hopefully,however, there will be more substantial guidance

FMLC filed in response to the guidance is available for download athttp://www.fmlc.org/papers/Issue160report.pdf
http://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/115/11502.htmhttp://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/115/11502.htmhttp://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/115/11502.htmhttp://www.fmlc.org/papers/Issue160report.pdfhttp://www.fmlc.org/papers/Issue160report.pdfhttp://www.fmlc.org/papers/Issue160report.pdfhttp://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/115/11502.htmhttp://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/115/11502.htm


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concerning the Acts purview forthcoming from theMinistry of Justice and the SFO. In is conceivablethat, as a result of the Growth Review, U.K.prosecutors will be instructed to relax theirenforcement effortsparticularly with regard tocontroversial issues such as facilitating payments,hospitality, and bribery by intermediaries/third parties.Again, however, it is unlikely that the terms of the Actitself will be modified and MAPI suggests thatconcerned entities prepare themselves to seestringent new anti-bribery laws come into force in theUnited Kingdom in 2011. As such, the further delay inguidance/implementation should be viewed as arespite and not a reprieve.

MAPI member companies that have even minimalconnections to the United Kingdom should use thisdelay as time to review and perhaps revise their anti-bribery procedures to ensure compliance with both theFCPA and the Bribery Act. Policies designed with the

FCPA in mind are likely to need at least somerevisions given the broader reach of the Act. Theimportance of such revisions is magnified in light ofthe close working relationship that exists betweenenforcement authorities in the United States and theUnited Kingdom. The DOJ and the SOF collaborateregularly on investigations and enforcement activities.Companies with minimal connections to the UnitedKingdom that are being investigated by the DOJ forFCPA violations are entirely likely to find themselvessubject to multijurisdictional charges. It should beremembered that voluntary disclosures of FCPAviolations may be shared by DOJ with U.K.authorities, exposing companies to potential penalties

in both jurisdictions.In revising anti-bribery policies and practices tocover the Acts broader scope, an area to whichparticular attention should be paid is the relationshipswith third parties. Since, under the terms of the Act, acompany can be liable for bribes committed byassociated persons, it is imperative that acommercial organization ensure that its agents,suppliers, subcontractors, distributors, joint venturepartners, consultants, and other third parties live up toits standards of ethical conduct. Establishing aneffective third-party ethics and compliance program isstrongly advised. Such a program should, at aminimum:

Survey these third parties as to their ethics andcompliance efforts.

Use the results of these surveys to create anapproved list of acceptable third parties withwhom doing business is acceptable. Thirdparties on the approved list should be monitored

to ensure that they maintain the standardswhich qualified them in the first instance.

Set standards in a Code of Conduct for thirdparties so they understand that integrity is aprerequisite for doing business with your

company. Include the third parties in your companies anti-

bribery training programs or conduct separatetraining for them.

Closely monitor all payments to and from thirdparties such as commercial representatives,agents, and consultantsparticularly in high-risk countries.

Maintain an ongoing communication link withyour third parties on key issues related to youranti-bribery policy.

Create an anonymous whistleblower facility forthird parties.

Ensure that contracts with third parties includeprovisions addressing the issue of bribery, suchas warranties that no secret commissions havebeen paid, no competition rules have beenviolated, no bid rigging or price fixing has beenengaged in, etc.

Provide ready access for third parties torelevant documents such as the code ofconduct, contracts, the approved list, etc.

Many companies anti-bribery policies and proceduresmay already touch upon these issues in the FCPAcontext (i.e., the concern over charges of willfulblindness discussed above). Still, the draft

guidances focus on the due diligence aspect ofdealing with associated persons as part of acommercial organizations adequate procedures toprevent bribery might warrant a reexamination andtightening of these policy and procedures.

* * *

In conclusion, MAPI recommends that companieswould be well advised to keep anti-bribery andcorruption matters high on the agendas of both seniormanagement and boards of directors. In preparing forthe broad reach of the U.K. Bribery Act, judiciousorganizations should read its provisions liberally anderr on the side of caution when reviewing and revisingappropriate policies and practices.

The Alliance will continue to monitor issuesassociated generally with anti-bribery and corruptionenforcement, and specifically with the U.K. BriberyAct, and report on them to its membership.


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APPENDIX

Nature of Scope/Reach of the Offenses

Criminal Conduct Covered Activities Territorial/Jurisdictional Reach

Section 1: Bribery Offering, promising, or giving afinancial or other advantage.

Intending to induce or rewardthe improper performance of arelevant function or activity ORknowing that accepting theadvantage is improper.

Acts committed in the UK.

Acts committed anywhere inthe world by a person with aclose connection with the UK(e.g., a UK company or aBritish citizen or resident).

Section 2: Being Bribed Requesting, agreeing toreceive, or receiving afinancial or other advantage.

Intending to perform relevant

function or activity improperlyOR reward for improperperformance OR whererequesting, agreeing toreceive, or receiving theadvantage is improper in itself.

Acts committed in the UK.

Acts committed anywhere inthe world by a person with aclose connection with the UK.

Section 6: Bribing a ForeignPublic Official

Offering, promising, or giving afinancial or other advantage.

Intending to influence theForeign Public Official in theirofficial capacity.

Intending to obtain or retainan advantage in the conduct

of business. Where the Foreign Public

Official is neither permitted norrequired by local law to be soinfluenced

Acts committed in the UK. Acts committed anywhere in

the world by a person with aclose connection with the UK.

Section 14: Senior OfficerOffence

The corporate body has bribedor has been bribed.

The senior officer hasconsented to or connived inthe bribery.

Acts committed by any seniorofficer with a closeconnection with the UK.

Acts committed by any seniorofficer, if the bribery takesplace in the UK.

Section 7: Failure to PreventBribery

A person associated with acommercial organisation

bribes someone else. Intending to obtain or retain

business, or an advantage inthe conduct of business forthe organisation.

The organisation did not havein place adequateprocedures.

Where the commercialorganisation is a UK company

or partnership. Where the commercial

organisation carries on abusiness, or any part of abusiness.

Documents

Bribery Legal Analysis and Regulations