U.K. Publishes Guidance on Bribery Act of 2010

三月 31, 2011

On March 30, 2011, the United Kingdom’s Ministry of Justice (“MOJ”), the Director of Public Prosecutions (“DPP”) and the Director of the Serious Fraud Office (“SFO”) issued their long-awaited guidance on the U.K.’s Bribery Act of 2010. The guidance clarifies the effective date of the Act—July 1, 2011—and seeks to allay fears about some of the more extreme interpretations that commentators have advanced since the Act received Royal Assent. For example, the guidance emphasizes that reasonable corporate hospitality—including invitations to sporting events—in connection with legitimate business activities is unlikely to violate the Act. The guidance also provides some limits on the Act's jurisdictional reach, making clear that listing shares on a U.K. exchange or having a U.K. subsidiary will not, without more, lead to a prosecution. There are also guiding principles designed to assist companies in fashioning “adequate procedures” under the Act. But there are also many questions left unanswered, and in many areas the guidance is so qualified and general as to provide little assurance. This client alert provides a basic overview, and a more detailed analysis will follow.

The MOJ’s guidance is available at: http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf. The DPP and SFO’s joint guidance on the approach prosecutors should take when deciding whether to bring a prosecution under the Act is available to download at: http://www.sfo.gov.uk/media/167348/bribery%20act%20joint%20prosecution%20guidance.pdf.

The MOJ attempts to clarify several important issues:

  • Reasonable Hospitality & Other Expenditures.  The Act is not intended to criminalize bona fide hospitality, promotional and other business expenditure so long as it is in line with reasonable industry norms.  For example, if New York is genuinely the most mutually convenient place for foreign officials to meet with the senior executives of a U.K. organization, then paying for the cost of travel, tickets to a sporting event and some “fine dining” for the official and the official’s spouse or partner will not on their own be indications of improper conduct.  (On its face, this view appears to be more permissive than the U.S. Department of Justice’s interpretation of acceptable hospitality under the Foreign Corrupt Practices Act.)  Conversely, a Five-Star holiday for a foreign official that is unrelated to a specific business visit is more likely to raise an inference of possible bribery.

  • Presence in the U.K.  Having a U.K. subsidiary or listing shares on a U.K. stock exchange, without more, is not enough to demonstrate that an organization is “carrying on a business” in the U.K. and is thus subject to the Act.  However, guidance is still lacking as to what level of contact gives rise to a “demonstrable business presence.”  For example, it is unclear whether the test would be satisfied if an organization participates in a yearly trade show or has a small representative office in the U.K., unrelated to any bribery.  The quantity and quality of contact triggering potential liability under the Act remains vague and untested.

  • Associated Persons.  Corporations can be liable for the acts of employees, agents, contractors, suppliers, partners, or any other entities that “perform services for or on behalf of” the organization.  For joint ventures operating through a separate legal entity, a bribe paid on behalf of the joint venture by one of its agents will not automatically trigger liability for other members of the joint venture even if they benefit indirectly from the bribe.  However, a member may be liable if the joint venture is performing services for the member and the bribe was paid with the intention to benefit that member.  For contractual joint ventures, the prosecution will look at the relevant circumstances to determine whether the person who paid the bribe was “performing services” for a participant of the joint venture.  In all these scenarios, an offense is committed only if there is proof of a specific intent to obtain or retain business or an advantage for the organization.

  • Facilitating Payments.  The MOJ reiterates that unlike the Foreign Corrupt Practices Act, the Bribery Act does not provide any exception for facilitating or “grease” payments.  However, in the guidance published by the DPP and SFO, it is recognized that it may not be in the public interest to prosecute a case involving facilitation payments in certain circumstances.  The following factors tend against prosecution: a single small payment that would attract a nominal sentence; the payment came to light as a result of a proactive self-reporting and remedial action; where an organization has a clear policy on facilitation payments that was followed; and the payer was in a vulnerable position.  It is important to note the following factors that would weigh in favor of prosecution: large or repeated payments; payments that are planned or accepted as a way of doing business; payments that indicate an active corruption of the official; or where an individual has failed to follow his or her organization’s policy on facilitation payments.
  • Prosecutorial Discretion.  Prosecutors have flexibility in deciding which cases to prosecute and are required to consider whether moving forward with a prosecution is in the public interest.  Public interest factors considered by prosecutors are discussed further in the guidance published by the DPP and SFO.  For example, factors weighing in favor of prosecution include whether a conviction is likely to attract a significant sentence or that those involved in the bribery are taking advantage of their positions of authority or trust.  For cases where there is minor harm or the organization is taking a “proactive approach” including self-reporting and remedial action, the guidance suggests that the public interest tends against prosecution.

  • Guiding Principles for Anti-bribery Policies and Procedures.  Notably, the Act provides for an affirmative defense if the organization can prove that it had adequate procedures in place designed to prevent persons associated with it from paying bribes.  The MOJ outlines six high-level principles to guide companies in developing and implementing anti-bribery policies and procedures:

(1) Proportionate procedures.  Policies and procedures should be clear, practical, realistic and proportionate to the level of risk that a company faces. 

(2) Top-level commitment.  Senior executives should foster an anti-bribery culture and ensure that policies are effectively communicated throughout the organization.

(3) Risk assessment.  Adopt risk assessment procedures that accurately identify and prioritize risks, paying close attention to commonly encountered risks including, for example, countries with high levels of corruption, high risk sectors such as large scale infrastructure, or the use of intermediaries in transactions with public officials.

(4) Due diligence.  Due diligence should be thorough and proportionate to the identified risk.

(5) Communication (including training).  Ensure that anti-bribery policies and procedures are understood throughout the organization and that training focuses on the skills needed to handle any bribery related issues.
(6) Monitoring and review. Monitor and review procedures and make improvements when necessary.

  • Case Studies.  The MOJ’s guidance concludes with a series of case studies outlining hypothetical scenarios and the practical steps that organizations should consider in their efforts to manage risk and ensure compliance under the Act. For example, one case study illustrates the type of internal guidance a company could issue when faced with paying for the travel costs of a foreign official attending an annual company event (see Case Study 4). Another case study covers potential steps to take when conducting due diligence of local agents in a foreign country (see Case Study 6). Corporate counsel is advised to read these case studies for concrete examples of how the U.K. government expects companies to act with respect to establishing and enforcing anti-bribery policies, conducting due diligence and risk assessments, communicating to employees and partners, providing training, and monitoring and evaluating internal controls.

Businesses with links to the U.K. should use the next three months (before the Act goes into effect on July 1, 2011) to review and strengthen their anti-bribery polices and procedures and evaluate whether any additional measures should be taken to ensure compliance and minimize potential liability.

 

About O’Melveny’s Foreign Corrupt Practices Act Practice
The lawyers in O’Melveny’s Foreign Corrupt Practices Act Practice are actively engaged in conducting internal investigations and transactional due diligence; responding to criminal and regulatory enforcement inquiries and proceedings; evaluating and implementing compliance programs, and providing prospective advice about issues in international business transactions. Our clients include U.S. and international companies, among them Fortune 100 companies, the world’s largest financial institutions, diversified U.S. and offshore companies, and corporate executives.