Bribery Act proves grass isn't greener

by Steven Beharrell, Fasken Martineau LLP

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01 Dec 2011

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grass-man-horizon

THE UK'S NEW bribery laws were enforced on 1 July 2011. The period leading up to that date had seen criticism of the proposed laws from some sectors of business. It was argued that the legislation was unclear in areas including corporate hospitality, ambiguous on the status of foreign companies operating in the UK and placed excessive burdens on companies to perform due diligence on agents in order to protect themselves from the offence of failing to prevent bribery by a person "performing" for a company, which is a strict liability offence.

As a result, some UK-based exporters and trading companies are citing the Bribery Act as one of their motivations for potentially moving their operations to other jurisdictions. However, when the question of moving is examined in detail, it becomes clear that many of these companies are over estimating the burdens associated with the new legislation and underestimating the rigour of anti-bribery laws in popular offshore destinations such as Switzerland and Asia.

For the companies that have made the move – and incurred all the associated costs and disruption of a relocation – the grass has proven to be no greener. Moreover, the very act of being seen to move to avoid the Bribery Act can cause reputational damage and make the firm a less attractive counterparty.

From this perspective, the Bribery Act can be viewed as a piece of national legal house-keeping which is long overdue. It replaces the previously fragmented nature of the UK's laws relating to possible bribery in business and replaces those with a consolidated anti-corruption law. As such, the 2010 Bribery Act is timely legislation for the UK and fits into a wider global push to change bad business habits.

In the past five years, there has been an increased tempo in the global programme of activity to eradicate corruption. More countries, including Switzerland and Korea, have implemented the Organisation for Economic Cooperation and Development's (OECD) anti-bribery convention, known more formally as the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The OECD, led by the United States and bolstered by the United Nations and European Union, put pressure on Britain to strengthen its laws on bribery, demanding that it plays by the same rules in global business, particularly in developing countries.

In the US, prosecutors have made a determined effort to investigate and prosecute overseas corporate corruption using the Foreign Corrupt Practices legislation. In a speech last November, US assistant attorney general Lanny Breuer described the results of a six-year effort to increase conviction rates: The number of defendants prosecuted under the Act rose from two individuals being charged and $11m (£7m) collected in criminal fines in 2004 to over 50 individuals being charged and nearly $2bn being collected in fines by 2010.

This global change of attitude towards corruption is leading to the formation of a 'premier league' of global exporting companies and the rest. A second division of companies is forming because of the lack of commitment of some sectors and some companies to anti-corruption practices. These businesses will find themselves only able to operate in high-risk jurisdictions and to do business with other second division players, with all the commercial danger associated with that lack of transparency.

This global move to eradicate corruption has been crystallised into laws and, in October 2011, there was the first conviction under the 2010 Bribery Act. In the UK, the Serious Fraud Office is currently investigating a £2 billion contract involving GPT, the British subsidiary of the aerospace defence company EADS and prosecutors are pursuing some 150 bribery cases in the US.

For those areas of business such as construction, defence, energy, healthcare and telecommunication, where the government is involved in the procurement processes, the global nature of the anti-bribery regime is bringing new levels of transparency and removing the institutionalised corruption in which bribery was considered the cost of sale.

The premier league of global business can no longer tolerate corruption and nor will they consider investing or doing business in nation states that do not have appropriate anti-corruption legislation. So despite its rigour, the UK's Bribery Act is the right law at the right time and, in the long term, it will leave investors, governments and exporting companies better off.

Steven Beharrell is a partner at law firm Fasken Martineau LLP

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