RegulationCorporate GovernanceBribery Act: on the take

Bribery Act: on the take

The Bribery Act that came into law earlier this year introduces new offences that could catch unprepared accountancy practices off guard

The Bribery Act 2010 received Royal Assent on 8 April 2010 and is expected to
become operative in April 2011. It will abolish all existing UK anti-bribery
laws and replace them with a suite of new offences markedly different to what
has gone before.

While the Act presents a considerable risk to all commercial organisations
and their senior management, the breadth of the new offences could have
particular implications for firms and senior individuals in the larger
accounting networks. On its face, the Act makes it significantly easier for the
UK enforcement agencies to achieve convictions for bribery offences and the SFO
has already made it plain that it will come down very heavily on individuals and
those organisations who have not taken action to establish an anti-corruption
culture and who use corruption to gain a business advantage.

The new offences and their implications

Bribing/being bribed. The Act makes it an offence not only
to bribe another (so-called active bribery), but also to be bribed (passive
bribery). A bribe may take any form and is referred to in the Act as a
“financial or other advantage”, so is clearly not limited to the archetypal
bribe of a brown paper envelope stuffed with banknotes. It need not be direct;
it is sufficient if the bribe is provided to a third party, for example a family
member of the person sought to be influenced.

These offences are very widely drafted and apply to both the public and
private sectors. They are not limited to the actual giving or receiving of a
bribe – to offer, promise, request or agree to receive a bribe may also
contravene the Act. Concern has been expressed that the Act is so widely drafted
that it has the potential to criminalise conduct that was not previously viewed
as criminal, such as corporate hospitality. A written policy on the offering and
acceptance of gifts and hospitality which is clear, well known and accessible,
will be of crucial importance.

Bribing a Foreign Public Official. A person who bribes a
foreign public official (a term which includes those who occupy a legislative,
administrative or judicial position as well as representatives of public
international organisations) is guilty of an offence if he intends to influence
that official acting in that capacity and also intends to obtain or retain
business or a business advantage.

Liability of Senior Officers. If a company or partnership
commits any of the bribery offences referred to above, a “senior officer” may
also be liable if he/she “consented or connived” in the commission of that
offence. A “senior officer” includes a director, secretary, manager and partner,
or someone purporting to act in that capacity. So, sanctioning a bribe or
turning a blind eye can result in liability for senior management, even if they
did not make the bribe themselves.

Failure of a commercial organisation to prevent bribery. A
commercial organisation will commit an offence if a person associated with it
bribes another (in the UK or overseas) intending to obtain or retain business or
a business advantage for that commercial organisation. An associated person
includes any person who performs services for the commercial organisation. So,
for example, an associated person may include not only employees, agents and
subsidiaries, but also entities over which the organisation has no ownership or

This offence is wholly new and applies to all commercial organisations, both
corporations and partnerships wherever incorporated or formed, which carry on
business or part of a business in the UK. This is potentially a very low
threshold test and it remains to be seen how it will be applied and construed by
the courts. Save as provided in the Act, it is a strict liability offence. The
only defence is if the commercial organisation can establish that it has
“adequate procedures” in place to prevent such bribery from occurring.
Draft guidance as to what may constitute “adequate procedures” is expected in
September with a view to being finalised in early 2011. Indications are,
however, that rather than being prescriptive, this guidance will only be
principles based and provide illustrations of good/bad practice.

These offences, and particularly the last, are highly relevant for all
organisations, operating across different jurisdictions, often with different
business cultures.

What are the implications?

For the large accounting networks, those entities or individuals with
co-ordinating or governance roles in the UK (including client facing and
non-client facing roles) may well be caught by these offences if an associated
member firm or individual bribes someone in another country. Senior individuals
in such roles might also attract personal liability under the “consent or
connive” offence if they knew or suspected any of the offences in any country
where they had responsibility, but they turned a blind eye or otherwise failed
to take steps to prevent the activity constituting the offence. This highlights
a need not only to ensure that domestic employees are fully aware of the
standards of business practice expected of them, but also that policies at
network level agreed to by all network firms and employees apply similar
standards and are sufficiently robust for the purposes of the new Act. Those
with management responsibility need to have the systems and procedures to
monitor compliance and respond where necessary.

Territorial application

If the conduct element of the bribery offence occurs in the UK, the UK
authorities can prosecute. They may also prosecute if the bribery offence occurs
wholly abroad if the person committing that offence has a “close connection”
with the UK. Even if a commercial organisation may not be subject to the Act for
all purposes, there needs to be an awareness that those of its employees who are
British citizens or otherwise have a close connection with the UK are subject to
the Act and are exposed to the risk of prosecution even if the bribery offence
occurs entirely overseas.

Facilitation payments

The UK Government has signalled a zero tolerance attitude towards bribery – a
bribery offence may be committed whatever the monetary value of the bribe.
Unlike the Foreign Corrupt Practices Act (“FCPA”), there is no de minimis
exemption. While facilitation payments may be viewed as an incidental cost of
doing business in particular countries, they may constitute an offence contrary
to the Act and any internal statements of policy or practice which permits or
condones them leave the commercial organisation exposed to prosecution and
conviction for the new offence of failing to prevent bribery.

What now?

Those who are already subject to the FCPA should already have in place
procedures to ensure FCPA compliance but since the Act is broader in scope than
the FCPA, these might not satisfy all the requirements of the new Act. The
Government has indicated that once the Act becomes operative, there will be no
grace period to enable commercial organisations to introduce any necessary
changes. Those subject to the Act have until April 2011 to take action to ensure
their house is in order. This should involve a comprehensive review of the
corruption risks their business is exposed to and the introduction (if not
already in place) of appropriate policies and procedures to mitigate against
those risks occurring. Most importantly, an anti-corruption culture should be
established, visibly led by senior management. As ever, tone from the top will
be seen as a very important factor for all organisations seeking to avoid the
potential for liability under the Act.

Andrew Legg and Matthew Lawson are partners in the Litigation &
Dispute Resolution team at Mayer Brown in London


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