Document

Report
Why foreign
companies need to
prepare for the UK
Bribery Act
Transparency International Belgium
Roger Best
3 March 2011
Why do foreign companies need to be
concerned by the UK Bribery Act?
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It creates a new corporate crime of failing to prevent bribery
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The new corporate crime applies to all companies carrying on
business in the UK in respect of activity throughout the world
There is a defence if the company can prove it had “adequate
procedures” designed to prevent bribery
UK prosecutors and regulators have recently become more
aggressive in prosecuting corporations for bribery and have
announced their intention to prosecute foreign companies
Because the UK Bribery Act is broader in scope than the US
Foreign Corrupt Practices Act anti bribery and corruption
programmes may need to be updated
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Bribery and corruption – the current
position in the UK
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Very old and inadequate legislation dating from 1889 onwards
Amended in 2002 to have extraterritorial effect
Historically a poor record of enforcement, especially in relation to
offences by corporates
In January 2009, the UK’s Financial Services Authority fined Aon
£5.2 million for failings in its systems and controls to prevent
bribery
In the last two years, the Serious Fraud Office (“SFO”) have
obtained significant fines through settlements (e.g. £6.5 million,
Mabey & Johnson) but the courts have said fines should match
those in the US.
The Bribery Act 2010 will be brought into force in spring/summer
2011 replacing existing corruption law and opening the door for
the aggressive criminal enforcement action against UK and
overseas corporates involved in bribery
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
The new Bribery Act offences
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Active Bribery – Section 1
Passive Bribery – Section 2
Bribery of Foreign Public Officials – Section 6
Failure of Commercial Organisations to
prevent Bribery – Section 7
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Cases 1 and 2: Active Bribery
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Case 1: offering, promising or giving an
advantage to another person, with the intention of
inducing or rewarding improper performance
Case 2: offering, promising or giving an
advantage to another person knowing or
believing that the acceptance of the advantage
would itself “constitute the improper performance
of a relevant function or activity”
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Cases 3-6: Passive Bribery
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Case 3: requesting or accepting an advantage with
the intention of performing a relevant function
improperly
Case 4: requesting or receiving an advantage where
that conduct in itself constitutes improper performance
of a relevant function
Case 5: requesting or receiving an advantage as a
reward for improper performance of a relevant function
Case 6: improper performance of a relevant function
in anticipation of an advantage
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Improper performance of a relevant
function or activity
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A relevant function or activity is one which:
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Is of a public nature, connected with a business, performed in
the course of employment or on behalf of a body of persons;
and
The person performing it is in a position of trust or is expected
to perform it in good faith or impartiality
Improper performance is:
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Breach of the relevant expectation (e.g. Breach of good faith
or trust) by reference to the expectations of a reasonable
person in the UK (overseas, local custom or practice is to be
disregarded unless permitted or require under “written law”)
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Bribery of Foreign Public Officials
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Active bribery offence in relation to foreign public officials has
wider application than the general offence
The offence occurs when there is a bribe intended to influence a
foreign public official to obtain or retain business or an advantage
in the conduct of business (there is no requirement of inducing or
rewarding improper performance)
Wide but uncertain definition of “foreign public official” extends to
officials of international organisations
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Includes those who hold “legislative, administrative or judicial
position of any kind”; or
Exercise a public function of a country or territory (or subdivision); or
Is an official or agent of a public international organisation
Advantages permitted to be received by “written law” are
permissible
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Territorial application of substantive
offences
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These offences apply if any act or omission forming
part of the offence takes place in the UK
The offences do not apply to acts outside the UK
unless committed by:
British Citizens/Citizens of overseas territories;
 UK residents;
 UK incorporated businesses
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The Act does not apply to non-UK subsidiaries of UK
businesses, but other offences (e.g. Conspiracy) may
be relevant
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Failure by commercial organisations to
prevent bribery
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The corporate offence occurs where an employee or an “associated
person” bribes in connection with the company’s business
It is a strict liability offence that is subject to a defence that the
company has adequate systems and controls to prevent the bribery
“Associated Person” means any person who performs services for or
on behalf of the company (there is concern about the scope of the
“associated person” link in relation to joint ventures and consortia)
The new offence applies to UK corporates and foreign companies
carrying on any part of their business in the UK irrespective of
where in the world the employee or “associated person” bribes
Guidance on procedures to prevent bribery is to be published by the
Government in [March] 2011 (section 9). The Ministry of Justice
published a consultation paper on 14 September 2010
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Who are the “associated persons” who need to
be prevented from bribing in connection with
your business?
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Persons who perform services for or on behalf of the
company.
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Others providing services for or on behalf of C could
include:
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Employees are presumed to be associated persons
Other examples include agents and subsidiaries
Consultants
Joint venture partners
Members of consortia
Franchisees
Business partners that do not perform services are not
associated persons (e.g. investee companies, borrowers,
purchasers and suppliers of goods and assets).
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
10
Business Relationships
Company’s customers
and clients
(may be subject to
AML KYC)
Performers of
services for or on
behalf of Company
(agents, consultants,
outsourced service
providers)
Other Third Parties
(suppliers of goods,
remitters of payments)
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
11
Draft guidance from the Ministry of
Justice
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Six Principles for Bribery Prevention:
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Risk assessment
Top level commitment
Due diligence
Clear, practical and accessible policies and procedures
Effective implementation
Monitoring and review
Includes case studies and further information
about the Act
Status of Guidance
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Other risks
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Particular risks
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Entertainment and hospitality
Corrupt service providers
Winning public sector business
Acquisitions of emerging market companies
Other Consequences of involvement in bribery
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EU wide public procurement bars
Long term money laundering issues
Civil claims and contracts may be avoided
Directors’ exposure to action for breach of duty
Reputational risk and massive costs arise from enforcement actions
Creates difficulties on exiting the investment (particularly if US
buyers)
Credit implications – ratings may be impacted
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Bribery Act -v- US Foreign Corrupt
Practices Act
Bribery Act
FCPA
Extra-territorial
UK residents and legal
persons,
Corporate offence applies to
all companies carrying on
business in the UK
US residents and legal persons
and US issuers
Non-US persons where US
connection or affect
Private Sector
Yes
Separate law
Facilitation
Payments
Not permitted
Exception for small scale
payments
Third Parties
Yes, if “associated persons”
Yes, if knowing disregard
Books and
Records
No – but separate false
accounting charge
Yes for US companies and US
issuers
Compliance
Program
Yes, for adequate procedures Yes, for mitigation under
defence
Criminal Sentencing Guidelines
Why foreign companies need to prepare for the UK Bribery Act – 3 March 2011
Speaker contact
details:
Roger Best
+44 (0)20 7006 1640
[email protected]
www.cliffordchance.com
Clifford Chance, 10 Upper Bank Street, London, E14 5JJ
© Clifford Chance LLP 2010
Clifford Chance LLP is a limited liability partnership registered in England and Wales
under number OC323571
Registered office: 10 Upper Bank Street, London, E14 5JJ
We use the word 'partner' to refer to a member of Clifford Chance LLP, or an employee or
UK/2690176
consultant with equivalent standing and qualifications

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