UK Bribery Act
This article first appeared in the August 2011 issue of Port Strategy and is reproduced with their kind permission. www.portstrategy.com.
Promising an incentive to stevedores to discharge a vessel in a timely manner, giving a bottle of whiskey to a customs official to avoid delays, or offering a large box of cigarettes to a port agent so as to receive special treatment. Activities such as these have always run the risk of falling foul of the criminal laws of the United Kingdom. However, until now, bribery offences under UK Law have been obscure and have lacked clarity.
The UK Bribery Act (“the Act”), which entered into force on 1 July 2011, has consolidated the existing law, and has introduced a new offence of failure to prevent bribery. The Act is very widely drafted, and has an ambitious territorial application, which extends far beyond the shores of the United Kingdom.
This article explains the law regarding bribery in the UK and considers how criminal liability under the Act may arise.
The existing offences have been clarified and updated
Paying/offering and soliciting/accepting bribes
A bribe is paid or received where one person provides a benefit to another person with the aim of inducing another person to do something which is improper in the eyes of a reasonable person in the United Kingdom. An offence will be committed even where the bribe is only offered or solicited, but not actually transferred.
The offences can be set out as follows:
- Bribing another person: offering, promising or giving a financial (or other) advantage to a person with the intention of inducing that person to perform a function improperly. Soliciting or accepting a bribe: requesting or accepting a financial (or other) advantage, intending that the performance of a relevant function should be performed improperly.
- A function will involve any public function or any activity connected with a business, or any activity performed in the course of a person’s employment. The person performing the function will be expected to do so impartially, and/or in good faith, and/or will be considered to be in a position of trust.
The function will be performed improperly where it is performed contrary to the manner in which a reasonable person based in the United Kingdom would expect a person performing that function in the United Kingdom to behave. For example, one would expect a harbour master or terminal operator to allocate berth space to ships on an open, fair and transparent basis (for example, first come, first served), and not to accept an inducement from one ship master to give it preferential treatment over other ships.
The reasonable person test illustrates the expansionist ambition of the Act. If a UK citizen pays a port master in a foreign country in order to receive such preferential treatment, it is irrelevant whether or not such behaviour is considered reasonable by people in that country - what matters is what a UK person would think. But the offence is not committed if the conduct is permitted or required by local written law, assuming that the performance of the function is not subject to the law of any part of the UK.
Bribing a foreign public official
An offence will be committed where a person offers or gives a financial (or other) advantage to a foreign public official (an “official”), with the intention of influencing that public official, where the official is not required or permitted by the local written law to be so influenced.
The offence does not require “improper performance” by the official of his functions. It is even more widely drawn than the two offences above. Giving an official any type of benefit which is not sanctioned by local written law may be caught by the Act.
The Act does not recognise, and therefore does not exempt, “facilitation payments”, which are exempted under the US Foreign Corrupt Practices Act (“FCPA”). A facilitation payment, or “grease payment”, is commonly understood to be a payment to an official to expedite an official process. A payment by a ship owner, ship owner’s agent or ship’s master to an official to speed up the clearance of a vessel into a port (where no official fast track service is available) may be exempt under the FCPA. However, it is likely to constitute an offence under the Act. In order for such a payment not to amount to an offence under the Act, the paying party would need to demonstrate that the payment was required or permitted by local written law. An official written receipt may assist in the justification of any such payments.
The existing offences set out above will catch corporate hospitality which the reasonable person in the UK considers to be designed to induce improper conduct by the person receiving it. In practice, it will be necessary to look at the lifestyle of the recipient, as well as the level of hospitality being offered. Corporate hospitality at the Wimbledon final would likely not be considered an attempt to bribe a UK company director, but the same offer of hospitality to an Egyptian stevedore could be scrutinised more closely. One useful test for corporate hospitality is whether or not the provider of the hospitality is present at the event: where the provider is not present, it is more likely that the hospitality will amount to a bribe.
Who can be liable for committing these offences?
The Act has a wide territorial application. The following “persons” fall under the jurisdiction of the UK Courts, and can be convicted of the criminal offence of bribery, no matter where in the world the offence is committed:
- Companies and partnerships incorporated in the United Kingdom.
- Individuals who are citizens of the United Kingdom or the British Overseas territories.
- An individual who is ordinarily resident in the United Kingdom.
Further, any company or individual, of any nationality, will fall under the jurisdiction of the UK Courts, if any act or omission which forms part of any of the offences outlined above takes place in England, Wales, Scotland or Northern Ireland.
- If a UK resident director of a UK incorporated company is found to have paid a bribe in Nigeria in order to secure a contract for his company, both the company and the director may be criminally liable under the Act.
- If a German (non-UK resident) director of a Swedish company offers a foreign public official an all expenses paid five star shopping trip to London (which may constitute a bribe), both the director and the company may be criminally liable, on the basis that the “bribe” was “paid” in the United Kingdom. The offer of the same type of trip to Paris would not fall within the jurisdiction of the Act.
- The same German director shakes hands with a Polish director of another company over the payment of a bribe to the Polish director for the benefit of the Swedish Company. If the handshake occurs in London, even if payment takes place in Poland, the German director and the Swedish Company will be liable for paying the bribe, and the Polish director will be liable for receiving it. If the French (non-UK resident) director of a UK incorporated company pays a bribe to an official in Egypt, the UK incorporated company may be criminally liable, but the French director will not (as the offence was not committed in the UK, and the director is not a UK resident or a UK citizen).
The new offence of failure to prevent bribery
Companies have often sought to limit their potential exposure to anti-corruption laws by employing third party agents to act on their behalf in parts of the world where the payment of bribes is accepted as necessary for doing business. The new offence seeks to prevent companies doing this.
A company will be guilty of an offence under the Act if another person (for example an employee, a subsidiary company, or a third party agent) who performs services on behalf of the company pays a bribe.
The Act applies to all companies which carry on a business, or part of a business, in the United Kingdom, as well as those which are incorporated under the law of the United Kingdom – as such it has a broader application than the offences set out above. However it only applies to companies, not to individual directors. Unlike the other offences, the person paying the bribe for the benefit of the company does not have to have any connection to the UK, and the bribe can be paid anywhere in the world (as such, the company may be held liable even where the person paying the bribe is outside the jurisdiction of the Act).
The company will only be able to avoid liability if it can show that it has “adequate procedures” in place to prevent bribery.
Where a ship owner (who carries on a business or part of a business in the UK) pays money to an agent to ensure the smooth port call of a ship through the ports of a particular country, if that agent bribes officials, the ship owner will be liable, unless it can demonstrate that it had in place “adequate procedures” to prevent bribery.
What constitutes “adequate procedures”?
What constitutes “adequate procedures” will depend on the countries and sectors in which the company operates, and the types of transactions and business counterparts involved. In general, it will be necessary to educate anyone providing services to your company, backed by top level commitment, to ensure awareness of what constitutes an offence under the terms of the Act. Companies should also monitor compliance closely, and cease to employ or retain any person or agent who fails to comply with the Act, and even consider informing the UK authorities of any breaches of the Act.
What should companies do?
All companies should consider taking the following steps:
- Review all commercial arrangements to ascertain the level of exposure to the Act – to ascertain what type of connection the company has with the UK.
- If there is any risk of exposure, consider inserting anti-corruption clauses into commercial agreements, covering “adequate procedures” and the consequences of bribery for enforceability of contracts.
- Train directors and staff in order to minimise exposure to the Act.
- Review Directors & Officers insurance to ensure that there is adequate cover in place, for example to cover the costs of investigating and defending any allegations of bribery or corruption, including for agents and non-management staff.
The OECD has been pushing bribery and corruption up the legislative and enforcement agendas of its member states for a number of years. Enforcement of existing laws has increased markedly. Arguably the UK Act should be seen as the latest chapter in this trend, rather than a one off event. As such, companies may consider taking the Act as a useful spur to focus on anti-corruption measures, as doing so will keep them in line with the major trend of reduced tolerance of corruption from OECD members.