As if global general counsel didn't have enough concerns about their companies falling victim to more vigorous U.S. prosecution of violations of the Foreign Corrupt Practices Act (FCPA), the liability of many will increase even more in April when Britain's Bribery Act 2010 takes effect.
This new law impacts any U.S. corporation with operations in the U.K. or with employees who are British citizens. It is broader in some respects that the FCPA, although questions remain about how British authorities and the courts will interpret many of the provisions.
"Whereas the FCPA for many years has been described as the most feared statute in corporate boardrooms around the world, the Bribery Act has leapfrogged it," says Andrew Keltie, a partner in Baker & McKenzie's London office.
Keltie notes that bribery has long been an offense under British law, but the previous law was vague and rarely enforced. The new law was designed to address the shortcomings.
"Equally significant is that the environment of enforcement has changed," Keltie says. "The clear message now is that the U.K. sees this as a serious offense." Keltie adds that the Serious Fraud Office, which will investigate bribery cases, has stated that it will devote significant resources to the effort.
The law creates three criminal offenses:
- Giving or accepting a bribe designed to induce someone to perform a function improperly
- Bribing a foreign public official with the intention of obtaining a business advantage
- Failing to prevent bribery
"The most significant development in the law is the new strict liability corporate offense of failing to prevent bribery," Keltie says. "If a company fails to prevent bribery by an employee, a joint-venture partner or a subsidiary, they are liable under this act" and could be penalized with an unlimited fine. The law also provides that a company can be held liable for acts of bribery by a person "associated" with the company who is trying to obtain a business advantage for the company.
The act provides a defense for companies judged to have "adequate" procedures in place to prevent bribery. "You would have to show you had properly evaluated risk and had measures in place to prevent that from occurring," Keltie says. "That is an aspect of compliance that people will have to factor into their policies."
The impact of the act extends far beyond U.K.-based companies. It covers companies with any "business presence" in the U.K., regardless of where the act of bribery occurs. It also covers bribery by any person with "close connections" to the U.K., including both British citizens and citizens of others countries "ordinarily resident" in the U.K.
Unlike the FCPA, the U.K. Bribery Act does not exempt from possible prosecution what are commonly known as "facilitation payments." In some parts of the world, it is common practice to pay a small amount of money to assure that an otherwise legitimate permit is approved in a timely manner. "The Serious Fraud Office says it will take a common sense approach and not prosecute for minor offenses, but people are nervous," Keltie says.
Gary Seib, a partner in Baker & McKenzie's Hong Kong office, says that facilitation payments are a big issue in China, where local anti-bribery laws do not exclude facilitation payments from potential prosecution, and where such payments are not clearly defined.
"There is no real guidance on what amounts to a facilitation payment in value terms," he says. "The problem is to identify what a facilitation payment is. In the context of Chinese criminal law there are no exceptions in any event, so the management of facilitation payments is quite a challenge."
While the British government released some draft guidance on the Bribery Act in late 2010 and more definitive guidance is expected early in 2011, it will ultimately be up to the courts to determine the true impact of the new law.
"We will have to see how it is interpreted in the courts, but on the face of the language of the statute, it is very wide and broad in its effect," Keltie says.