Bribery Bill set to raise liability issues

After some wrangling, the Bribery Bill that received Royal
Assent in April is set to modernise and consolidate existing offences, making
what is a general offence of active or passive bribery into specific offences –
bribery of a foreign public official, or a corporate offence of failure to
prevent bribery.

Companies registered in the UK, with a UK branch office, or that are
otherwise doing work here are liable for instances of bribery overseas, under a
bill that will extend the geographical range of prosecution.

The bill defines what constitutes bribery as anything that causes a corporate
to gain commercially by giving advantage to a third party. The advantage does
not have to be money, but could be the offer of an internship, or extravagant
entertainment in exchange for a contract.

“The bill does not seek to stop companies from marketing themselves, but they
should take a common-sense approach,” says Neill Blundell, head of fraud for law
firm Eversheds. “Very extravagant entertaining during a procurement process
could be seen as an attempt to win that contract.”

A company will be liable if it offers or gives a bribe and if it agrees to
receive, or actually receives, a bribe. And where an organisation bribes a
foreign public official, “it captures the active bribery, but not the foreign
public official”, says Blundell.

Burden of proof
Currently, prosecutors must prove there is a controlling mind – for example,
that a senior person is involved – and that bribery is part of the company’s
business plan, which is difficult. With the new bill, it is enough to prove that
someone paid a bribe or gave benefit to receive commercial advantage.

“Then it is for the company to prove it had adequate controls and procedures
to prevent bribery and, if it did not, it will be prosecuted,” says Bill Waite,
chief executive of The Risk Advisory Group. ‘Adequate’ has yet to be defined.
“The government has agreed not to implement the bill until it has been given
guidance on this.”

There will be a cost attached to putting necessary measures in place. “There
are significant procedural and contractual – and therefore financial – burdens,”
says Waite.

“Company policy must be housed at senior level – the chief executive – and
will need to include educational screening of staff, to ensure they will
comply, as well as due diligence of third parties, to ensure they are not in
breach of UK domestic law.”

Prevention and control
There are key things that companies must bear in mind:
• Penalties are severe. In a recent case against chemical company Innospec, Lord
Justice Thomas ruled that bribery cases are more serious than cartel cases,
where fines reach millions of pounds. He also ruled that there should be no room
for arbitrage between different criminal justice systems, in the hope of getting
a lighter judgment.

“This is a massive driver to put in place adequate controls and procedures,”
says Waite. There is an upside: “A growing body of research in the US shows that
companies with the right procedures have better price-to-earnings ratios.”

• Organisations that operate in “red flag” jurisdictions, such as Russia,
Iraq and

Afghanistan, where corporate bribery is more prevalent, need to ensure that
systems and controls work properly.

The new legislation is not about targeting businesses that practise bribery.

“It is about preventing it in the first place,” says Blundell. “It gives a
tool to the Serious Fraud Office, HM Revenue and Customs and Crown Prosecution
Service to prosecute more easily.”

So companies that practise bribery as part of their day-to-day work not only
risk being debarred from participation in public contracts in the US and the
European Union, but also risk having to announce that to shareholders.

Recommendations
Source: BDO
Defence against bribery prosecution requires you to prove that your company has
‘adequate procedures’ in place to prevent bribery and that you did everything
reasonably possible to try to prevent the occurrence. “You then shouldn’t be
liable for the actions of an errant employee or agent acting on your behalf,”
says BDO.

1 The new Corporate Liability offence in the bill means you
can be prosecuted for the actions of anyone under your authority in any
jurisdiction.
All employees, agents, intermediaries, joint ventures and foreign subsidiaries
fall under UK law, as do foreign companies with UK operations.

2 Educate all directors and senior officers throughout the
business across the world about the bill. They will now be personally criminally
liable if it can be shown their company committed a bribery offence with their
consent or connivance, or through their failure to check the actions of staff.