Bribery Act update
Following in the wake of other high profile investigations of companies such as Rolls-Royce, GlaxoSmithKline and Tesco, recent reports that the Serious Fraud Office (SFO) is currently investigating allegations of fraud, bribery and corruption by the Airbus Group signal the SFO’s determination to pursue prosecutions and serve as a reminder to UK business that anti corruption legislation can bite.
The Bribery Act 2010 was heralded as the “toughest anti bribery legislation in the world” when first introduced in July 2011, but initially, prosecutions were slow in coming – more a damp squib than legislative big stick. Recently however there have been indications things are changing. Earlier this year the SFO secured its first corporate conviction under the UK Bribery Act. Sweett Group PLC, a construction and professional services company, was convicted of the offence of failing to prevent its Middle Eastern subsidiary from paying bribes on its behalf. The consequences for Sweett were very serious – a fine of £2.25 million, a dramatic drop in its share price and considerable damage to reputation.
What is the message for UK business? The Bribery Act has teeth, so it is crucial to have in place a considered anti corruption policy which all employees understand and follow. The Sweett conviction and Airbus investigation high light, in particular, the specific issues for companies working with agents, joint venture partners or subsidiaries overseas. The UK company may be liable even if the bribe takes place in an overseas jurisdiction and is made by a foreign agent; there is no requirement to establish that the UK company encouraged or even knew a bribe was being paid.
The “corporate offence” under the Bribery Act – a recap
In addition to offences of bribing another person and being bribed, the Bribery Act introduced a corporate only offence of failing to prevent bribery. (The legislation did not apply retrospectively which possibly accounts for the slow burn in prosecutions under it.) The Sweett case was the first conviction under this section 7 offence which has significant and sobering practical implications: – any “relevant commercial organisation” will be guilty of the offence if an “associated person” bribes another person with the intention of obtaining or retaining business, or a business advantage for the organisation. This means if an agent, employee, subsidiary or third party performing services for the company any where in the world, offers a bribe, even without the company’s knowledge, the company will be liable.
The only defence available to this corporate offence is for the company to establish that at the relevant time it had in place “adequate procedures” to prevent bribery. Sweett could not rely on this as it had done very little to implement anti bribery policies after the Bribery Act came into force and admitted its procedures were inadequate.
Action points for companies
Although the Bribery Act has been in force for five years, clearly some companies have struggled to establish the robust internal systems and procedures required by legislation. Lip service compliance will not result in “adequate procedures” being put in place.
Directors need to assess the risks in the context of their particular business and:-
- Review to what extent the business relies on agents or other third parties;
- Implement thorough due diligence on any partners, agents or distributors etc. working with the business;
- Establish a clear anti corruption policy and communicate this within the organisation;
- Educate staff and train them in compliance;
- Monitor all anti corruption policies, encourage feedback, review and update procedures as necessary.
Over the last few years, new leadership at the SFO, its use of deferred prosecution agreements and its access to “blockbuster” funding to assist with significant investigations, together with the Government’s transparency agenda, have resulted in a changed environment. Things may change further. Before the Brexit Referendum the Government announced plans to consult on a new corporate offence of “failing to prevent economic crime” modelled on section 7 of the Bribery Act with a similar global reach and “adequate procedures” defence.
Simon Thomas, corporate partner at Clarke Willmott, said “The Bribery Act continues to be a steep learning curve for business, and the possible addition of this new offence makes it even more important for businesses to plan ahead and review their existing anti corruption policy and internal procedures.”