It seems that each time one opens the financial press there is yet another report of a major regulatory investigation into corporate bribery and corruption.
Historically, it has been the SEC (the US Securities and Exchange Commission), working with the DOJ (to a lesser extent) that has led the way internationally.
Both these organisations have ramped up their investigations since 2007, and since 2011 they have opened ninety-one new FCPA (Foreign Corrupt Practices Act 1977) investigations and resolved sixty ongoing ones. They have managed to take a number of high profile corporate scalps along the way, and have netted well over $500 million in fines as a result. This frenetic activity is likely to continue, once the provisions of the Dodd-Frank Act bites, particularly concerning whistle-blowers and the payment thereof.
The Americans have worked closely with the UK over the years in connection with many of their investigations (both officially and otherwise) and, again, this is likely to continue. In fact the US has just joined the current SFO corruption probe of the Kazakh mining company ERNC. The SEC and DOJ have used Deferred Prosecution Agreements, as part of FCPA settlements since 1999; the UK will be using them from February 2014.
What of the differences between the two Acts, and have those differences been eroded a result of various guidance notes to the 2010 Act, issued by the MOJ (Ministry of Justice) and the SFO, as has been suggested by the FCPA Professor, Mike Koehler? The SFO have issued guidance notes on facilitation payments, business expenditure and corporate self-reporting; it is these that have convinced Mr Koehler that the application of the two Acts have more in common.
Both Acts are draconian and have a long reach; they each have extensive extra-territorial jurisdiction.
When the 2010 Act came into force (1 July 2011), the Government announced that it was “one of the most draconian and far-reaching pieces of anti-corruption legislation in the world.” It is not retrospective and so only deals with offences that have arisen after that date. This explains why the SFO have just brought their first prosecution against individuals under the Act, and they have two pending investigations against unidentified corporates.
If we consider some of the basic principles of both Acts, the differences will become apparent:
1. Bribery between private individuals is covered by the 2010 act but not the FCPA.
2. Active and passive bribery are both covered by the 2010 Act; the FCPA, however, only deals with active bribery.
The requisite intent is simply to bring about or reward improper performance of a function or activity. S.5(1) of the 2010 Act defines the objective test of improper performance as “a test of what a reasonable person in the United Kingdom would expect in relation to the performance of the type of function or activity concerned.”
3. Bribery of Foreign Officials
Both statutes deal with this issue, though the Bribery Act has a more narrow definition:
- Anyone who holds a foreign legislative or judicial function;
- Individuals who exercise a public function for a foreign country, territory, public agency or enterprise;
- Any official or agent of a public organisation.
Under the FCPA, those offering the bribe must have a corrupt intent; it is not so under the 2010 Act. All that is necessary for this particular offence is:
- If he intends to influence the public official in his capacity as such;
- He intends to obtain or retain business (or an advantage in the conduct of business);
- The payment/advantage is not permitted or required by the written law of that country.
4. Facilitation Payments
These have been very controversial in the UK (businesses have complained that it puts them at a disadvantage in certain jurisdictions) because they are outlawed completely by the 2010 Act.
The FCPA does allow small facilitation payments (known as ‘grease money’ in the US) however this issue, as far as the FCPA is concerned, may be academic these days. The USA is a signatory to the OECD Anti-Bribery Convention 1997 which prohibits such payments; those sentiments were echoed in a joint DOJ/SEC Guidance note, issued in 2012.
The SFO did issue its own guidance on this topic; discretion regarding prosecuting this offence lies with the prosecution.
The SFO advise that there are six principles to consider:
- Has the company a clear and issued policy?
- Has the company published written guidance to employers regarding expected procedures to be followed?
- Are those procedures properly followed?
- Are records kept of all gifts?
- Did the company inform the authorities in the relevant country in which the breach occurred?
- Is the company making moves to curtail such breaches?
Obviously the authorities would be unlikely to prosecute if the payment in question was a small one-off payment, never to happen again, rather than a regular system of payments.
5. The corporate offence: s.7 Bribery Act 2010
This is usually described as the strict liability offence of failing to prevent a bribe. There is not an equivalent under the FCPA. The prosecution do not need to prove knowledge of the bribe.
The defence to such a charge is that the company had in place adequate procedures to deal with bribery and corruption. There are six principles to which the company is supposed to adhere; essentially they focus upon zero tolerance of bribery right to the top of the organisation and the culture of that organisation.
This section has a particularly long extraterritorial reach, and it applies to any company that carries on a business or part of a business in the UK AND can apply to conduct outside of the UK.
The 2010 Act also includes ‘associated persons’ of the company and defines these people as ‘anyone who performs services for or on behalf of the commercial organisation’ i.e. any agent, intermediary sub-contractors, or joint venture partners.
This caused massive disquiet amongst many UK businessmen with joint venture partners abroad, who were concerned that it would be impossible for them to police the actions of these partners. The MOJ responded with guidance that could offer some limited protection to companies finding themselves with problems from such joint venture partners.
There has been some concern about the disproportionate effect on SMEs when attempting to shoulder the onerous bureaucratic detail of the Act, and very recently the IOD have claimed that this is deterring SMEs from exporting their goods and services. They have asked that the Act be amended but because of the OECD anti-bribery agreement the government has refused. What has happened is that the guidance notes for both companies and prosecutors have been issued, which will go a long way to allay any fears. In short, an SME will be expected to have proportionate procedures in place only.
At present there are two effective consultations in place concerning the Act: the draft Code of Conduct for prosecutors, and the Sentencing Council for England and Wales is consulting on sentencing guidelines on corporate crime and deferred prosecution agreements.
I would venture to suggest that, again, this may bring us more in line with our American counterparts.
This is an age when we have seen multinational corporates pay huge fines to a number of countries after signing a DPA with the Americans, so it makes sense that the individual authorities are all in tune with one another when it comes to fines and terms of agreement under these DPAs. From next February the UK will have their own DPAs and it will be imperative for the prosecuting authorities that the multinationals, in particular, are not afforded the opportunity of jurisdiction shopping i.e. looking for the most sympathetic option.
When the UK prosecutors find their feet we may also see them usurping their American counterparts because the 2010 Act is broader and more far reaching than FCPA, which is looking increasingly out of date.
The author was a member of the Sentencing Council of England and Wales until March 2013, and has advised on the current consultations in relation to corporate crime, money laundering, fraud, bribery and corruption, and Deferred Prosecution Agreements.
Lewis Nedas Law has been instructed to represent an individual facing the first SFO prosecution under the Bribery Act 2010.
