LEGAL ANALYSIS AND REGULATIONS

LAR-503 March 2011

U.K. Bribery Act Implementation Delayed: Respite or Reprieve?

By: Frederick T. Stocker Vice President, General Counsel and Secretary fstocker@mapi.net

The Alliance promotes the technological and economic progress of the United States through studies and seminars on changing economic, legal, and regulatory conditions affecting industry. Copyright 2011 Manufacturers Alliance/MAPI, All rights reserved. 1600 Wilson Boulevard, Suite 1100, Arlington, Virginia 22209-2594 Phone: 703.841.9000 Fax: 703.841.9514 www.mapi.net

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U.K. Bribery Act Implementation Delayed: Respite or Reprieve?

Bribery, if left unchecked, destroys the integrity of all institutions, public and private. Economic globalization means that the damaging impact of commercial bribery that seeks to subvert open competition in business transactions has now moved beyond unilateral, national policies and has become a global problem. Kenneth Clark Lord Chancellor and Secretary of State September 14, 2010

Introduction
On January 31, 2011 the U.K. Ministry of Justice announced that implementation of the U.K. Bribery Act (the Act)1which was expected to go into effect this coming April, would be indefinitely delayed. This new law has been a cause of consternation in the global business community and among compliance professionals. The Acts anti-bribery reach is expansive. In some key respects, its bribery prohibitions are broader than those contained in U.S. Foreign Corrupt Practices Act (FCPA)2 which heretofore has been considered the gold standard of such measures. This expansive reach has prompted one hyperbolic commentator to describe the new law as [t]he FCPA on steroids,3 and another to opine that [w]hen the U.K. legislation is enacted, it will be one of the most draconian anti-corruption measures in the world.4 Although there are significant differences between these two anti-bribery legal schemes, the legislative history of the U.K. law and interpretive statements by enforcement officials in that country suggest that it is likely to be applied in a manner similar to its U.S. counterpart. Moreover, while on its
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face the new Bribery Act reaches a broader range of conduct than does the FCPA, other U.S. laws are increasingly being used to narrow this perceived gap. Regardless of similarities/differences in the two countries legal frameworks, U.S. companies should not be lulled into complacency thinking that their FCPA compliance programs are entirely adequate to protect them against potential violations of the U.K. Bribery Act. The delay in implementation of the new law affords companies additional time to refine their compliance practices to ensure that the nuances of the new law are identified and addressed. After providing a brief overview of the new law and the draft guidance as to interpretation of its key provisions issued by the U.K. Ministry of Justice, this report will provide a more detailed analysis of the laws specific dictates. Those provisions will be compared to, and contrasted with, the FCPAs legal regimen. Also reviewed in detail are provisions of the law which pose the most troubling questions which were the focus of the earlier draft guidance. Finally, thoughts on the eventual implementation of the Act, its enforcement, and suggestions for compliance preparations will be offered.

The U.K. Bribery Act dictates were explained in an earlier MAPI publication. Reexamining Corporate Compliance Programs in Light of Recent U.S. FCPA Enforcement and the New U.K. Anti-bribery Law, LAR-501, July 2010. The Act is available for download at http://www.legislation.gov.uk/ukpga/2010/23
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The New Law in a Nutshell

The U.K. Bribery Act was published in draft form on March 25, 2009 for pre-legislative scrutiny by a Joint Committee of both Houses of Parliament. It was passed on April 8, 2010, and received Royal Assent that same day. The purpose of the Act is to reform the U.K. criminal law of bribery by providing a new consolidated scheme of bribery offenses covering such activity both in that country and abroad. The Act repeals the pre-existing criminal antibribery/corruption laws in the United Kingdom, including the common law offense of bribery, the Public Bodies Corrupt Practices Act of 1889, the 1906 and 1916 Prevention of Corruption Acts, and related measures. The laws being replaced were generally acknowledged as being antiquated and lacking clarity

15 U.S.C. 78dd-1, et seq. Available for download at http://www.justice.gov/criminal/fraud/fcpa/statutes/regulations.html

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Edward M. Joffee of Joffee & Joffee, LLC monitors global customs and trade issues and reports on them in a blog. UK NEW BRIBERY ACT CALLED FCPA ON STEROIDS, January 1, 2011. Available for download at http://www.trendsininternationallitigation.com/2011/01/articles/foreig n-corrupt-practices-act/uk-new-bribery-act-called-fcpa-on-steroids/
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A statement attributed to Mr. Nic Carrington, a partner in the forensic and dispute services practice of business advisors Deloitte. Michael Dempsey, Bribery Act is set to bare its teeth, Raconteur on BUSINESS ETHICS, May 18, 2010, p. 8. Available at http://www.goodcorporation.com/documents/TheTimes_businesseth ics_final.pdf

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and scope. Once the Act comes into force it will replace old fragmented offenses with a more coherent legal framework of offenses with broad scope and extraterritorial reach. In most basic terms, the Bribery Act creates two general offenses: the offering, promising, or giving a bribe and the requesting, agreeing to receive, or accepting a bribe. The Act also creates a discrete offense of bribery with a foreign government official in order to obtain or retain business or an advantage in the conduct of business. These offenses apply to any acts which take place in the U.K., and to acts carried out anywhere in the world by a person with a close connection with the U.K. (including but not limited to U.K. citizens, residents, and companies). There is also a specific offense for senior corporate officers. If any of the offenses mentioned above are committed (under the usual rules of attribution of knowledge) by a corporate body with the consent or connivance of such a person, that senior official may also be liable for the underlying offense. When such an offense is committed entirely outside of the U.K., the senior officer will be guilty only if he or she has a close connection with the U.K. Of particular concern to corporations and partnerships is the Acts new strict liability offense of failing to prevent bribery. This offense applies to any commercial organization that carries on any part of its business in the U.K., which fails to prevent bribery being committed by anyone associated with it (including but not limited to employees, agents, or subsidiaries) in order to gain a business advantage. It will not matter where in the world the bribery takes place. The only defense to this crime is for the commercial organization to establish that it had in place adequate procedures designed to prevent the bribery from taking place. The Act does not define such adequate procedures but does require the Secretary of State to promulgate guidance on the procedures that commercial entities could put in place to prevent bribery. The features of the U.K. Bribery Act that are usually cited when it is described as being broader in scope than the FCPA, include the fact that it applies to both commercial bribery as well as to bribery of foreign public officials. The FCPA only covers the latter form of bribes. Moreover, while the FCPA focuses exclusively on the payment of bribes, the new Act covers both the payment and receipt of such financial or other advantage. Unlike the FCPA, the Bribery Act does not include an explicit defense for so-called facilitating payments to secure the performance of routine governmental action or an affirmative defense for bona fide and reasonable expenditures relating to the promotion, demonstration, or explanation of products or services. Furthermore, the Act does not require that improper offer, promise, or payment be made with corrupt intent as does the FCPA in the

case of bribes to foreign officials. Finally, on this point, with regard to territorial reach, the Act is potentially broader than the FCPA. For purposes of jurisdiction the FCPA requires acts in furtherance of the bribery scheme to occur within the territorial United States. The new strict liability corporate offense in the Act has no such territorial nexus requirement. That is to say, while the commercial organization has to be organized, or carry on at least part of its business, in the U.K., no act in furtherance of the underlying offense needs to transpire in the United Kingdom. Originally, the Act was expected to come into force in late 2010. In July of last year, however, the newly elected coalition government in Great Britain announced that implementation would be delayed until April 2011. This delay was intended to afford businesses sufficient time to prepare for the new law and to give the Secretary of State time to publish the statutorily required guidance as to what would constitute adequate procedures to prevent the new corporate offense of failure to prevent a bribe. On September 14, 2010, the U.K. Ministry of Justice published its Consultation on guidance about commercial organizations preventing bribery, (draft guidance)5 which included draft guidance on what constitutes adequate procedures. The draft guidance is principles-based and not prescriptive. The document notes that the question of whether an organization has adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case. In other words, there is no one-size-fits-all answer to the question of what constitutes adequate procedures. An organization subject to prosecution will have the burden of proving that preventive measures are adequate. The draft set out six general principles (each followed by commentary and explanation) which commercial organizations should consider when establishing and maintaining bribery prevention programs. Those six principles, which will be elaborated on later in this report, are as follows:
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Risk assessment; Top-level commitment; Due diligence; Clear, practical, and accessible policies and procedures; Effective implementation; and Monitoring and review.

Available for download at http://www.justice.gov.uk/consultations/docs/bribery-act-guidanceconsultation1.pdf

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The draft guidance also commented in general terms on other issues of concern about the Bribery Act, including its impact on corporate spending on hospitality/entertainment and on facilitation payments. It was anticipated that this consultation process would lead to the publication of final guidance on adequate procedures by the end of January 2011. During this period the U.K. Ministry of Justice also announced it would be publishing a circular on the Act as a whole to assist those seeking a better understanding of its provisions. Moreover, the Serious Fraud Office (SFOan independent U.K. government department that investigates and prosecutes serious or complex fraud and corruption and is likely to have enforcement responsibility for the Bribery Act) is expected to follow with specific guidance on what constitutes reasonable corporate hospitality. As this past January progressed, there were signs that formal guidance on, and implementation of, the Act might not be on schedule. On January 13, Prime Minister David Cameron ordered a review of the Bribery Act, as a result of strong concerns expressed by the business community in his country that the new law could have an adverse impact on the British economy by hampering U.K. companies ability to compete abroad. As part of the so-called Growth Review, the Act will be scrutinized by a committee chaired by the U.K.s Chancellor of the Exchequer and the governments Business Secretar y. Their charge is to review regulations with an eye towards reducing red tape that impedes business growth. As previously noted, while it is less than clear what impact the Growth Review will have on final guidance on, and implementation of the Act, on January 31 the Ministry of Justice announced an indefinite delay. At this time it is uncertain when finalized guidance on the Acts adequate procedures provisions and other issues will be published. Once published it will be followed by a three-moth notice period before implementation of the Act.

individuals and corporate bodies all over the world. These offenses will be examined in turn. Bribing another person.Section 1 of the Act creates a new general bribery offense where a person (P) offers, promises or gives a financial advantage to another person [either directly or through a thirdparty intermediary] and P either: (1) Intends the advantage to induce that person (or someone else) to perform improperly a relevant function or activity or to reward that person (or someone else) for improper performance of a relevant function or activity, or (2) Knows or believes that the acceptance of the advantage would itself constitute the improper performance by that person (or someone else) of a function or an activity. As indicated, it does not matter if the person to whom the advantage is offered, promised, or given is the same person who is to perform, or has performed, the involved function or activity. Receiving a bribe.Section 2 of the Acts offense of being bribed is largely complementary to the Section 1 of offense of bribing. A person (R) is guilty of this offense when they either request, agree to receive, or accept a financial or other advantage (directly or through a third party): (1) Intending that, in consequence, a relevant function or activity should be performed improperly; (2) Where the request, agreement, or acceptance itself constitutes an improper performance; or (3) Where the advantage is an award for such improper performance. Person R would also violate Section 2 of the Act: (4) Where a relevant function or activity is performed improperly in anticipation of, or in consequence of, R requesting, agreeing to receive, or accepting a financial or other advantage. In the scenarios set forth in 2-4 immediately above, it does not matter whether R knows or believes the performance is improper. Defining key terms in the Section 1 and 2 general offenses.For the purposes of these general bribery offenses the Act provides some definitional assistance. Section 3 sets forth an expansive definition of what constitutes a relevant function or activity. Covered are virtually all activities associated with businesses, trades, or professions, even if it is entirely within the private sector. The explanatory notes to the Act7 make it clear that the
BRIBERY ACT 2010, Explanatory Notes, p.5, paragraph 28. Available for download at
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General Bribery Offenses

A Detailed Examination of the Acts Focus and Reach6

As alluded to previously, the Bribery Act creates five distinct criminal offenses in the area of bribery/corruption; that is, bribing another person, being bribed, bribing a foreign public official, senior official liability for persons who consented to or connivedin their corporations bribery or receipt of bribes, and the strict liability offense for commercial organizations that fail to prevent bribery by associated persons. All of these offenses apply not only to behavior in the U.K., but also potentially to behavior of
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The Appendix to this report outlines the Acts focus and reach in a convenient chart.

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purpose of the definition is to ensure that the law of bribery applies equally to public and selected private functions without discriminating between the two. This factor is often cited as one of the key differences between the Act and FCPA since the latter only applies to bribery of foreign officials to obtain or retain business. While the Bribery Act does indeed prohibit a broader range of conduct it should be noted that U.S. statutes other than FCPA can serve as the basis of commercial bribery charges. For example, U.S. prosecutors are increasingly relying on the U.S. Travel Act,8 which prohibits travelling between states or countries or using the mail or interstate facilities in aid of any crime (state or federal), to target commercial bribery abroad. As such, from an overall perspective, the laws of the two countries are not so different. Section 3 of the Act does limit the general bribery offenses to those cases where the person performing the function or activity meets at least one of the following conditions: is expected to perform in good faith; is expected to perform impartially; and/or by virtue of such performance holds a position of trust.

categoriese.g., a person who under the British Nationality Act of 1981 was a British subject), or a U.K. corporation or partnership. Important features of bribery offenses. An actual advantage need not be conferredit is sufficient that an offer, promise, or an agreement is made or reached to satisfy this element of the offense. Improper performance of a relevant function or activity need not happen. Also, if it does take place, the perpetrators need not believe that they are acting improperly. It is not necessary for prosecuting authorities to prove dishonesty or corrupt intent, instead they only need to meet a less stringent standard that is, the intent to reward improper performance. The advantage conferred need not exceed any minimum threshold. The U.K. government has acknowledged the broad scope of these offenses, but has said it will rely on the appropriate exercise of prosecutorial discretion to establish those exact parameters.

What constitutes an improper performance of a function or activity is defined in Section 4 of the Act as conduct that is in breach of a relevant expectation that the target of the bribe is expected to perform in good faith or impartially, or where the target holds a position of trust with regard to such performance. Moreover, what constitutes a reasonable expectation in these circumstances is defined by the Expectation Test found in Section 5 of the Act. That objective test is what a reasonable person in the United Kingdom would expect in relation to the performance of the type of function or activity concerned. Also, Section 5 specifically notes that this expectations test is to be applied without regard to any local custom or practice unless it is permitted or required by the written law [either judicial or legislative] applicable to the country or territory concerned. A general bribery offense is committed if the proscribed conduct takes place in the United Kingdom (Section 12 (1) of the Act). As such, the new law will apply to foreign entities and individuals. Moreover, a general bribery offense is committed if the proscribed conduct takes place anywhere in the world, provided such act or omission is done or made by a person with a close connection to the U.K. (Section 12(2)(4) of the Act). In these circumstances, a person with a close connection is defined as a British citizen or resident (or a person falling into similarly defined
http://www.banksr.com/statutes/Bribery_Act_2010_Explanatory_Not e.pdf 18 U.S.C. 1952. One such case is United States v. Commercial Components, Inc., No. 8:09-cr-00162-JVS (C.D. Cal. July 22, 2009).
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Bribery of a foreign public official.Section 6 of the Act contains a specific stand-alone offense for bribing foreign government officials. This section is included in order to ensure that the Act complies with the United Kingdoms commitments under the Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention (the OECD Convention).9 Section 6 largely mirrors the substantive standards of the FCPA, on which the OECD Convention is basically modeled. U.K. prosecutors have the option to target such acts of foreign bribery under either Section 1 of the Act of or the Section 6 foreign official bribery offense. In essence this offense applies where a person offers, promises, or gives any financial or other advantage to a foreign public official, either directly or indirectly to influence that official in his/her official capacity and to obtain or retain. . . business, or. . . an advantage in the conduct of business. Importantl y,
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CONVENTION ON COMBATING BRIBERY OF FOREIGN PUBLIC OFFICIALS IN INTERNATIONAL BUSINESS TRANSACTIONS, available for download at http://www.oecd.org/document/21/0,3746,en_2649_34859_201781 3_1_1_1_1,00&&en-USS_01DBC.html While the Act would bring the United Kingdom into line with the OECD Convention, critics who say it would place the country at a disadvantage in comparison with international competitors note that only 7 of the 36 signatories to the convention are currently enforcing it. Jonathan Russell, Fears Bribery Act will harm UK plc, The Telegraph, January 21, 2011. Available at http://www.telegraph.co.uk/finance/yourbusiness/briberyact/8272140/Fears-Bribery-Act-will-harm-UK-plc.html

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unlike the FCPA, this offer, promise, or payment need not be made corruptly. Similar to both the OECD Convention and the FCPA, the Act defines the term foreign public official to include individuals who (1) hold a legislative, administrative, or judicial position (whether elected or appointed); (2) exercises a public function for or on behalf of a foreign government or public agency or enterprise; or (3) is an official or agent of a public international organization. In contrast to the FCPA , but consistent with the OECD Convention, the Act does not include in this definition of foreign officials, foreign political parties, party officials, or candidates for foreign political office. Conceivably, however, the Act could bring these parties and their officials and candidates within its purview as the exercise of a public function. The Act does not specify what degree of government ownership or control is required for an organization to qualify as a public enterprise for the purposes of Section 6 of the Act. Existing guidelines on ownership/control issued by the OECD in reference to its Anti-Bribery Convention, however, might well assist U.K. regulators, prosecutors, and courts in such interpretive efforts.10 Section 6 of the Act provides a specific exception to its reach in cases where the recipient of an advantage is permitted or required by the written law of that persons country to be influenced in his/her official capacity by the offer, promise, or gift. This exception corresponds to the seldom-invoked affirmative defense in the FCPA that the payment was lawful under the written laws of the country of the recipient. Section 6s foreign official bribery offense basic ally has the same jurisdictional scope as the general bribery offenses previously described. Senior official offense.Section 14 of the Act provides that if any of the three offenses examined previously (i.e., the general offenses of bribery and receiving a bribe and the offense of bribing foreign public officials) is committed by a covered corporation or a partnership, and the offense occurs with the consent or connivance of a senior officer of the organization. Both those persons and the body corporate will be guilty of the same offense as the perpetrators. A senior officer includes a director, manager, secretary, or other similar officer (or a person purporting to act in such capacity). Notably, criminal liability under the new strict liability corporate offense of failure to prevent bribery (Section 7, which will be detailed in the next segment of this report) does not trigger senior officer liability. As such, failure to meet the standards for an adequate procedures defense to that new corporate offense will not, in itself, serve as a basis for criminal liability of corporate management.
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Available for download at http://www.oecd.org/dataoecd/4/18/38028044.pdf

The Act does not clarify whether the organization itself must be charged with violations of Sections 1 (bribery), 2 (receiving a bribe), or 3 (bribing a foreign government official) in order to support a senior officer violation under Section 14. Conceivably, current or former senior officers could be the subject of prosecution, while their organizations escape such a fate (e.g., through a negotiated civil settlement). It should be noted that the SFO already has shown, in recent cases, a readiness to target senior management in egregious bribery-related cases. This trend is even more pronounced in recent FCPA enforcement actions in the United States. Corporate failure to prevent a bribe.Section 7 of the Bribery Act is perhaps its greatest cause of consternation for global companies. It provides a new offense, specifically applicable to commercial organizations, for their failure to prevent bribery by an associated person. For the most part, an organization can only be convicted of a crime in the United Kingdom if a senior manager (i.e., someone who can be viewed as possessing the direct mind of the organization) is personally responsible for an element of the crime. This U.K. legal precept, known as the identification doctrine, has posed a difficult hurdle for prosecutors in bribery cases where such transgressions are often perpetrated by relatively junior personnel in an organization without senior management involvement. Section 7 creates a new offense that clears this hurdle by rendering organizations criminally liable, on a respondeat superior basis, for conduct by persons acting on their behalf. Under this new corporate offense, a relevant commercial organization can be found guilty if any person associated with it commits bribery with an intent to obtain or retain business or obtain or retain an advantage in the conduct of business for the organization. The term relevant commercial organization is defined (Section 7(5)) to include all U.K. corporate bodies and partnerships no matter where in the world they conduct their business. Most significantly for global companies, Section 7 of the Act applies to corporations (wherever incorporated) and partnerships (wherever formed) which carry on business, or part of a business, in any part of the United Kingdom. The term carry on business or part of a business is not defined. SFO officials, however, have stated publicly that whether a company carries on business in the United Kingdom will be a factspecific question, unique to each case. Commentators have suggested that, for the purposes of this aspect of Section 7 of the Act, a sufficient nexus would exist if a commercial organization had a representative or sales office in the United Kingdom or was listed on the London Stock Exchange or Alternative Investment Market. A reasonable person could ask whether purchasing commercial insurance

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in the London market or engaging a U.K. law, accounting, or consulting firm would be deemed carrying on business in that country? Suffice it to say that the phrase part of a business is quite broad and will be left to the courts to construe. Section 8 of the Act attempts to clarify the term associated person as used in Section 7s new corporate offense. A person who commits bribery is associated with a commercial organization if he performs service for or on behalf of that entity. The persons exact capacity is not relevant. The Act gives non-exclusive examples of such persons to include employees, agents, and subsidiaries. It goes on to say that whether there is a sufficient connection between the person and the organization to satisfy this provision of the Act will be evaluated by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between the organization and the partnership. This potentially open-ended concept does not require a contractual relationship between the commercial organization and the associated person. The standard is sufficiently broad to apply to foreign affiliates, partners, and consortia over which the commercial organization does not have direct control. It is not necessary that the associated persons have been convicted of bribery for the new corporate offense to be brought into play. The government must, however, establish beyond a reasonable doubt that the associated person engaged in misconduct would constitute bribery under Section 1 of the Act or bribery of a government official under Section 6 of the Act. In making its case, the government need not establish that the associated person or the misconduct in question had any connection to the United Kingdom as is required when prosecuting cases under Section 1 and 6 of the Act. To reiterate, the Section 7 corporate offense applies to any commercial organization that is established under United Kingdom law or any foreign corporation that carries on business, or part of a business, in the U.K. The strict-liability offense applies to any acts of bribery, anywhere in the world that can be linked to those organizationseven if the bribery itself transpires outside the United Kingdom. There is no direct correlation in the FCPA to the strict-liability corporate offense set forth in Section 7 of the Bribery Act. The breadth of the U.S. statute, however, is broad enough to reach much of the conduct targeted by the latter law. First of all, companies that fall within the purview of the FCPA are generally responsible for the criminal acts of employees, agents, or other intermediaries under the respondeat superior principle. Secondly, the FCPA provides that it is unlawful to make a payment to a third party, while knowing that all or a portion of that payment will go directly or indirectly to a third party. The term knowing, however, includes a conscious

disregard and deliberate ignorance standard under which a company can be held liable for an FCPA violation without actual knowledge or direct complicity in the criminal acts of third parties such as agents. In other words, knowledge of illegal acts can be imputed to a company when evidence shows that it was aware of red flags that could have alerted it to corrupt activity and that it failed to investigate further or act to prevent the illegal conduct or transaction. Although this does not constitute a strict liability offense, the standard is broader than the face of the FCPA would seem to indicate. Also with regard to this new corporate offense, as mentioned above, Section 7 of the Act contains an affirmative defense whereby organizations can avoid criminal liability if they can establish that they have adequate procedures in place to prevent bribery. It will be the organizations obligation to present evidence and establish by a balance of probabilities, that its anti-bribery compliance efforts are adequate. Since Section 7 requires the Secretary of State to provide guidance on adequate procedures more will be said on the meaning of this term in the segment of this report below which examines the draft guidelines published by the U.K. Ministry of Justice. Finally, with regard to Section 7 of the Act, the FCPA has no such affirmative defense. Showing that an entity has an effective FCPA compliance program in place, however, would go a long way toward blunting a willful blindness charge in such a prosecution. Moreover, proof of such a compliance effort would be considered a mitigating factor in prosecutorial decisions and by a court in sentencing determinations. Conversely, the absence of an effective anti-bribery compliance program and adequate related internal controls could expose a company to civil liability from charges of violating the statutes accounting provisions. In these circumstances, a strong argument can be made that the inducements for creating, implementing, and continuously improving a strong anti-bribery compliance program, which includes thorough intermediary/third-party due diligence policies and procedures, are the same under both the FCPA (to counter charges of deliberate ignorance or willful blindness) and the Bribery Act (to meet the requirements of an adequate procedures defense). Penalties.Penalties for offenses under the Bribery Act are up to 10 years imprisonment for individuals and unlimited monetary fines. The U.K. government has yet to issue guidance as to how to weigh these fines, but may do so (as recommended by the Parliamentary Joint Committee on the Bribery Bill). Recent SFO enforcement actions under preexisting bribery law suggest that penalties in the millions of pounds can be expected in significant cases. By comparison, pursuant to the statutes terms, criminal penalties under the anti-bribery

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provisions of the FCPA can be as high as $2 million for corporations and other business entities and up to $100 thousand for covered individuals. Moreover, such individuals can be imprisoned for up to five years. Under the Alternative Fines Act11 these fines could climb significantly higherthe actual fine may be up to twice the benefit that the defendant sought to obtain by making the corrupt payment. Additionally, the U.S. Attorney General or the U.S. Securities and Exchange Commission (SEC) could bring a civil action against corporations and/or individuals for these violations for amounts up to $500 thousand. In terms of the magnitude of total financial exposure a company can face in these kinds of cases, suffice it to note that in 2009 Siemens AG entered into a plea agreement with the U.S. Department of Justice and the SEC in an FCPA case for $800 million. This was part of $1.6 billion the company paid in fines, penalties, and disgorgement of profits to U.S. and German authorities for bribery-related offenses. The previous record FCPA penalty was the $44 million settlement that Baker Hughes Inc. entered into with the DOJ and the SEC. That settlement was made up of over $23 million in disgorgement and a $10 million penalty to the SEC along with an $11 million criminal fine imposed by the DOJ. As alluded to previously, unlike the FCPA which permits both civil and criminal penalties, the Bribery Act is strictly a criminal statute. It should be noted that criminal penalties under the Act would result in mandatory debarment under the U.K. Public Contracts Regulation 2006, which implements the European Union (EU) Procurement Directive. The U.K. government has indicated that it will seek guidance from the EU as to how the Directives mandatory debarment feature should apply in connection with the Acts corporate offense and EU guidance on the matter is expected to be forthcoming. This debarment possibility tracks closely with potential FCPA penalties. Under guidelines issued by the U.S. Office of Management and Budget, a person or firm found in violation of the FCPA may be barred from doing business with the federal government. Indictment alone can lead to a suspension of the right to do business with the U.S. government. The SFO, the U.K. government body that has been most involved in bribery prosecutions, has recently sought to emulate the U.S. Department of Justice and the SEC in the practices of encouraging defendants to voluntarily disclose criminal acts, often agreeing to plea bargains and financial settlements with potential defendants who come forward on their own. Similarly, SFO has offered immunity and reduced sentences to whistleblowers and others providing useful information and engaged in practices similar to those in the United States such as non-, or deferred-, prosecution
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agreements with the use of monitors and agreed to compliance program improvements. It has also signed off on press releases of defendants who agreed to penalties. The SFO has also stated that it would be amenable to settlements in bribery cases that result in civil penalties under other related statutes for parties that voluntarily disclose infractions. The United States and the United Kingdom have also regularly cooperated with one another both formally and informally on anti-corruption matters including those which were brought to light through voluntary disclosures. Two recent U.K. court cases cast doubt on the continuation of these practices. The separate casesone involving the corporation Innospec Limited,12 and the other cooperating individual13question the use of plea-bargains. The judge in the Innospec case indicated that it was proper for the courts, not prosecutors, to impose sentences. He added that it was improper for a party accused of corruption to be treated in a manner different from those accused of other serious crimes such as rape or murder. He went on to castigate the SFO for agreeing to press statements and monitoring agreements, indicating that it is inappropriate for the SFO to engage in global settlements which, in effect, deprive the courts of sentencing discretion. The judge stated in no uncertain terms that the Director of the SFO had no power to enter into the arrangements made and no such arrangements should be made again.14 These developments inject a measure of uncertainty into the negotiating process for parties seeking to resolve these matters in the United Kingdom and could have an impact on related matters in the United States. While this issue of international cooperation may resolve itself over time, the present uncertainty creates a strong disincentive for defendants to constructively engage with the enforcement authorities of either or both countries. These uncertainties will be exacerbated by questions concerning interpretation of the provisions of the Bribery Act. Adding to these complications, the relatively new coalition government in the U.K. announced last year that it planned to create a single new agency to tackle serious economic crimework that is currently
12 Regina v. Innospec Limited [2010] EW Misc 7 (EWCC) (18 March 2010), available for download at http://www.sfo.gov.uk/media/105634/opening%20note%2018.03.10. pdf Comments noted in the sentencing remarks of Lord Justice Thomas from the sentencing hearing of March 26, 2010, available for download at http://www.judiciary.gov.uk/NR/rdonlyres/5343F038-A6E5-448BBB2D-7CA31F9E2DDA/0/sentencingremarksthomasljinnospec.pdf 13 Regina v. Dougall [2010] EWCA Crim 1048, available for download at http://www.bailii.org/ew/cases/EWCA/Crim/2010/1048.html 14 Op. cit., footnote 12. Sentencing remarks of Lord Justice Thomas, p. 13.

18 U.S.C. 3571.

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handled by the SFO and other government entities (e.g., the Financial Services Authority and the Office of Fair Trading). Uncertainties regarding the new entitys mission and practices will further influence corporations decisions to interact with enforcement authorities.

Consultation on Guidance About Commercial Organizations Preventing Bribery

Adequate procedures.As described above, Section 7 of the U.K. Bribery Act introduces a new strict liability offense for the failure to prevent bribery for commercial organizations. Commercial organizations, such as corporations and partnerships, can commit this offense if persons or entities providing services on their behalf pay bribes that are intended to get or retain business for the organization or secure it as a business advantage. By showing that it has in place adequate procedures to prevent bribery, however, the commercial organization can escape liability under this new offense. While the Act sets forth no specifics as to what might constitute such adequate procedures, organizations that would be subject to new laws held out some hope for enlightenment on the issue by the Acts requirement that the U.K. Secretary of State would issue guidance on this critical point prior to the new law being implemented. Moreover, even prior to such formal guidance, there was a wealth of information available that concerned organizations could turn to for help to position themselves for future compliance. These resources setting forth international best practice compliance standards include, but are not limited to, the following: Guidance on compliance standards outlined by the SFO in its July 2009 guidelines on selfreporting.15 Chapter Eight of the U.S. Federal Sentencing Guidelines Manual, which governs FCPA penalties, and sets forth standards for an effective ethics and compliance program.16 The OECD Good Practices Guidance on Internal Controls, Ethics, and Compliance.17

15

APPROACH OF THE SERIOUS FRAUD OFFICE TO DEALING WITH OVERSEAS CORRUPTION, July 21, 2009. Available for download at http://www.sfo.gov.uk/media/28313/approach%20of%20the%20sfo %20to%20dealing%20with%20overseas%20corruption.pdf
16

The May 2008 Woolf Committee independent report on the BAE Systems anti-corruption compliance program prepared after the relatively recent bribery scandal involving that company.18 Other compliance benchmarking material is available from such organizations as Transparency International19 and the World Economic Forum.20 There are some common themes that run through these various best practice benchmarks. For example, organizations are expected to: (1) publish clear policy statements and anti-corruption guidance (including specific procedures, where appropriate, covering issues such as dealing with intermediaries, processes for securing regulatory approvals from foreign governments, facilitating payments, travel and entertainment expenditures, and political and charitable contributions); (2) have visible involvement and support for anti-corruption efforts from the highest levels in the organization (i.e., senior management and the board of directors); (3) have a code of ethics and anti-corruption principles that are to be adhered to regardless of whether local laws prohibit bribery and whether there is cultural acceptance of improper payments; (4) conduct and oversee specific training of employees and third-party representatives on the organizations anti-corruption code, policies, and practices; (5) hold individuals accountable through appropriate disciplinary and incentive programs; (6) in terms of dealings with intermediaries, have a specific policy on outside agents, consultants, advisers, and other third parties, including appropriate due diligence policies and procedures; (7) implement transparent books and records procedures to ensure that company funds are properly accounted for and not diverted for the purpose of making improper payments; and (8) conduct ongoing risk assessment and auditing and continuously work to improve the anti-corruption compliance program. In anticipation of prospective implementation of the Act, the Ministry of Justice issued its draft guidance on September 14, 2010. The guidance was split into four parts: a summary of the law; five questions about the guidance (plus a general request for public comment); six key principles for ensuring bribery prevention (i.e., adequate procedures guidance); and illustrations set against the backdrop of the six key principles. Concerning the adequate procedures guidance, the draft does not contain prescriptive rules nor does it propose to introduce any direct obligations on commercial organizations. Instead, it envisagesas
18

2010 Federal Sentencing Guideline and Manual and Supplement, Chapter Eight, Sentencing of Organizations. Available for download at http://www.ussc.gov/Guidelines/2010_guidelines/index.cfm
17

Good Practice Guidance on Internal Controls, Ethics, and Compliance (OECD Council, February 18, 2010). Available for download at www.oecd.org/dataoecd/5/51/44884389.pdf

WOOLF COMMITTEE REPORTBusiness ethics, global compliance and the defense industry, May 2008. Available for download at http://ir.baesystems.com/investors/storage/woolf_report_2008.pdf
19 20

http://www.transparency.org/ www.weforum.org

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is evident from the illustrative scenarios set against the backdrop of the six principlesthat what constitutes adequate procedures will depend on the unique facts and circumstances of a particular case. Influencing factors as to adequacy considerations are the size of the organization and the nature of its activities. Clearly, there was reliance on the abovementioned, and likely other, compliance best practice benchmarks in developing the six principles. The draft guidance suggests that organizations may wish to consider putting into place procedures relating to the general principles. It is entirely likely that the final guidance, whenever it might be issued, will not provide a detailed compliance format that organizations can model after without the need for rigorous self-assessment. While this might disappoint potentially affected organizations, final guidance will still constitute a useful template and necessary scheme of reference. Concerning the draft guidances six key principles for ensuring bribery prevention, they are examined in turn. (1) Risk Assessment Commercial organizations should know and keep up-to-date with the bribery risks they face in their sectors and markets. The adequate nature of any risk assessment procedure is dependent upon such factors as the organizations size, the nature of its business, who its customers are, and where it does business. Regardless of these factors, the draft guidance advises organizations to consider whether those performing the assessments have adequate skills and what data sources they rely on for information. The draft suggests that both internal data (e.g., annual audit and internal investigations reports, client/customer complaints, and input from staff and focus groups) and external data (e.g., publicly available data on bribery/corruption in particular sectors and markets) should be analyzed. Global entities that are subject to the FCPA and other international anti-bribery regimes should not be surprised by this compliance requirement. Chapter Eight of the U.S. Sentencing Guidelines includes periodic risk assessments as an element of an effective compliance program. Similarly, OECD good practice guidance advises use of risk assessment techniques. Common sense dictates that identification, and understanding, of the risks an organization faces is a necessary starting point for any viable compliance program. (2) Top-Level Commitment Top-level management (normally senior executive management and the board of directors) must set a cultural tone within an organization that bribery is simply unacceptable. These same senior people are responsible for clearly communicating this message to

all levels of management, the general workforce, and any relevant external actors. The draft guidance offers some examples of what top-level commitment should include: a zero tolerance policy communicated throughout the organization; defined consequences for breaching the provisions of the policy; the personal involvement of top-level management in developing a code of conduct and in ensuring that anti-bribery policies are published and communicated to employees, subsidiaries, and business partners; and the appointment of a senior manager to oversee the development of anti-bribery programs and to ensure their effective implementation throughout the organization. Top-level commitment is another commonly recognized element of an effective compliance program. This tone at the top message is included in virtually every guide to compliance activity including the Committee of Sponsoring Organizations of the Treadway Commission (COSO, the framework upon which most U.S. corporations Enterprise Risk Management Activities are based) and the DOJ. (3) Due Diligence Commercial organizations should develop due diligence policies and procedures which cover all parties to a business relationship, including the organizations supply chain, agents and intermediaries, all forms of joint ventures and similar relationships, and all markets in which it does business. The types of enquiries which should be made include: Locationthe bribery risks unique to a particular country where an organization intends to do business. This may include information about the relevant civil, administrative, and criminal law and the existence of any procedures for reporting bribery to local authorities. Business opportunitythe bribery risks inherent in a particular business opportunity (e.g., examining whether the project is to be undertaken at market prices as well as whether it has defined legitimate specifications and objectives). Business partnerswhether involved individuals or entities (e.g., intermediaries, partners, contractors, suppliers, etc.) have a reputation for bribery. Also, whether such parties or their associates have been investigated, prosecuted, convicted, and/or debarred for bribery or related offenses should be examined. Additionally, organizations may wish to enquire as to whether partners have anti-corruption measures in place.

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Anti-bribery enforcement authorities throughout the world have focused on counterparty due diligence in their investigations. Largely as a result of FCPA enforcement activity in recent years, global companies have heightened awareness of the risks they face as a result of activities by partners, agents, and other intermediaries. Indeed, a relatively new industry of investigative firms such as Trace International, which specialize in this type of due diligence, has developed to fill this pressing need. Notwithstanding the increased awareness of the importance of due diligence on what the Bribery Act refers to as associated persons, this requirement poses a daunting task for many organizations. Understanding everything that one needs to know about myriad third parties located all over the globe poses monumental challenges. Satisfying the thrust of this principle will be expensive and can only serve to increase the reliance on outside organizations. (4) Clear, Practical, and Accessible Policies and Procedures Commercial organizations should develop and maintain clear, practical, accessible, and enforceable anti-bribery policies and procedures which take into account the roles of their entire ownership and workforce as well as all people and entities over which they have control. Some aspects of appropriate policies and procedures which the draft guidance identifies include the following: A clear prohibition of all forms of bribery including a strategy for building this prohibition into the decision-making processes of the organization; Guidance on making, directly or indirectly, political and charitable contributions, gifts, and appropriate levels and manner of provision of bona fide hospitality or promotional expenses to ensure that the purposes of such expenditure are ethically sound and transparent; Advice on relevant laws and regulations; Guidance on what action should be taken when faced with blackmail or extortion; The organizations level of commitment to the U.K. Public Interest Disclosure Act of 1998 (employment law protection for whistleblowers)21 and an explanation of the process; and Information on anti-corruption programs relevant to the sector. Organizations may also wish to consider issuing a code of conduct, which sets out expected standards of behavior for employees that is included in their
21

employment contracts. Additionally, organizations might consider: How existing procedures may be used for bribery prevention purposes (e.g., financial and auditing controls, disciplinary procedures, performance appraisals, anonymous whistleblower hotlines, etc.); Modifying sales incentives to give credit for orders refused where bribery is suspected; The vulnerability and ability to resist bribery of particularly exposed functions or operations of the entity (e.g., procurement, supply chain management, etc.); and Implementation of procedures to deal with incidents of bribery, should they arise, in a prompt, consistent, and appropriate manner. This principle seems to be the most substantive recommendation in the draft guidance. The need to provide clear anti-bribery standards and procedures is an integral part of an effective ethics and compliance program under the U.S. Sentencing Guidelines for Organizations and the COSO framework among other compliance program guidelines. (5) Effective Implementation Commercial organizations must implement their anti-bribery policies and procedures throughout the business entity. Effective implementation requires the allocation of roles and responsibilities and the setting of milestones for delivery and review. Large organizations should establish an implementation strategy specifically detailing how policies and procedures are to be put into place throughout the business entity, including, for example: Who will be responsible for implementation; How the policies and procedures will be communicated internally and externally; The nature of training and how it will be rolled out; The internal reporting of progress to top management; The extent to which external assurance processes will be engaged; The arrangements for monitoring compliance; The timetable for implementation; A clear statement of the penalties for breaches of agreed policies and procedures; and The date of the next review of these policies and procedures. If enforcement authorities such as the DOJ or the SOF instigate a bribery investigation and find that an organization has not fully implemented a relevant compliance program, the extent to which that entity is

Available for download at http://www.legislation.gov.uk/ukpga/1998/23/contents

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able to produce a well-conceived implementation plan against which it has made reasonable progress will undoubtedly improve the targets situation. The notion that paper compliance is a potential pitfall that organizations should be wary of has been a mantra of U.S. enforcement authorities. By way of example, one can look to the changes made in 2008 to the Principles of Federal Prosecution of Business Organizations22 directed by then U.S. Deputy Attorney General Mark Filip, that cautions prosecutors to distinguish between mere paper programs and those compliance programs that are designed, implemented, reviewed, and revised, as appropriate, in an effective manner. Those latter effective compliance programs, the prosecutorial principles provided, may well result in a decision to charge only the corporations employees and agents or to mitigate charges or sanctions against the corporation. 23 (6) Monitoring and Review Commercial organizations must put into place mechanisms to monitor and review compliance with their anti-bribery policies and implement improvements when appropriate. Among other things, along these lines organizations may wish to: Consider what internal checks and balances are necessary for effective monitoring and review of these policies and procedures. The draft guidance suggests that larger organizations might include financial monitoring and reviews of bribery reporting mechanism and incident management procedures; Larger organizations might also consider periodically reporting the results of their monitoring/review efforts to the Audit Committees of their Boards of Directors, full Boards, or equivalent bodies; Identify appropriate trip-wires for mandatory bribery risk assessments and anti-corruption program reviews; and Utilize external tools for assurance and verification of the continuing effectiveness of their anti-bribery policies, or join one of several independently verified bodies or associations that evaluate anti-corruption compliance programs. As is the case with most of the other five principles, monitoring and review of anti-bribery policies and procedures is a widely recognized element of effective compliance efforts by government and private organizations alike. Indeed, Article 12 of the OECDs Working Group on Briberys February 18, 2010 Good
22

Practices Guidance on Internal Controls, Ethics and Compliance calls for periodic reviews of ethics and compliance programmes or measures, designed to evaluate and improve their effectiveness in preventing and detecting foreign bribery, taking into account relevant developments in the field, and evolving international and industry standards.24 Of course, it would behoove organizations to keep abreast of related statutory and regulatory changes and trends in prosecutions and convictions. These events should be tracked both in their home countries and abroad. * * *

Available for download at http://www.usdoj.gov/opa/documents/corp-charging-guidelines.pdf

23

All in all, the draft guidance, while offering some direction, does not go a long way toward calming the fears of potentially affected organizations concerned with developing and implementing adequate procedures to prevent bribery. It does not relieve the uncertainty posed by the breadth of the Act, inasmuch as it is incomplete and drafted in terms as general as the statutory language itself. It simply does not provide a great deal of practical assistance or real help in understanding an organizations obligations under the Act. Again, in large part, the guidance just reiterates the Acts language. Moreover, its principles-based approach leaves much to be desired in terms of instruction about compliance procedures that prosecutors will deem adequate in any particular case. By being purposefully non-prescriptive and intentionally indefinite, the Secretary of State is sending a message that companies should aspire to maximum compliance efforts and consistent, clear, and ethical decision making. That is to say, organizations should exercise an abundance of caution in these matters and err on the conservative side in interpreting the Act. Most commentators are not predicting a departure from this principles-based examination of the adequate procedures standard in the forthcoming final guidance. Unfortunately, it will be left to the U.K. courts to provide guidance on these matters in the context of actual bribery cases. Facilitating payments.The draft guidance also explores the issue of facilitating payments in the most general terms. Consistent with pre-existing law in the United Kingdom, the Act does not provide an explicit defense or exception for small, routine, nondiscretionary payments to foreign officials which are commonly referred to as grease or facilitating payments. In fact, such an exception was proposed during the legislative process and rejected by Parliament. In this respect, the Bribery Act is consistent with the OECD Convention and more stringent than the FCPA. Under the FCPA these payments are described as being for routine governmental actions. Routine governmental action
24

Ibid., Section 9-28.800, p.16.

Op. cit., footnote 17.

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in turn, is defined to include only an action which is ordinary and commonly performed by a foreign official, such as: obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; processing governmental papers (e.g., visas and work orders); providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to the transit of goods across country; providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration; or actions of a similar nature. The term specifically does not include decisions by such officials to award new business to or continue business with a particular party. In contract, as previously mentioned, the Bribery Act contains no exception for nondiscretionary facilitating payments. Nonetheless, U.K. enforcement authorities have been quoted as saying that they do not intend to focus their efforts on the prosecution of such matters. In that regard, on September 23, 2010, the head of anti-corruption enforcement at the SFO said: We certainly dont condone facilitating payments and never will. But whether we prosecute depends on whether it falls within our criteria. Is it significantly serious?25 While admitting that facilitating payments are likely to fall under the Acts proscriptions, the Ministry of Justice anticipates that prosecutors will consider the public interest in bringing charges and . . .[t]he more serious the offense, the more likely it is that a prosecution will be required in the public interest.26 As such, the decision as to whether a case should be brought involving facilitating payments is a matter left to prosecutorial discretion and it is not expected that many cases involving only small facilitation payments will be pursued. Moreover, this distinction between the Act and the FCPA is not as dramatic as it might appear on the face of the two laws since the FCPA exception has been narrowly construed and companies subject to its jurisdiction are increasingly discouraging the use of facilitating payments. This discouragement is fostered by the U.S. government enforcement authorities and typically is finding its way into corporate compliance programs as well as those entities standards of conduct. As alluded to above, signatories to the OECD Conventionwhich includes the United Stateshave agreed to a set of resolutions that, among other things, discourage the practice of facilitating payments. To further document this undeniable development, a 2009 survey on this
25

Richard Tyler, SFO to prosecute serious overseas bribes, The Telegraph, September 23, 2010. The article, quoting Mr. Robert Amall is available for download at http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/ 8019024/SFO-to-prosecute-serious-overseas-bribes.html#
26

subject by the antibribery compliance/due diligence specialist Trace International27 found a clear trend in which companies are banning or severely limiting the use of facilitating payments in their anti-bribery compliance programs. This trend has been further confirmed by informal polls taken at a recent meeting of the MAPI Law and Ethics and Compliance Councils. In these circumstances, because most jurisdictions tend to be critical of the facilitating payment exception to the FCPA, global organizations would be well advised to be sure that their anti-bribery compliance programs and related training materials address the matter specifically. Hospitality.The FCPA, unlike the Act, provides an affirmative defense for reasonable and bona fide expenditures (such as travel and lodging expenses, incurred by or on behalf of a foreign official), directly relating to the promotion, demonstration, or explanation of products or services or the execution or performance of a contract with a foreign government or agency. A person charged with a violation of the FCPAs anti-bribery provisions can assert as a defense that the payments made were a reasonable and bona fide expenditure as part of demonstrating a product or performing a contractual obligation. This affirmative defense allows individuals or entities subject to the FCPAs jurisdiction to incur reasonable expenses for legitimate business hospitality or entertainment of foreign officials that might otherwise violate the letter of the law. With regard to the Act, on the other hand, considerable concern has been expressed that what would be seen by most commercial organizations as a legitimate hospitality or entertainment expense would constitute a criminal offenseparticularly when the expenditures involve a government official. The Act, on its face, takes a broad-brush approach, making criminal acts of corporate hospitality or entertainment where there is an intention either to induce a person to perform an act improperly or to influence an official for the purpose of obtaining business or an advantage in the conduct of business. Furthermore, because the Bribery Act does not require that an improper offer, promise, or payment made to a foreign government official be made corruptly, as does the FCPA, the plain language of the Act would seem to criminalize all promotional gratuities and hospitality expenses. Arguably, by definition, such gifts and promotional expenditures are extended with the intent to influence the recipient in order to obtain or retain business. Once again, the legislative history of the Act, the draft guidance, and statements by the U.K. enforcement authorities help, to a degree, to allay
27

Draft Guidance, op. cit.

TRACE FACILITATION PAYMENTS BENCHMARKING SURVEY (October 2009, Trace International). Available for download at https://www.traceinternational.org/documents/FacilitationPayments SurveyResults.pdf

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these concerns. The Joint Committee on the Draft Bribery Bill in Parliament, on July 28, 2009, issued a report on the bill28 in which it recognized that, in certain circumstances, legitimate and modest hospitality expenditures might satisfy the constituent elements of bribery of a foreign government official. The report went on to affirm that corporate hospitality is a legitimate part of doing business at home and abroad. The Joint Committee expressed confidence that enforcement authorities would not exercise their prosecutorial discretion in a way that would make legitimate and proportionate hospitality criminal. This moderate take was reinforced in the draft guidance which suggests that reasonable and proportionate expenditures which seek to improve the image of a commercial organization, better present products and services, or establish cordial relations, are recognized as an established and important part of doing business. The guidance indicated that not all such business expenditures would constitute briberyeven though the clear language of the Act would suggest otherwiseand the question of whether a particular expenditure is a bribe would have to be determined by the totality of the circumstances. The draft pointed out that it is unlikely that a routine and incidental business courtesy of small value would have an impact on decision making in the context of a high value business opportunity. Again, the guidance noted that the standard to be applied by a commercial organization making hospitality or promotional expenditures is whether they are making such expenditures to induce a person to perform a function improperly. In the eyes of the Ministry of Justice, reasonable and proportional hospitality is unlikely to trigger the offense of giving or receiving a bribe. Commercial organizations should be wary, however, that the more expensive or lavish the gift or hospitality is, the closer to the less-than-specifically-defined line of impropriety they may be straying. Finally on this point, at an October 7, 2010 industry/governmental consultation session on the Act, a Ministry of Justice spokesperson stated that the concern over the hospitality and business expenditure issue is misplaced. Only hospitality that is lavish or clearly a sham, he added, is likely to be the target of prosecution. In response to the draft guidances request for public comment, the Financial Markets Law Committee (FMLC),29 submitted a report that
28

expressed continued concern over this hospitality issue. Reflecting on the proper exercise of prosecutorial discretion in these matters, the FMLC suggested it would be preferable to set approval limits for such expenditures. These limits, the FMLC suggested, could be graduated to reflect varying circumstances. For example, tighter limits on expenditures or even a zero tolerance approach could be taken where public officials are the focus of the promotional activity. Less restrictive standards, however, might be applicable for commercial entities, taking into account existing practices in particular industries. It was further suggested that even an express statutory affirmative defense, similar to the FCPA approach, would put companies in a more comfortable position regarding hospitality expenditures for foreign officials. While concerns remain over the hospitality issue if one takes the U.K. government at its wordit would appear that enforcement of the Act, at least regarding foreign government officials, will not be much different than that currently associated with the FCPA.

Conclusion
What should a commercial organization that is potentially subject to the provisions of the U.K. Bribery Act make of the delay in the issuance of final guidance on the new law and the corresponding delay in its implementation? Whether final guidance will be more specific and, thus, have the effect of allaying concerns over the Acts harsher aspects remains to be seen. Clearly, the delay coupled with the Growth Review of the Act ordered by Prime Minister David Camerons office, means that the U.K. government is concerned about the Acts potential as an obstacle to investment in the country and a weight on its economic growth. Despite these concerns it must be remembered that the U.K. government continues to denounce commercial corruption and voice its support of OECD efforts regarding the criminalization of foreign bribery. When trying to predict what will happen with the Act it is important to remember the circumstances that led up to its development. The United Kingdom had been the subject of vigorous criticism from its EU partners over its handling of certain high profile commercial bribery cases, including the notorious matter involving BAE Systems. In that particular case an SFO investigation was halted on government orders. Looking at this history and the debate which preceded Parliaments enactment of the Actalong with the worldwide publicity attendant to its passageit is difficult to imagine that the Growth Review will result in any transformational changes to the Act. Hopefully, however, there will be more substantial guidance
FMLC filed in response to the guidance is available for download at http://www.fmlc.org/papers/Issue160report.pdf

Joint Committee on the Draft Bribery Bill-First Report, July 28, 2009. Available for download at http://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/11 5/11502.htm
29

The FMLC is an independent United Kingdom legal expert, sponsored by the Bank of England, whose role is to identify issues of legal uncertainty or misunderstanding in the framework of wholesale financial markets that give rise to material risks, and to consider how such issues should be addressed. The report the

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concerning the Acts purview forthcoming from the Ministry of Justice and the SFO. In is conceivable that, as a result of the Growth Review, U.K. prosecutors will be instructed to relax their enforcement effortsparticularly with regard to controversial issues such as facilitating payments, hospitality, and bribery by intermediaries/third parties. Again, however, it is unlikely that the terms of the Act itself will be modified and MAPI suggests that concerned entities prepare themselves to see stringent new anti-bribery laws come into force in the United Kingdom in 2011. As such, the further delay in guidance/implementation should be viewed as a respite and not a reprieve. MAPI member companies that have even minimal connections to the United Kingdom should use this delay as time to review and perhaps revise their antibribery procedures to ensure compliance with both the FCPA and the Bribery Act. Policies designed with the FCPA in mind are likely to need at least some revisions given the broader reach of the Act. The importance of such revisions is magnified in light of the close working relationship that exists between enforcement authorities in the United States and the United Kingdom. The DOJ and the SOF collaborate regularly on investigations and enforcement activities. Companies with minimal connections to the United Kingdom that are being investigated by the DOJ for FCPA violations are entirely likely to find themselves subject to multijurisdictional charges. It should be remembered that voluntary disclosures of FCPA violations may be shared by DOJ with U.K. authorities, exposing companies to potential penalties in both jurisdictions. In revising anti-bribery policies and practices to cover the Acts broader scope, an area to which particular attention should be paid is the relationships with third parties. Since, under the terms of the Act, a company can be liable for bribes committed by associated persons, it is imperative that a commercial organization ensure that its agents, suppliers, subcontractors, distributors, joint venture partners, consultants, and other third parties live up to its standards of ethical conduct. Establishing an effective third-party ethics and compliance program is strongly advised. Such a program should, at a minimum: Survey these third parties as to their ethics and compliance efforts. Use the results of these surveys to create an approved list of acceptable third parties with whom doing business is acceptable. Third parties on the approved list should be monitored

to ensure that they maintain the standards which qualified them in the first instance. Set standards in a Code of Conduct for third parties so they understand that integrity is a prerequisite for doing business with your company. Include the third parties in your companies antibribery training programs or conduct separate training for them. Closely monitor all payments to and from third parties such as commercial representatives, agents, and consultantsparticularly in highrisk countries. Maintain an ongoing communication link with your third parties on key issues related to your anti-bribery policy. Create an anonymous whistleblower facility for third parties. Ensure that contracts with third parties include provisions addressing the issue of bribery, such as warranties that no secret commissions have been paid, no competition rules have been violated, no bid rigging or price fixing has been engaged in, etc. Provide ready access for third parties to relevant documents such as the code of conduct, contracts, the approved list, etc.

Many companies anti-bribery policies and procedures may already touch upon these issues in the FCPA context (i.e., the concern over charges of willful blindness discussed above). Still, the draft guidances focus on the due diligence aspect of dealing with associated persons as part of a commercial organizations adequate procedures to prevent bribery might warrant a reexamination and tightening of these policy and procedures. * * * In conclusion, MAPI recommends that companies would be well advised to keep anti-bribery and corruption matters high on the agendas of both senior management and boards of directors. In preparing for the broad reach of the U.K. Bribery Act, judicious organizations should read its provisions liberally and err on the side of caution when reviewing and revising appropriate policies and practices. The Alliance will continue to monitor issues associated generally with anti-bribery and corruption enforcement, and specifically with the U.K. Bribery Act, and report on them to its membership.

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APPENDIX

Nature of Scope/Reach of the Offenses

Criminal Conduct Section 1: Bribery Covered Activities Offering, promising, or giving a financial or other advantage. Intending to induce or reward the improper performance of a relevant function or activity OR knowing that accepting the advantage is improper. Requesting, agreeing to receive, or receiving a financial or other advantage. Intending to perform relevant function or activity improperly OR reward for improper performance OR where requesting, agreeing to receive, or receiving the advantage is improper in itself. Offering, promising, or giving a financial or other advantage. Intending to influence the Foreign Public Official in their official capacity. Intending to obtain or retain an advantage in the conduct of business. Where the Foreign Public Official is neither permitted nor required by local law to be so influenced The corporate body has bribed or has been bribed. The senior officer has consented to or connived in the bribery. A person associated with a commercial organisation bribes someone else. Intending to obtain or retain business, or an advantage in the conduct of business for the organisation. The organisation did not have in place adequate procedures. Territorial/Jurisdictional Reach Acts committed in the UK. Acts committed anywhere in the world by a person with a close connection with the UK (e.g., a UK company or a British citizen or resident). Acts committed in the UK. Acts committed anywhere in the world by a person with a close connection with the UK.

Section 2: Being Bribed

Section 6: Bribing a Foreign Public Official

Acts committed in the UK. Acts committed anywhere in the world by a person with a close connection with the UK.

Section 14: Senior Officer Offence

Section 7: Failure to Prevent Bribery

Acts committed by any senior officer with a close connection with the UK. Acts committed by any senior officer, if the bribery takes place in the UK. Where the commercial organisation is a UK company or partnership. Where the commercial organisation carries on a business, or any part of a business.