Eight months since the entry into force of the UK Bribery Act 2010 (the “Act”), the Serious Fraud Office (the “SFO”) is investigating alleged corrupt corporate behaviour in diverse industries. Whilst the SFO has made it clear that the identities of these companies must remain confidential at this early stage, at least some of these investigations have been prompted by cooperation with the US authorities and self-reporting by corporate officers (it is reported that the SFO’s whistleblower hotline is receiving 500 calls a month, and the whistleblower section of its website has had 200 hits). UK enforcement of the Act and resulting penalties are therefore influenced by coordinated, cross-border prosecutions involving US, UK and other countries’ authorities, in relation to bribery and other corruption offences, such as money-laundering, and financial services regulatory infringements.
This alert highlights the key aspects of the Act. The accompanying Thought Piece goes into greater detail on, inter alia, the scope of the offences (especially the corporate offence), the ambit of the Act’s extra-territorial reach, recent related case law and penalties, current enforcement trends (including plea-bargaining), and how to devise and implement (or upgrade) an effective compliance programme.
The Act prohibits private sector bribery, as well as bribing public officials, and therefore goes well beyond the scope of the US Foreign Corrupt Practices Act (the “FCPA”). The Act contains four main offences: (i) “active bribery” i.e. giving or offering a bribe; (ii) “passive bribery” i.e. receiving or asking for a bribe; (iii) bribing a foreign public official; and (iv) the “corporate offence” of failure by a commercial organisation to put in place “adequate procedures” to prevent a person associated with it from engaging in bribery. Each offence has extra-territorial reach. Offences (i)-(iii) apply where any part of the offence is committed in the UK or by a UK person. The “corporate offence” applies to every commercial organisation that carries on a business or part of a business in the UK.
UK Government guidance has sought to clarify and narrow the Act’s scope, particularly regarding extra-territoriality, and with respect to corporate hospitality and public sector facilitation or “grease” payments (in short, corporate hospitality must be reasonable and proportionate, facilitation payments must never occur). However, such guidance remains subject to judicial endorsement.
The SFO is the main UK agency with responsibility for prosecuting cases of overseas corruption. UK prosecutorial guidance highlights the authorities’ discretion in prosecuting the Act and encourages self-reporting and co-operation. Despite judicial reluctance, plea-bargaining is also possible and may lead to lesser charges or a joint submission (with the prosecution) on penalties. However, the US FCPA experience indicates that widespread plea-bargaining can lead to more aggressive overall enforcement and development of a “prosecutorial common law”, which can give rise to onerous interpretations of legislative provisions.
So far there has been only one prosecution under the Act, albeit relatively low-level bribery by a local court clerk, resulting in concurrent prison terms. The maximum penalty for corporates is an unlimited fine, and in some cases officers and employees may face personal liability. Indications of the likely level of fines for corporates can be gleaned from recent penalties imposed under prior anti-corruption laws, similar laws, including under Part 5 of the Proceeds of Crime Act 2002 which in certain circumstances allows civil recovery of monies obtained by unlawful conduct, and financial regulatory infringements (please see the attached table of penalties).
The safest approach for corporations seeking to minimise risk is to adopt an effective multijurisdictional compliance programme or upgrade their existing programme in order to prevent violations and potentially provide a defence of “adequate procedures”. Further, an effective compliance programme may help mitigate against prosecution and reduce any penalties imposed.
An effective compliance programme should adhere to the six guiding principles in the UK Government’s guidance on adequate procedures i.e. (i) proportionate risk-based procedures; (ii) high level commitment to compliance; (iii) risk assessment; (iv) due diligence; (v) communication and training; and (vi) monitoring and review. Our accompanying Thought Piece provides full details of the content of and implementation strategy for an effective compliance programme.
|Date||Persons||Sector||Approximate Values of Relevant Transactions||Legal Basis of Penalty||Approximate Value of Main Penalty||Other
|Jan 12||Mabey Engineering (Holdings) Limited||Engineering||£131,204 (dividends received)||Part 5, POCA||£131,204||SFO costs|
|Nov 11||Munir Patel||Public Service||£500 (received, although the prosecution believe he may have made £20,000 during 2 years)||Passive Bribery, Bribery Act 2010||3 years imprisonment|
|Jul 11||Macmillan Publishers Limited (MPL)||Educational Materials||£11.26m (contractual revenues)||Part 5, POCA||£11.26m||SFO costs; debarred from World Bank contracts for minimum of 3 years; SFO monitoring; MPL withdrawal from all public tenders in East and West Africa, loss of bid securities|
|Jul 11||Willis Limited||Wholesale insurance and reinsurance broking||£59.7m (gross insurance commissions earned), £27m (insurance commissions paid)||Section 206, FSMA||£6.895m (with a 30 per cent reduction in fine due to co-operation and early settlement)||“Significant” FSA costs|
|Dec 10||BAE Systems Plc||Defence||US$39.97m (contract value), US$12.4m (payments to marketing advisors)||Section 221, Companies Act 1985||£500k, plus £29.5m ex-gratia payment for the benefit of the people of Tanzania||£225k SFO costs|
|Mar 10||Innospec Limited||Chemicals||US$160m (UK Revenues), US$11.7m (commissions to agents), US$8m (bribes)||Pre-Bribery Act 2010 offences||US$40m global settlement (US$12.7m in the UK) (judge comments level of fines might have exceeded US$150m in the UK and US$400m in the US)||SFO monitoring|
|Jan 09||Aon Limited||Insurance broking||US$7m (suspicious payments)||Section 206, FSMA||£5.25m (with a 30 per cent reduction in fine due to co-operation and early settlement)|
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:Valenstein-Carl
This article was originally published by Bingham McCutchen LLP.