Bribery Act 2010: Is it time for a re-think?

24 June 2013

Stephen Musgrave, Will Smith

Introduction

The Financial Times has recently reported that the government is considering amending the Bribery Act 2010 ("BA"), apparently as part of its wider efforts to reduce red tape and the compliance obligations thought to burden SMEs. It is as yet unclear whether this is just a rumour, but it is worth looking at what might be involved, in the context of the BA generally.

Background

The BA created four offences - making a bribe, accepting a bribe, bribing a foreign public official and the failure of commercial organisations to prevent bribery.

It is the final offence, under s7 BA, which has caused the most concern to businesses because it imposes strict, criminal liability on a commercial organisation for the acts of its employees, wherever in the world they may take place.  

A commercial organisation has a defence where it can show that it had adequate procedures in place to prevent bribery. This requires businesses to take (potentially expensive) advice on the precise nature of such procedures, because directors could potentially find themselves personally liable for acts in their organisations of which they were otherwise unaware.

Reform

The mooted review of the BA will focus on "facilitation payments". These are not defined in the BA however the Serious Fraud Office's Joint Prosecution Guidance on the BA describes them as:-

"unofficial payments made to public officials in order to secure or expedite the performance of a routine or necessary action. They are sometimes referred to as ‘speed’ or ‘grease’ payments. The payer of the facilitation payment usually already has a legal or other entitlement to the relevant action."

The law was previously sympathetic to businesses and, whilst such payments were illegal, the risk of prosecution for unconnected offences was extremely low. However, the Guidance goes on to say that:

"There is no exemption in respect of facilitation payments. They were illegal under the previous legislation and the common law and remain so under the Act."

Accordingly, whilst there may be a commercial distinction, there is technically no difference in legal treatment between a facilitation payment and a bribe. Any amendment to the law to address this point may therefore have to define "facilitation payment".

Prosecution for the making of a facilitation payment requires sufficient evidence and must be in the public interest. The Guidance indicates the following factors may be relevant:

Factors tending in favour of prosecution:

  1. Large or repeated payments are more likely to attract a significant sentence;
  2. Facilitation payments that are planned for or accepted as part of a standard way of conducting business may indicate the offence was premeditated;
  3. Payments may indicate an element of active corruption of the official in the way the offence was committed;
  4. Where a commercial organisation has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and these have not been correctly followed.

Factors tending against prosecution:

  1. A single small payment likely to result in only a nominal penalty (Code 4.17a);
  2. The payment(s) came to light as a result of a genuinely proactive approach involving self-reporting and remedial action (additional factor (a) in the Guidance on Corporate Prosecutions);
  3. Where a commercial organisation has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and these have been correctly followed;
  4. The payer was in a vulnerable position arising from the circumstances in which the payment was demanded.

Facilitation payments are seen as important by businesses seeking to break into developing economies and are not illegal under the US Foreign Corrupt Practices Act. Critics of the BA argue that this puts UK PLC at a competitive disadvantage.

Comment

News of the possible review of the BA has been largely welcomed by SMEs who perceive a disadvantage entering markets where facilitation payments are common, and view the current prosecution guidelines as inadequate. Businesses argue the risk of criminal liability prevents exportats into emerging markets and that competitors from other jurisdictions (particularly the USA) are not hampered in the same way.

Critics of the proposals suggest that for the UK to relax its position on bribery would be a backwards step, particularly as the BA is only two years old and at present there have been no prosecutions brought against companies. Furthermore, the UK is bound to observe the Organisation for Economic Co-operation and Development's Convention on Combating Bribery which does outlaw facilitation payments. It is suggested that the government should instead issue guidance to raise understanding of the BA, in particular on the application of the adequate procedures defence which is as yet untested.

Other commentators suggest these two extreme positions ignore the middle ground and that there is a greater problem with which national legislation is ill-equipped to deal. Business criticism of the BA in contrast to laws of other jurisdictions highlights a broader problem of a lack of global harmonisation in bribery legislation. This is perhaps unsurprising as it reflects different cultural opinions on how business should be conducted.

Businesses across developed economies, where anti-bribery provisions are in force, need certainty of outcome when operating. This should be reflected in any reform, especially if legislative amendments attempt to define the concept of facilitation payments. The legal distinction between what is permitted and what is not must be clear for businesses to understand in order for them to operate with confidence. Unfortunately given the surreptitious nature of the area, and without clear governmental guidance by which bribes (or legitimate payments) can be judged, businesses may continue to struggle with the risk of liability when exporting to emerging markets.