Under
the British Bribery Act, the authorities can charge any British bank
with committing bribery or allowing "associated persons" to do so on its
behalf. Relationship managers are at the forefront of banks' efforts to
comply. This is especially true as there is no “mental element” to the
crime; the only defence is the maintenance of an effective program by
bank staff.

When
the Act was enacted in 2010, with government guidance to follow,
lawyers in the City of London were rubbing their hands at the prospect
of fresh business and proclaiming that a ‘new gold standard’ had been
created. This might turn out to be something of an exaggeration, but
there are still dangers ahead for US companies that trade with the UK
and indeed much of Europe.

Cases, so far, are rare. The Serious Fraud Office has stated that
only two prosecutions have occurred to date under the new Act. The first
one concerned a Magistrates’ Court clerk who took £500 (£753) in
exchange for cancelling someone’s speeding charge; the second revolved
around an offer of ÂŁ300 from someone who wanted to pass a driving test.
No corporation has been charged so far, nor has any foreigner.

It is also true that the Act has not set up a regulatory regime as
such. The SFO and the Crown Prosecution Service are the only agencies
that can prosecute anyone for bribery according to Section 10 and they
do publish guidance, but this falls short of regulation.

The legislation, in the words of The Economist on 11 July
2011, was “conceived by the previous Labor government in response to
the scandal of BAE bribes in Saudi Arabia” but no case involving a
public official has yet come to light.

The likelihood of a US target

The new Act, however, should not be discounted as a mere paper tiger;
all new legislation has to be “bedded in”. The US authorities, for
their part, prosecuted nobody at all under the Foreign Corrupt Practices
Act 1977 during its first two years of life. Speculation is rife about
the ground on which the SFO will choose to fight its first test case.

Richard Lissack QC, drawing from his knowledge of that body, said
that he expected a case against a foreign corporation which, through a
bribe, had secured an advantage in a situation where a rival British
company did not pay the bribe. He thought that this would “tick a lot of
boxes”, especially since it would be good for the image of British
businesses. This strategy could be popular in government circles at the
moment in view of the recent swingeing fines that US regulators have
levied – some say in a nationally targeted way – on UK banks such as
HSBC, Barclays and RBS over money-laundering controls and LIBOR. Lissack
also thought that the SFO wanted to prosecute small multinationals –
possibly US, once again – that lacked the resources for good controls.

The FCPA v the Bribery Act: two different viewpoints

US companies that deal with the UK are used to running compliance
systems in accordance with their Foreign Corrupt Practices Act, but many
are struggling to take in the provisions of the new UK statute. The
FCPA prohibits the payment of any amount of money or “anything of value”
(the case law interprets this to mean meals, drinks and travel as well
as solid presents) to a foreign (i.e. non-US) official in order to
influence him in his official capacity or to secure any other improper
advantage in order to obtain or retain business.

US people and businesses (“domestic concerns”) are prohibited from
doing this, but in some cases foreign entities can be as well. Every
foreign public company (15 USC § 78dd-1) is forbidden to make such
payments if it is are listed on a US stock exchange or obliged in some
way to report to the Securities and Exchange Commission, which shares
prosecuting rights with the Department of Justice for this crime. These
“issuer” companies’ people – including shareholders and agents – can
also be found guilty. Foreign people and entities can also be liable if
they do anything to further corrupt payments while in the US (15 USC §
78dd-3). The FCPA applies to bribes paid anywhere in the world.

There are considerable grey areas in the courts’ interpretation of
“foreign official”; one case included doctors who spent only some of
their time working for a nationalized healthcare service.

The Act also bans the falsification of accounts, books and records
(15 USC § 78dd-1) and requires “issuers” (but no-one else) to run
adequate internal accounting control systems. This is because many
bribes are hidden on the books as expenses, consulting fees and other
things. The British statute, by contrast, governs more activity and is
capable of punishing more entities.

Sections 1 and 2 contain the active and passive offences of bribery;
s6 contains a standalone offence of bribing a foreign public official;
and s7 makes it an offence for a UK commercial organization to prevent
bribery on its behalf or to allow “associated persons” who act on its
behalf (s8) to commit it. This last is a strict liability offence, the
only defence to which is the upkeep of good anti-bribery systems in line
with “guidance” which the Ministry of Justice issued in 2011 under s9.
All individuals and companies anywhere in the world can be found guilty
of breaking ss1, 2 and 6 as long as they or their misdeeds are
sufficiently well connected with the UK. The Act affects every company
in the UK. Directors and officers can be found personally liable with
unlimited fines and 10 years in jail. US companies that deal with the UK
would do well to remember this.

Bribery of non-officials

Business-to-business bribery – which the FCPA does not cover except
at its extreme fringes – is expected to be the main target of future
prosecutions. To face charges for such purely commercial bribery a UK
company, or an American company when dealing with the UK, has to offer
an advantage – which need not be a business advantage – to someone
performing a “relevant function” or to play the passive partner in such
bribery. Section 3(2)(d) says that a relevant function is any activity
performed by or on behalf of a body of persons whether corporate or not –
a very wide definition indeed. Anything to do with business or the
person’s employment is obviously included.

This is more extensive than anything in the FCPA, even though that
Act does ban some activity that strays beyond the public sphere, as in
the case of the semi-private doctors. It is also wider than in the s6
offence against a public official. In such a case, the briber must be
hoping to obtain a business advantage; this is not true of purely
commercial bribery.

Most of the UK Bribery Act applies to public and private bribery
alike – for example, s7’s guidance about how a company should stop its
associates from bribing – and many global law firms count this as one
reason why the UK’s new regime is so sweeping. However, more countries
have business-to-business bribery regimes than is generally thought.

Business-to-business bribery is banned by the anti-corruption
legislation of practically all countries in the European Economic Area,
although it is legal in certain circumstances in Italy. It is also
outlawed in China, Hong Kong, Singapore and South Africa. In the UAE
purely commercial bribery is an offence but the person who offers the
bribe cannot be charged. In Jordan it is against the law only if a
publicly-traded company commits it. In Iraq, which is heavily influenced
by the US, it is not an offence generally although it can be if the
government owns at least some of the business involved.

The harsh mental element: purely commercial bribery v official bribery

Under the FCPA the briber, if an individual, can only be criminally
liable if he acts “wilfuly.” This means that he must have a “bad
purpose” (US v Kay, 513 F.3d 432, 448 (5th Cir. 2007)). If the defendant
is a company, the prosecution need not prove wilfulness. It must,
however, also prove that the briber, whether a human or a corporation,
is offering the bribe “corruptly.” This has a bearing on the mental
element in the crime as, according to the US Congress when enacting the
FCPA, the word “corruptly” means an intent or desire to wrongfully
induce the recipient to misuse his official position. The US federal
courts interpret this to mean that there must be a quid pro quo, i.e.
the briber makes the favor contingent upon the misuse. An executive who
authorizes others to pay “whoever you need to” in a foreign government
to obtain a contract has broken the law, even if no actual offer or
payment takes place. To put it another way, for a prosecution to be
successful there must be corrupt intent. The motivation to obtain or
retain business, otherwise known as the “business purpose test,” must
always be present in US law.

The UK’s legislation is not hedged around with the same mental
requirements. It is true that when committing a s6 offence against a
foreign official, the briber must be hoping to obtain a business
advantage if he is to be found guilty. For bribing and being bribed
under ss1 and 2, however, the defendant need only intend some advantage
to accrue and it need not be a monetary one. The intention must be also
to cause the improper performance of a relevant function. This is also
true when the very acceptance of the advantage constitutes such improper
performance. The mirror image of this comes when the bribed party
agrees to accept the advantage and knows that this is improper
performance in itself. It is immaterial whether the bribed party wants
the advantage for himself or not.

This applies to business-to-business bribery but there is nothing in
the Act to stop it also applying to the bribery of foreign officials,
quite independently of the provisions of s6. The SFO has often said that
s1 might be used more often than s6 in foreign official bribery cases.
US companies whose operations are connected with the UK must therefore
tread more carefully than s6 suggests.

Facilitation payments

Unlike its British counterpart, the American Act allows “facilitation
payments” (sometimes known in the US as “grease” payments) whereby the
payer tries to induce the payee to perform a function that he ought to
be performing anyway as his official duty. Such payments have always
been illegal in British law and the guidance that the MoJ issued goes
out of its way to describe them as bribes. US companies that operate in
the UK ought to beware of this.

Even here, though, there seems to be leeway. An article in the London Financial Times
(25 February 2011) describes the strenuous last-minute efforts that HM
Government was making to withdraw 200 British citizens who were stranded
in Libya at the beginning of the civil war. The government had been
tardier than others in doing this and therefore felt obliged to pay
monies above and beyond the usual price of bookings to various officials
at Tripoli airport to ensure a speedy evacuation.

The paper quotes the Foreign Office: “We categorically deny
accusations earlier that British officials have paid ‘bribes’ to Libyan
officials. Officials at Tripoli airport charge fees for services, such
as aircraft handling. These charges are applied to all countries and
carriers seeking to fly in or out of Tripoli airport. In the current
situation, these fees have increased.”

When cornered about this at a conference the Bribery Act’s draftsman
rushed to the government’s defence with an assertion that the payments
were “fast-track fees.” The Act and the guidance never mention this
term. The so-called “quick start guide” that comes with the guidance,
which itself has legal status as a supporting document, says that “you
can continue to pay for legally required administrative fees or
fast-track services. These are not facilitation payments.” If the
incident were to happen today the government would therefore presumably
hold that the Libyan officials were demanding money in a “legally
required way”.

This is a relevant point as many global corporations might have to
snatch their staff out of unfavorable jurisdictions from time to time.
To help the process along, the guidance (point 48) adds: “It is
recognized that there are circumstances in which individuals are left
with no alternative but to make payments in order to protect against
loss of life, limb or liberty. The common law defence of duress is very
likely to be available in such circumstances.”

Most countries in the European Economic Area do not tolerate grease
payments. Danish law allows small ones if they involve Danish firms but
take place outside Denmark. Hungary (under certain circumstances) and
Spain allow them, although they do not when the giver or receiver is an
official.

Territorial reach for official bribery

The FCPA applies to conduct anywhere in the world. As is usual with
federal crimes, it is an offence for bribe-related activity to cross a
state line and this is true of telephone calls and emails.

Foreigners – although not “issuers” or “domestic concerns” – may be
prosecuted under the FCPA if they try to further corrupt payments while
on US soil even if their bribery schemes have nothing to do with the US.
Also, US citizens can be found guilty under the FCPA even if they are
acting outside the US. Under s3 of the UK’s Bribery Act, meanwhile, a
function or activity (which the briber is trying to influence) is
relevant even if it does not happen in the UK and indeed has no
connection at all with the UK.

The US Act does, however, contain a “local law” defence. This
guarantees that if the payment in question is lawful under the written
laws and regulations of the foreign official’s country, no crime is
committed (15 USC §§ 78dd-2(c)(1), 78dd-3(c)(1)). The UK’s Bribery Act
offers this type of defence under s6 in the case of bribing foreign
officials. The official cannot be said to have been bribed if he is
allowed to be swayed by the gift according to the written laws that
apply to him.

Territorial reach for business-to-business bribery

This defence is not, however, available for the business-to-business
offences. Here, the bribed party must be breaching a “relevant
expectation” which he ought to be fulfilling impartially or in good
faith (ss3-4). Section 5 states than when a jury evaluates the validity
of such an expectation it must look at “what a reasonable person in the
UK would expect in relation to the performance of the type of function
or activity concerned.” This tendency to apply UK standards all over the
world is present in other criminal statutes such as the Money
Laundering Regulations and is increasing with time.

Draconian measures: the new normal

These facts do not, however, mean that the UK Act is the “new gold
standard” or that US companies have more to fear in the UK than
elsewhere in the world. Draconian bribery legislation is sweeping the
planet; the chairman of the Organization for Economic Control and
Development’s anti-bribery working group recently described the UK’s
Bribery Act as “pretty middle-of-the-road”.

Various “high risk” countries have over-reacted to the threat of
bribery, producing severe laws that arguably go too far. In Romania,
pressure from the European Union has resulted in some severe
stultification. Every tender for certain types of contract must be
opened in front of all the officers of the approval committee;
consequently it can take weeks to get the right people together in the
same room. In China, meanwhile, anyone who takes bribes exceeding
RMB100,000 ($16,130) can face a firing squad. Wu Zhiming, the former
General Secretary of the Communist Party in Jiangxi Province, was
sentenced to death in December. He took over RMB47 million yuan ($7.5
million) in bribes and doled out jobs and contracts in exchange.

Nightmare on Elm Street?

The new head of the SFO, David Green, also seems to be steeling his
organization for a fight. In October he announced that companies –
including US companies that have “sufficient connection” with the UK –
that admit failings under the Act’s self-reporting regime could no
longer be sure of exemption from criminal penalties. Watch this space.