Deemed by many to be the toughest anti-corruption law in the world, the new Bribery Act has caused a great deal of discussion in business circles, including the mining and minerals industry. The Act received Royal Assent on 8 April 2010 but its implementation was delayed to allow for a consultation from September to November 2010 on the “adequate procedures” guidance for commercial organisations. Initially expected in January 2011, the final guidance was released on 30 March. The Bribery Act 2010 will now come into force on 1 July 2011, requiring many businesses to (re)assess their corruption risks and anti-bribery procedures.
Women in Mining wanted to better understand the scope and implications of the Bribery Act, and in particular how it could affect mining businesses: Ranked in band one for Fraud: Criminal: Corporate in Chambers 2010, Simmons & Simmons was the perfect law firm to decode the Bribery Act with us.
On 16 March 2011, Claire McLeod, Managing Associate in the firm’s Crime Fraud and Investigations Group, spoke to over thirty WIM members about the offences introduced by the Bribery Act, the defences and penalties applicable and how the Bribery Act compares with the US Foreign Corrupt Practices Act (FCPA), before discussing some specific risk areas for mining businesses.
Click here to see the presentation slides.
Since the seminar, the Ministry of Justice has released the final version of the Guidance on Adequate Procedures which relevant commercial organisations must put in place in order to avail themselves of the statutory defence for the purposes of the corporate offence under the Act.
For more information, please visit Simmons & Simmons’ free online legal resource, Elexica.
The Bribery Act 2010 provides for two general offences of bribing another person and of requesting or receiving a bribe, as well as a separate offence of bribing foreign public officials; it also includes “consent and connivance” provisions applicable to senior officers, and a new corporate offence of failing to prevent corruption. Interestingly, the Bribery Act applies to both public and private sector bribery, which is wider than comparable legislation elsewhere, including the US FCPA.
The “consent and connivance” provisions, similar to other legislation relating to the conduct of businesses (for example health and safety regulations), create personal criminal liability for senior officers if a company is deemed liable for one of the principal offences and a senior officer “consents or connives” in the commission of the offence. The definition of a “senior officer” is potentially wide, covering directors, managers, company secretaries and “other similar officers”.
The general offences of giving or receiving a bribe (sections 1 and 2) are committed if a person offers,gives, promises or receives an advantage which is intended to induce or reward “improper performance” or if it is known or believed that acceptance would in itself be improper. “Improper” performance means performance in breach of an expectation of good faith or impartiality or in breach of trust.
There is a separate offence of bribing a foreign public official (section 6). Questions were raised about the need for a separate offence and whether it should depart from the test for the general bribery offences. The offence was included in order to meet international obligations to deter and punish corrupt transactions in an international business context. In fact, the section 6 offence goes further than the OECD Convention in not requiring prosecutors to demonstrate any criminal intent or impropriety. This has caused concerned among the business community, particularly in connection with corporate hospitality.
To commit an offence, the briber must give an advantage simply intending to (a) influence the recipient in their capacity as a foreign public official; and (b) obtain or retain business or a business advantage. If an advantage is given to the official in such circumstances, an offence is committed.
It is not an offence if the official is permitted or required by the written law of the relevant country to be influenced in his capacity as a public official by the bribe: usually it doesn’t!
A “foreign public official” is widely defined as (1) an individual who holds a legislative, administrative or judicial position of any kind, whether appointed or elected, of a country or territory outside the UK (or any subdivision of such a country or territory); (2) an individual who exercises a public function for or on behalf of a country or territory outside of the UK or for any public agency or enterprise of that country or territory; or (3) an individual who is an official or agent of a public international organisation. It could, for example, include employees of sovereign wealth funds or state owned companies.
The principal offences under sections 1, 2 and 6 cover acts of bribery committed in the UK, irrespective of whether the “function or activity” under the offence takes place in the UK or abroad, and irrespective of the nationality of the person committing the bribery. The Act also extends to an act of bribery occurring overseas if it would have been a bribery offence in the UK and the person/entity committing the bribery is a British citizen, an individual ordinarily resident in the UK, or a UK incorporated company.
The corporate offence (section 7) will impose criminal liability on organisations in the event that any entity or person “performing services” for the organisation (including employees, subsidiaries, agents, joint ventures or consultants) pays a bribe in relation to the organisation’s business anywhere in the world. The bribe has to be paid intending to obtain or retain a business advantage for the organisation.
The jurisdictional reach is once again very wide, as it catches not only UK incorporated companies but also foreign companies “carrying on a business or part of a business” in the UK.
Vivian Robinson QC, General Counsel of the Serious Fraud Office (SFO), has said that “ [UK prosecutors] shall be able to prosecute those corporates if they are involved in bribery anywhere in the world. This will create a level playing field between corporates incorporated here and those incorporated elsewhere.”
Offences under the Act are punishable by an unlimited fine for corporates, and up to ten years imprisonment for individuals. In addition to the obvious reputational damage, companies convicted of corruption offences under the Act can also be debarred from tendering for public sector contracts in the UK. Debarment is discretionary in respect of the section 7 corporate offence.
There is only one statutory defence to the corporate offence: for the organisation to show it had adequate anti-bribery procedures in place. Once the prosecution has proved to the criminal standard that a bribe was paid (under sections 1, 2 or 6 of the Act), for the benefit of the company, the burden of proof will shift to the company to demonstrate that it had in place “adequate procedures”. This will be according to the civil standard of proof – the balance of probabilities.
The Ministry of Justice has issued Guidance on what constitutes adequate procedures for the purposes of the corporate offence. The Guidance was deemed a significant improvement on the initial draft by commentators, including Simmons & Simmons in their announcement of the release.
The final version of the Guidance on Adequate Procedures emphasises a proportionate and risk based approach to bribery risk, clarifies key concepts such as “carrying on a business in the UK”, reduces the number of parties on whom companies will be expected to conduct due diligence and shows more understanding of the limits of control in joint ventures. It is interesting to note that certain industry sectors, including energy and defence, already have advanced practices and procedures in place in this regard, and could guide the transition of less advanced sectors to similar levels of corruption prevention.
The introduction of the guidance clarifies exactly how it is to be used by organisations to assess the bribery risks they may face and adopt proportionate measures that work for their business and structure: “The guidance is […] formulated around six guiding principles, each followed by commentary and examples. The guidance is not prescriptive and is not a one-size-fits-all document. The question of whether an organisation had 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. The onus will remain on the organisation, in any case where it seeks to rely on the defence, to prove that it had adequate procedures in place to prevent bribery. However, departures from the suggested procedures contained within the guidance will not of itself give rise to a presumption that an organisation does not have adequate procedures. If [an] organisation is small or medium sized the application of the principles is likely to suggest procedures that are different from those that may be right for a large multinational organisation.”
The six guiding principles set out in the guidance are:
Principle 1 – Proportionate procedures: A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.
Principle 2 – Top-level commitment: The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.
Principle 3 – Risk Assessment: The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.
Principle 4 – Due diligence: The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.
Principle 5 – Communication and training: The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.
Principle 6 – Monitoring and review: The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.
The guidance is completed by case studies which look at how the application of the six principles might relate to a number of hypothetical scenarios businesses may encounter. Most of these scenarios relate to foreign markets, where bribery risks are deemed to be generally higher than in domestic markets. Some in particular have been noted by commentators even in the draft guidance.
One case study relates to facilitation payments, which remain prohibited under the Bribery Act as they were under previous anti-corruption legislation in the UK. The US FCPA on the other hand includes an exemption, albeit narrowly-defined, for these small bribes which are paid to facilitate routine government action.
Another case study relates to hospitality and promotional expenses, which should be “transparent, proportionate, reasonable and bona fide”, where “that any hospitality should reflect a desire to cement good relations and show appreciation, and that promotional expenditure should seek to improve the image of [the payer] as a commercial organisation, to better present its products or services, or establish cordial relations” and “the recipient should not be given the impression that they are under an obligation to confer any business advantage or that the recipient’s independence will be affected”.
The recommendation for businesses, including in the mining sector, to prepare for the implementation of the Bribery Act is to conduct an in-depth risk review, including a review of capital and services links which determine the scope of the Bribery Act in groups with UK links. This will inform the definition of internal policies, but also contractual wording in relevant agreements and third party vetting and monitoring procedures.