REUTERS | Eric Thayer

Bribery Act 2010: too many questions, too few answers?

So, the Bribery Bill is now the Bribery Act. It’s passed Parliament but is not yet in force. The “old” law is in force until then. So what is going to change?

For me, the new Act poses many more questions than it currently answers. Here are a few of my concerns:

Will it be business as usual?

For some, business as usual may be paying bribes to foreign officials for lucrative overseas contracts (and hoping that nobody finds out).

However, we could just see a seismic shift under the “new world order” of honesty, transparency and “doing the right thing”.

Is a bribe still going to be a bribe?

Do we actually know for sure what a bribe was?

Apparently, corporate hospitality of the wrong kind could be a bribe. Corporate hospitality of the right kind might not be. So, where do you draw the line?

Was there really a problem with the old test that made a payment a bribe if it was made “corruptly”?

The new regime makes a payment a bribe if it is intended to “induce a person to perform improperly a relevant function or activity”. If the intention was to make the new law crystal clear, then the drafting of section 3 which explains what a “relevant function or activity is” hardly qualifies as clear.

Is this really global action?

From an English-registered company’s perspective, if you are doing business overseas and need to “grease the palms” of a recalcitrant police officer to get through a checkpoint, if you pay in “British Pounds” you will be committing an offence under English law.

However, if you pay in US Dollars, might the Rottweiler Department of Justice also have jurisdiction? But will the US authorities care? Arguably not, because, under the US’s Foreign Corrupt Practice Act 1977, these so-called “facilitation payments” are not bribes.

It’s all very well for a multinational “global” corporation to spend millions on policy documents, training and compliance. But what of the small, medium size enterprise moving into, say, China for the first time? How far do you have to go to ensure that you will not be prosecuted?

Business wants certainty: will they get that?

That certainty for business will be lacking until the Government publishes its promised guidelines, which are not expected until October 2010. Until then, nobody is really sure how far “compliance” should go.

In fact, “compliance” is hardly the right term. The Ministry of Justice made it plain that the new law did not create a “regulatory offence”. There is, in fact, no obligation to “comply”. There is certainly a risk assessment to be carried out and, for those exposed, some work will inevitably have to be done. Risk management more than compliance, I think.

What do you need to do to rely on your adequate procedures?

Nobody wants to fall foul of the new offence (which is different to the old law) of failing to prevent bribery. Companies will want to be able to rely on the so called “adequate procedures” defence, a bit like the health and safety legislation that allows, in certain circumstances, a company to defend a potential prosecution by showing it had a safe system of work in place, and that an accident was a one-off aberration.

Individuals (not companies) make corrupt payments. Being told not to do it does not guarantee that it will not happen, particularly in the so-called “red flag” jurisdictions overseas. However, companies will not have liability attributed to them if they can show that these individuals were “rogue elements” not acting in accordance with the policies and culture of the organisation.

What about local custom or practice?

Many who do business in, for example, Southern African states will know that if you do not make payments that English, American, international law and the laws of many other countries call “bribes” you cannot compete.

Does the new Act mean that you have no option but to give up and withdraw from those markets or face the risk of prosecution? You will have a defence under section 5 of the Act if it can be shown that the law applicable to the country or territory concerned permits or requires the making of the suspect payment. But note that has to be written law. Custom and practice is not going to be an excuse any more.

Are we imposing a value judgement?

Is it right for international law (formulated by Western society) to impose its value judgements on other cultures? Is this another step towards a single, global law that applies everywhere any time?

Changing social culture has challenged the best of us. Changing business culture will be no less challenging.

Can we afford to fund prosecution?

Furthermore, are the prosecuting authorities in England sufficiently funded (and even if they are now, will they continue to be in the future in the age of austerity) to resource investigations and pay for prosecutions?

The Serious Fraud Office (responsible alongside the Overseas Corruption Unit of the City of London Police) has the main responsibility for enforcing the old and the new law. The record there is not good (remember BAE?). The government’s assessment was that there would be just 1.3 more prosecutions a year under the new regime.

Mind you, if you do get it wrong, 10 years behind bars, a fine with no upper limit and being forced to hand over the profit realised on the unlawfully obtained contract (under money laundering legislation) may give pause for thought.

Should businesses write nothing down?

One suggestion has been to carry on as before, but to keep no records to make it harder for a prosecution to be proved. Maybe a practical suggestion, but hardly a strategy. Companies can be prosecuted for keeping inadequate records. That by itself could lead to a civil recovery order and having to hand over the profit anyway.

Turning yourself in and doing a deal with the prosecution like they do in America was apparently going to be the new way of doing things. But step forward the judge in Innospec who thinks it is for the courts and not the prosecutors to decide what the level of penalty should be. His view in that case was that the prosecution was not being hard enough!

Are increased legal costs inevitable?

Confused? If you are, during the passage of the Bill it was made clear that companies are expected to spend money on getting proper legal advice at home and abroad. A law that says you have to spend money with your lawyers sounds like a pretty good news for lawyers.

It remains to be seen whether the new law will provide clarity and certainty for business, or just more unanswered questions.

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