Publications

16 Sep 2011

The first UK Bribery Act enforcement case: a sign of tougher things to come?

FCPA Alert

Sharie A. Brown
Simon Airey
Mitka T. Baker

Amid continuing concerns about the expansive jurisdictional reach of the UK Bribery Act and how it will be enforced by the Serious Fraud Office (SFO), the first prosecution under the Act was recently announced. 

Ironically, the first prosecution is against a UK court official, not a multinational company or its employees.  Less than two months after the Act came into force, the Crown Prosecution Service (CPS)¹ has charged a Magistrates Court clerk, Munir Yakub Patel, with violating Section 2 of the Act for allegedly accepting £500 for fixing a motoring offence (traffic violation). 

In its statement announcing the prosecution, the CPS asserted that it is “satisfied there is sufficient evidence to charge Munir Patel with requesting and receiving a bribe on 1 August 2011 intending to improperly perform his functions.”

What is the significance of this prosecution?

This case demonstrates that the Act is fully operational and that UK prosecutors are actively looking for anti-bribery cases to prosecute.  As the first prosecution under the Act, the CPS’s decision to charge a court official for fixing traffic tickets may create the impression that prosecutors will use the Act to go for low-hanging fruit.  However, a more accurate assessment is that the Act has made it easier to bring prosecutions for all kinds of corrupt activity and that UK prosecutors will take seriously every clear violation of the Act, no matter how big or small.  The case could also be a sign that UK prosecutors are as interested in prosecuting individuals for violations of anti-corruption laws as are the US Department of Justice and the US Securities and Exchange Commission.

While the first prosecution under the Act is not the multimillion-dollar bribery investigation that many may have expected, it does not mean that such a prosecution is not on its way.  Anecdotal evidence suggests that significant matters are already under active investigation. Companies should be mindful that the primary focus of the Act, as well as the related guidance, is to combat bribery by commercial organizations. 

Tougher stance on enforcement against companies than previously signaled?

Section 7 of the Act introduces what is essentially a new corporate “strict liability” offense of failing to prevent bribery of third parties by persons who are "associated" with the company (e.g., an employee, agent, sub-contractor, subsidiary or joint venture partner).  The only defense is for the company to demonstrate that it had in place "adequate procedures" that were designed to prevent such bribery.

On March 30, 2011, the Ministry of Justice (MOJ) published a 43-page document offering guidance to commercial organizations seeking to implement adequate procedures (the Guidance).  The Guidance indicated that a “common sense approach” would be applied to enforcement of Section 7 and set out six key compliance principles that ought to be taken into account, namely: (1) the need for proportionate procedures; (2) top (board) level commitment; (3) risk assessment; (4) due diligence; (5) communication and training; and (6) monitoring and review.  [Please see our Alert “The UK Bribery Act: final guidance at last.”] 

However, the MOJ stated that the Guidance is intended only to be illustrative, not prescriptive.  Indeed, the Guidance specifically emphasizes the need to devise policies and procedures that are tailored to the company’s individual circumstances and that “one size does not fit all.”  This inevitably creates uncertainty, which has been compounded by additional concerns about issues such as the jurisdictional reach of the Act and the likely approach to facilitation payments which are illegal under the Act.

Extraterritorial jurisdiction - did the long arm of the law just get longer?

Section 7 of the Act applies to any body corporate, regardless of where it is incorporated, "which carries on a business, or part of a business, in any part of the UK."  Section 12 of the Act makes it clear that an offense is committed under Section 7 irrespective of whether the acts which form part of the offense take place in the UK or elsewhere.

In an effort to alleviate concerns about the wide jurisdictional reach of this section, the MOJ Guidance states that:

The Government would not expect... the mere fact that a company’s securities have been . . . admitted to trading on the London Stock Exchange, in itself, to qualify that company as carrying on a business or part of a business in the UK and therefore falling within the definition of a ‘relevant commercial organization’.

 However, Richard Alderman, director of the SFO, recently confirmed that he would adopt a more “aggressive” interpretation of the Act.  On the day the Act came into force, Alderman gave an exclusive interview to The Daily Telegraph newspaper indicating the SFO’s intention to take a stronger stance than expected. [Please see our Alert, “Bribery Act – tough stance from the SFO.”] In direct conflict with the MOJ Guidance, Alderman stated:

You bet we will go after foreign companies [listed on the London Stock Exchange].  This has been misunderstood.  If there is an economic engagement with the UK then in my view they are carrying on business in the UK. 

Alderman has also asserted that the SFO intends to take a “tough line” on large business and that he specifically intends to “go for the difficult cases.”  Significantly, Alderman also invited competitor companies and whistleblowers to “tip [him] off and tell [him] there was corruption” so that the SFO can “take courageous action against these foreign companies.”

Unlike the CPS, the SFO has not yet brought its first anti-bribery prosecution under the Act, but when it does, it promises to be significant.

When signals are mixed - how to comply

The fact that UK prosecutors decided to bring a prosecution in a relatively small matter indicates that the Act is actively being enforced just two months after it came into effect.  This makes it important for companies to ensure that their anti-corruption compliance programs are up to date and actively implemented.  It should be noted that the Act differs from the FCPA in many significant respects. The least that an international entity ought to do is conduct a gap analysis and upgrade its policies and procedures to ensure that they are in compliance with UK legislation and other relevant anticorruption laws.  In many instances, this need not be a significant undertaking.

For further information, please contact:

In the US:

• Sharie Brown, Co-Chair, Foreign Corrupt Practices Act, Anti-Corruption and Corporate Compliance Practice
• Jonathan King, Co-Chair, Foreign Corrupt Practices Act, Anti-Corruption and Corporate Compliance Practice
• Mitka Baker, Associate, Litigation

In the UK:

• Simon Airey, Head of Corporate Crime, Investigations and Compliance
• Jo Rickards, Head of Corporate Crime, Investigations and Compliance