Publications

31 Mar 2011

The UK Bribery Act 2010: final guidance at last

FCPA Alert

Sharie A. Brown
Laura L. Flippin
Mitka T. Baker

The UK Ministry of Justice (MOJ) has published its final guidance on compliance with The UK Bribery Act 2010. 

The self-stated aim of the Guidance, issued on March 30, 2011, is to make “life difficult for the mavericks responsible for corruption, [but] not unduly burdening the vast majority of decent, law-abiding firms.” This anticorruption objective is consistent with comments that UK Secretary of State for Justice Kenneth Clarke made to DLA Piper LLP in February during meetings at the British Embassy in Washington, DC, regarding the UK being “business friendly” and reasonable.  The Act is now scheduled to come into force on July 1, 2011.

The Guidance provides specific interpretation of the bribery charges in the Act and sets forth six guiding principles, each with corresponding commentary and examples, designed to assist companies to put in place a tailored, risk-based approach to manage the specific bribery risks they face. The six principles articulated by the Guidance are (1) proportionate procedures; (2) top-level commitment; (3) risk assessment; (4) due diligence; (5) communication (including training); (6) monitoring and review. The principles, and their commentary, largely track the ideals and procedures followed by US companies that seek to comply with the FCPA, with a few exceptions.

The six principles guiding adequate procedures

Proportionate procedures: The Guidance suggests that companies adopt procedures that are proportionate to the risks it faces based on the nature, scale and complexity of its activities.  Close attention must be paid to the people associated with the company and the procedures should be a practical and realistic means to obtain its anti-bribery goals.

Top-level commitment: Similar to the FCPA’s focus on “Tone at the Top,” the second principle articulated in the Guidelines requires that top-level management, such as the board of directors, owners, or other governing bodies, make a commitment to create a culture in which bribery is considered inappropriate.  This commitment should be communicated both internally and externally, and tailored to the given audiences.

Risk assessment: The Guidance suggests that companies assess the internal and external risks of exposure to bribery (i.e., country risk, sectoral risk, transaction risk, business opportunity risk and business partnership risk). The assessment should be done one a periodic basis and well documented. When making such an assessment, attention to the things such as the nature of the business, its size, structure, and location should be considered.

Due diligence: The Guidance urges companies to conduct due diligence on the individuals and entities who perform services on behalf of the company. The company should consider its risk assessment when considering the extent of the due diligence conducted. Interestingly, the Guidance highlights that since employees are presumed to be “persons associated” with the company under the Act, that the company may also wish to conduct due diligence on its employees to help mitigate the bribery risk.

Communication (including training): Principle 5 of the Guidance stresses the importance of making sure the anti-bribery policies and procedures are clearly communicated and understood within the company.  The Guidance highlights the use of “speak-up procedures,” statements conveying “tone at the top,” prevention policies, and training as key components of this principle.

Monitoring and review: Principle 6 states that companies should monitor and review its anti-bribery procedures.  The Guidance stresses the changing nature of a company’s business, as well as governmental changes in countries the company works, as some of the reasons why periodic review is important.

Section 7: Specific guidance on failure to prevent bribery

The Guidance discusses in detail the bribery offenses under the Act – (1) offering, promising or giving a bribe under Section 1; (2) bribing a public official under Section 6; and (3) failing to prevent bribery on behalf of a commercial organization under Section 7. Of most importance to US companies is the potential for liability under Section 7, which on its face appears to have extensive territorial reach (even beyond that of the US anti-corruption laws) and could potentially create liability for companies that have little nexus with the UK.

Section 7 of the Act makes it a crime for a “relevant commercial organization” to have a “person associated” with it bribe another person to obtain business.  The term “relevant commercial organization” includes any company, regardless of place of incorporation, that “carries on business” in the UK.  The Guidance provides much needed clarification on how the government will interpret whether an organization “carries on a business” in the UK.  Notably, the Guidance suggests that US companies with a limited connection to the UK will not get “swept up” in liability under the UK Bribery Act. 

For non-UK companies, the Guidance suggests that a “common sense” approach will be applied and the facts of the case will be determined by a court.  It further suggests that a demonstrable business presence in the UK would be required.  Mere presence of a company’s securities on the London Stock Exchange does not necessarily constitute business presence in the UK.  Nor, does the mere fact that a company has a UK subsidiary, given that it may act independently, mean the non-UK parent was carrying on business in the UK.

The Guidance also provides clarification on who qualifies as a “person associated” with the company.  Although “person associated” is defined by Section 8 of the Act, the Guidance makes clear that this can include contractors, suppliers, and joint ventures. The specific facts of the case, such as existence of direct contractual relationship, will be considered. 

Reasonable business entertainment permissible

Companies previously raised concerns that reasonable business entertainment for government officials and others would violate the UK Bribery Act. Consistent with the UK Justice Minister’s comments to DLA Piper in February, the guidance makes clear that genuine, bona fide hospitality provided to government officials that is “reasonable and proportionate” for promotional purposes is not intended to be covered by the UK Bribery Act.  Indeed, the guidance expressly states that tickets to sporting events or taking clients to dinner will not be an offense under the UK Bribery Act, so long as it is reasonable and proportionate to your business. 

Facilitation payments still not permitted

Although the Guidance indicates that it recognizes the problems companies face regarding the use of facilitation payments throughout the world, it makes clear that facilitation payments are not permissible, and there is no exception for such payments under the Act. Instead of accommodating these types of payments, the Guidance encourages companies to fight to help eradicate the use of these payments throughout the world.  Criticizing the US exception for facilitation payments, the Guidance also notes the danger such payments pose to the integrity of anti-bribery laws. However, the UK Bribery Act’s approach to facilitating payments is not inconsistent with the prohibitions on those types of payment in other local country anticorruption laws.

Potential for cooperation credit

Although not specifically stated, the Guidance suggests that companies that have incorporated anti-bribery prevention procedures and choose to self-report an offense may receive “credit” or leniency.  Making reference to the Serious Fraud Office’s guidance – Approach of the Serious Fraud Office (SFO) to dealing with overseas corruption – the Guidance notes that the company’s willingness to cooperate will be taken into account when the government is determining whether to bring criminal proceedings.

Next steps before July 1

The guidance from MOJ and SFO discusses several other important issues for compliance with the UK Bribery Act. We recommend that companies promptly review their anticorruption procedures designed to comply with the UK Bribery Act and the US Foreign Corrupt Practices Act to ensure that current company anticorruption procedures fully comply with the recent final UK guidance. At DLA Piper LLP, we are available to assist you in all aspects of your compliance with the UK Bribery Act, the FCPA, and broader anticorruption compliance.

Read the guidance from MOJ and from SFO. 
 

For more information, please contact:

Sharie A. Brown

Laura L. Flippin

Mitka T. Baker