Dealing with bribery is a serious matter for the UK authorities. While a gift or treat might seem innocent enough, as Adam Bernstein explains, it can land a firm in hot water
Bribery is a global issue and one which the UK generally fares well in combatting. According to Transparency International’s annual Corruption Perceptions Index 2018, Denmark is the least afflicted country
(with a score of 88 out of 100), the UK comes joint 11th (with a score of 80), Kenya comes 149th while Mauritania is 150th, both with scores of 27. Bottom of the pile is Somalia at 180 with a score of just 10 out 100.
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Bribery is a serious matter, so consider what can happen when it is uncovered. In the US, in 2017, federally indicted bus company owner Richard Brega had to resign from his five companies, including one with a multi-million-dollar contract to run the Rockland bus service. In the UK, it seems difficult to find cases involving the coach and bus sector. But other transport-related firms have been caught out. Logistics and freight operations company F.H. Bertling Ltd and seven individuals were charged in 2016 with one count of making corrupt payments. Also in 2016, a Glasgow-based logistics firm – Braid Group – agreed to pay £2.2m to the Crown after it uncovered illegal bribery operations in its own organisation; and in 2017 it was announced that four rail firm employees involved with Alandale Rail – who paid or received bribes of at least £140,000 to rig a lucrative contract – had been sentenced to up to two years each in prison.
But it’s sufficient enough of a problem for Stagecoach, for example, to have a policy on whistleblowing that expressly covers “…bribery, fraud and other criminal activity, breach of competition/anti-trust rules…”
Defining bribery
According to Jeanette Burgess, a partner from the Regulatory team at Walker Morris, the Bribery Act 2010 simplified fragmented law on bribery and corruption that was previously split between common law and historic statutory provisions.
“The unified Act,” said Jeanette, “sent a clear message to organisations that has been mirrored in subsequent legislation including most recently in the Criminal Finances Act 2017 – that they must take steps to ensure their employees act with integrity and in an ethical and lawful way.”
The Act covers public and private sector bribery and applies to individuals, corporates and unincorporated organisations. The principal offences under the Act include paying a bribe, receiving a bribe, bribing a foreign public official and the failure of a commercial organisation to prevent bribery. Unlikely as it may be for the average business, as Burgess points out, they still need to be aware of the Act’s extra-territorial application. “For the offences of paying a bribe, receiving a bribe or bribing a foreign public official, the Act applies to bribery that occurs within the UK or bribery that is carried out by someone with ‘a close connection’ to the UK, even if it occurs outside of the jurisdiction.” Corporates face the same risks with an offence of failing to prevent bribery, anywhere in the world, by any person associated with the organisation, as long as the organisation is partly located within the UK.
Claire Burrows, a colleague of Burgess and a senior associate at Walker Morris, says that “ultimately courts have to consider whether the conduct in question amounts to a bribe.”
And that’s the problem. As Claire has found, in some cases this may seem clear cut, but in others it is far harder to ascertain. “In cases of corporate hospitality, for example, when does taking a customer out for dinner or to a local cricket test match cross the line from a simple ‘thank you’ or legitimate relationship building exercise, into the realms of bribery?”
The Ministry of Justice has made clear that the Act is not intended to prevent businesses from providing their customers with ordinary hospitality. This applies as long as the hospitality is reasonable and proportionate, and not in itself intended to influence an official and therefore secure a business advantage. Both Claire and Jeanette note that “it is important for organisations to consider the context in which gifts and hospitality are given very carefully, and with a mind to how a jury might interpret the conduct.”
The problem that most businesses face is that when dealing with the public sector or large corporates is that they generally need a policy as part of the tendering processes.
The impact on business
The big worry is the corporate offence – the failure of a commercial organisation to prevent bribery – as it can impact both an entity and individuals concerned. Continued Claire: “This offence is one of strict liability; it is irrelevant if the organisation had knowledge of or involvement in the bribe. Unless it can make out the only statutory defence (by demonstrating on the balance of probabilities that it had in place adequate procedures to prevent bribery), then it is automatically guilty of the offence.” This is deliberate policy on the part of lawmakers, to ensure that organisation and those at the top take their responsibilities seriously and cannot avoid liability simply by turning a blind eye to what is done in their name.
But joint head of bribery and corruption at the SFO, Camilla de Silva, has previously gone on record saying that it’s very hard to use the defence: “We saw last week (March 2018) the argument run for the first time and a jury rejecting a defence in a prosecution. I cannot comment on the prosecution… but, plainly if you are relying on the defence, corruption has been proved to have taken place which your procedures failed to prevent.”
Jeanette reckons that firms need to be aware that the Act makes them responsible for the conduct of any persons ‘associated’ with it, not only its own employees and officers “including employees, subsidiaries, business intermediaries and joint venture partners.”
It’s for this reason that she advises businesses to carry out appropriate due diligence on all employees, officers and third parties with whom it does business to verify their integrity and establish any history (or high risk of) corruption.
The risks
Ignoring the legislation risks harsh penalties. Individuals face up to 10 years imprisonment and/or an unlimited fine whilst corporate entities are subject to an unlimited fine based on the benefit derived from the bribe and the conduct of the organisation. Further, under the Proceeds of Crime Act 2002, the value of illegal deals may also be forfeited.
But Jeanette notes the “collateral consequences for firms include debarment from EU public procurement contracts and untold reputational damage. Convicted directors may be disqualified for up to 15 years.”
One alternative to prosecution highlighted by Claire is the self-reporting of alleged bribery to the SFO, full co-operation with the investigation and the potential for a DPA to be offered. This avoids a prosecution in exchange for a number of conditions imposed on them along with a substantial fine.
“There is no requirement for the organisation to admit guilt when entering into a DPA and by avoiding a criminal conviction, adverse PR is substantially reduced. Crucially, the organisation can also avoid debarment from tendering for public contracts. However, an organisation has no right to a DPA.”
To finish
Only time will tell how the law plays out, and unfortunately, businesses cannot go to the SFO for advice. A former director of the SFO, David Green, had previously stated “we do not give advice on what a good compliance programme looks like, or provide official guidance on adequate procedures. We are a prosecution agency, not a regulator. And of course, what is applicable to your business is dependent on the type of business we are talking about.”
The only solution is to take good advice before issues arise.
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