It is now 13 years since the UK committed to fulfil its obligations under the OECD Anti-Bribery Convention, and almost nine years since it became a signatory to the UN Convention against Corruption.

In that time, there has been an unremitting flow of effort aimed at transforming the UK’s complex Victorian laws on bribery and corruption into something more readily understandable and enforceable.

Now we finally stand on the eve of the UK’s new Bribery Act being brought into force.

The Ministry of Justice last week published guidance on the Bribery Act 2010, which marked the start of a 90-day countdown to the implementation of the act on 1 July 2011.

Common-sense approach

The act itself runs to just 17 pages and contains only four substantive offences.

But it is the scope of two offences in particular that prompted business leaders to voice concerns to ministers and others.

Section 6 (bribery of foreign public officials) and section 7 (failure of commercial organisations to prevent bribery) offences, have attracted criticism for being too widely drawn, introducing novel and undefined concepts and giving wide discretion to the Serious Fraud Office.

Comments by justice secretary Kenneth Clarke, along with the guidance, aimed to reassure companies that the act would be enforced with common sense and pragmatism, as previously signalled by the SFO.

The guidance, as expected, focuses on six high-level principles and advocates a risk-based, proportionate and common-sense approach to the design of policies and procedures.

It states that ‘the objective of the act is not to bring the full force of the criminal law to bear upon well-run commercial organisations that experience an isolated incident of bribery on their behalf’, and that ‘no bribery prevention regime will be capable of preventing bribery at all times’.

Organisations such as the International Chamber of Commerce (UK) and the Confederation of British Industry have welcomed the guidance, but others, including anti-corruption watchdog Transparency International, have described certain aspects as ‘deplorable’ and have complained that ‘parts of it read more like a guide on how to evade the act, than how to develop company procedures that will uphold it.’

Companies are keen to understand whether the guidance provides any tangible assistance on the act’s thorniest issues, such as: the UK’s jurisdiction over non-UK companies; the extent of third-party liability; and the boundary between acceptable corporate hospitality and a prosecutable bribe.

A question of jurisdiction

The guidance recognises that the courts will be the final arbiter of whether a non-UK company ‘carries on a business, or part of a business’ in the UK but states that ‘… the government anticipates that applying a common-sense approach would mean that organisations that do not have a demonstrable business presence in the [UK] would not be caught’.

It states that the government ‘would not expect’ a mere listing on the London Stock Exchange, or the presence of a subsidiary in the UK, automatically to bring a company within the reach of UK courts.

In most cases, it should be clear whether a company is carrying on a business or part of a business in the UK. Where there is room for debate, the intricacies need to be examined by companies and their advisers, and, in the worst case, by prosecutors and the courts.

Companies should be mindful that, in the appropriate case, prosecutors are likely to take a broad approach to powers conferred by the act.

As the director of the SFO has stated, he will be taking a ‘wide view of jurisdiction’ and will not be impressed with ‘overly technical interpretations’ of the act crafted to evade the UK’s jurisdiction.

Third-party liability – associated persons

A company will only be liable for the actions of associated persons – those performing services for it or on its behalf – if a bribe is paid by them with the intention of obtaining or retaining business or a business advantage for the company.

The guidance states that a bribe paid by an employee or agent of a subsidiary, for example, ‘will not automatically involve liability on the part of its parent company… if it cannot be shown the employee or agent intended to obtain or retain business or a business advantage for the parent company ...’

In practice this requirement is likely to stop liability travelling up too many links in the supply chain.

Corporate hospitality and other business expenditure

The guidance adopts a permissive tone on this topic.

It states that ‘bona fide hospitality and promotional, or other business expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations, is recognised as an established and important part of doing business and it is not the intention of the act to criminalise such behaviour’.

And its foreword urges companies to ‘rest assured’ as ‘no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix’.

It endorses reasonable and proportionate hospitality and expenditure, and states that the more lavish the offering, the greater the inference that it is intended to influence the granting of business or a business advantage in return.

Much of this is already part of the compliance mantra but the guidance also appears to sanction certain expenditure which would, today, receive critical scrutiny by compliance officers.

As an example, it envisages that the provision of flights, airport to hotel transfers, hotel accommodation, and even ‘fine dining’ and tickets to an event for a foreign public official as well as their spouse is ‘unlikely to raise the necessary inference’ to engage section 6, so long as there is a business rationale for the trip.

Facilitation payments

The guidance reiterates that there is no exemption for facilitation payments and sets out the Organisation for Economic Co-operation and Development position that such payments are corrosive and that exemptions create artificial distinctions.

Where an individual is forced to make a facilitation payment to ‘protect against loss of life, limb or liberty’, it states that ‘the common law defence of duress is very likely to be available’.

As for decisions on whether to prosecute, it defers to the Joint Prosecution Guidance.

Conclusion

Companies will welcome this guidance and will look to draw as much comfort as possible from its more permissive tone, but the reality is that global companies will not look at their UK exposure in isolation and will certainly not be rushing to relax their policies and procedures.

It is not much comfort for a company to avoid prosecution in the UK for interactions with foreign government officials for example, but to be in violation of their industry codes of conduct or be called to account in a US court for that same conduct.

Global companies will continue to be mindful of their global exposure.

Robert Amaee, counsel at the London office of Covington & Burling, is former head of anti-corruption and head of proceeds of crime at the UK Serious Fraud Office