[authors: David Pang and Prajakt Samant]
The Organisation for Economic Co-operation and Development (OECD) has published a report (the Report) on the implementation and application in the United Kingdom (UK) of the OECD Convention on Combating The Bribery of Foreign Public Officials in International Business Transactions (the Convention). The Report sets out a number of recommendations on the application and enforcement of anti-bribery measures in the UK and evaluates the noteworthy progress achieved by the UK authorities since the last review in 2005.
The Convention requires all 38 signatory nations to implement and enforce criminal legislation prohibiting bribery of foreign officials. Adherence to the Convention is monitored by the OECD Working Group on Bribery (the Working Group), which conducts periodic reviews of the application of the Convention in each country that has ratified it. The Report is the latest step (phase 3) in the Working Group’s review of the United Kingdom, with previous phases being conducted in 2005 (phase 2) and 1999 (phase 1). The Report considers UK-specific issues arising from changes in anti-bribery law, most notably the introduction of the Bribery Act 2010 and related anti-bribery enforcement.
The Report commends the efforts made by the UK authorities to address the issues of facilitation payments and hospitality expenditure. In addition, it recognises that the UK authorities have made substantial efforts to promote anti-bribery legislation, such as the global publicity surrounding the introduction of the UK Bribery Act 2010. As a result, the Report concludes that there is now a heightened awareness of foreign bribery-related issues in the UK.
Further, the Report notes that the UK Serious Fraud Office (SFO) has increased its activity considerably in relation to foreign anti-bribery enforcement. The Report encourages continued support of the UK’s enforcement agencies to underpin the continued improvement of the profile of foreign enforcement actions.
Concerns Highlighted in The Report
Despite the recent anti-bribery changes in the UK, the Report outlines a number of concerns:
The UK lacks transparency in resolving bribery cases. The Report states that the UK authorities are increasingly reliant on civil recovery orders, instead of criminal plea agreements, to settle foreign bribery-related matters. In addition, the Report reveals that the SFO has entered into confidentiality agreements with defendants. This, the Report argues, results in a lower level of information being made available to the public, representing missed opportunities for the authorities to raise public awareness of foreign bribery-related issues.
Clarification is required in relation to certain aspects of the UK anti-bribery framework. For example, the Report calls for clearer definition of, and guidelines on, the significance of “reasonable and proportionate” hospitality and promotional expenditures and the process of self-reporting to the SFO.
The inability of UK HM Revenue & Customs (HMRC) to investigate suspected incidents if bribes have been deducted from income tax, despite this being a recommendation arising from an earlier phase of the Working Group’s review.
Progress in extending the Convention to UK overseas territories has been slow. The Report urges prompt action to be taken as some of these territories, for example, the British Virgin Islands, Bermuda and Gibraltar, have a reputation as offshore financial centres that could be regarded as high risk for corrupt transactions.
Anti-Bribery Recommendations for The UK
As a result of these concerns, the Report sets out a number of recommendations to enhance the implementation of the Convention:
The UK authorities should disclose publicly information relating to civil settlements of foreign bribery cases. This should, where possible, include detailed information of all the key facts, as well as the court documents and the settlement agreement itself. In addition, the UK authorities should avoid confidentiality agreements with defendants that prevent the disclosure of settlement information. While confidentiality agreements encourage the resolution of investigations, they concurrently minimise their usefulness as a deterrent.
Steps should be taken to clarify the meaning of “reasonable and proportionate” in relation to hospitality, especially in reference to industry standard practice. A consistent definition of facilitation payments should be used in all official anti-corruption material.
The SFO should establish clear procedures for bribery-related communications between the SFO and organisations. The procedures should distinguish plainly between the seeking of anti-bribery advice and the self-reporting of anti-bribery violations. All such communications should be disclosed publicly in writing, and including the advice and decisions of the SFO, unless such public disclosure would be inappropriate. As the UK Financial Services Authority (FSA) does not have a mandate to impose sanctions for foreign bribery, it is essential the SFO investigates and prosecutes allegations of foreign bribery, where appropriate, irrespective of action taken by the FSA.
HMRC should be more proactive in ensuring tax benefits are not claimed on the proceeds of bribery. After the conclusion of an enforcement action where allegations of bribery have been proven, HMRC should re-examine the defendants’ relevant tax returns to verify whether bribery-related tax deductions were made and recover the appropriate sums from the defendant.
As a matter of priority, the UK authorities should develop a strategy for implementing the Convention in its overseas territories. This strategy should include specific goals, practical steps and deadlines for implementation. Further, the Report recommends the jurisdiction of the UK Bribery Act 2010 is extended to legal persons incorporated in UK overseas territories.
The Report provides qualified approval of the UK anti-bribery framework and, therefore, it is notably more positive and supportive of the efforts made by the UK authorities to address bribery-related issues than previous reviews have been. However, the fact that the UK Bribery Act 2010 is still at its infancy, coupled with the various concerns and recommendations outlined in the Report, signifies that there is still considerable scope for the UK to improve its effort in combating bribery and corruption.
The UK Government is required to make an oral follow-up on the implementation of certain recommendations set out by the Report by 15 March 2013. In addition, by 15 March 2014, the UK Government must submit a written report on the implementation of all of the recommendations contained in the Report. Consequently, all organisations should be alert to future guidelines and statements published by the UK Ministry of Justice and the SFO, in order to stay abreast of the legislative changes concerning anti-bribery and corruption.
To view a copy of the Report click here.
Keo Shaw, a trainee solicitor in London, also contributed to this article.