What you (still) may not know about the UK Bribery Act

by Cohen & Grigsby, P.C
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Business Law, International Law, Anti-Bribery

While many companies have implemented policies and procedures in response to the Foreign Corrupt Practices Act, as amended ("FCPA") that combat bribery by the organization, its employees and agents, many companies have not yet assessed or considered whether their existing efforts should be expanded in light of the UK Bribery Act of 2010 ("UKBA"). 

Those conversant on the differences between FCPA and UKBA may understand many of the key statutory differences, but it is important to make sure that these differences are reflected in an organization's compliance efforts.  When applying these statutory differences to implementing a practical compliance program, many more nuanced questions and issues may exist.  For example, does the UKBA apply at all, and if so, to what extent and which individuals?  Therefore, all existing anti-bribery and corruption policies should be reviewed to make sure they are sufficiently broad to prevent inadvertent violation of the UKBA and for an organization to have a valid defense available if such a violation occurs.

Those who were waiting for enforcement actions to determine how seriously to take UKBA should act now.  Recent UK headlines would suggest that Britian's Serious Fraud Office has gained confidence and credibility in its recent enforcement efforts, with its first successful prosecution and conviction in December 2014 of two individuals for bribery charges and a corporate bribery conviction. Below are some key questions that legal counsel or compliance and risk-mitigation officers should consider and explore when reviewing their existing anti-bribery and corruption efforts to make sure their practices are maximizing your organization's compliance efforts.

1.  UKBA is broader than the FCPA in the scope of conduct that is illegal.  Do you know how and what that means for your policy?

UKBA has been referred to as a "caffeinated younger sibling" of the FCPA.  For example, the UKBA is broader in scope.  UKBA applies to both bribing and being bribed.  UKBA is not limited to public officials, but applies to any individual whether in the public and private sector.  While these are several of many fundamental differences, it is important to understand these differences in crafting and tailoring a policy and in training individuals and third-party agents you may be dealing with in your business affairs.  A policy should consider all of the differences and be crafted to address any situation. 

2.  Are the right people being trained? 

Those who have specifically conducted FCPA training may have drawn the training lines based on who was covered by FCPA.  That list of attendees may be similar to, but not necessarily identical to, those who are covered by UKBA.  It is important to consider the list of attendees and make sure that the scope is sufficiently broad.  UKBA applies to United Kingdom nationals, individuals ordinarily residents in the United Kingdom, and companies headquartered and/or conducting business in the United Kingdom.  It also applies to non- United Kingdom citizens engaged in prohibited activities in the United Kingdom.  An organization is also responsible for its associated persons, which is intentionally broad and a fact specific analysis.  Therefore, it would be prudent for companies to make sure their policies and compliance efforts are broad enough to require compliance by persons that may be deemed to be "associated" with the organization. 

3.  What does "carries on a business" in the United Kingdom mean under Section 7(5) of UKBA? 

This is an unclear standard, and precedent may come.  Guidance published by the Ministry of Justice in March of 2011 indicates that organizations that do not have a demonstrable presence in the United Kingdom may avoid its application using a common sense approach. The Ministry acknowledges that there is no other guidance available at this point as to what that means, but they do suggest, for example, that a subsidiary of a parent might be excluded as long as it acted independently from its parent or group companies.  It also does not speak to whether the presence is physical, volume of business or marketing leaving open how this would be measured.  There also seems to be a control element from parent to subsidiary, which again, caution may suggest we should assume it may apply (even though if challenged, we want to take the position that it shouldn't and doesn't apply).  Therefore, absent judicial precedent or additional guidance, many companies that are not headquartered in the United Kingdom may be left to consider whether their business operations are significant enough to bring them within the jurisdiction of the UKBA. 

4.  Do you know if you are subject to the UKBA, and if so, does it apply to everyone in your organization or just a portion of the organization's business? 

Understanding your organization's business and understanding what its response has been to date when asked by others if UKBA applies is critical.  If the organization was asked to defend its position that UKBA did not apply, it is important for an organization's leadership to understand its position on this and to have a consistent voice.  Often times in the course of contracting or in the course of engaging third-party agents, questions will be asked about compliance with laws (either your organization is agreeing or certifying that it is complying with all laws or it is asking someone else to agree or certify they are complying with all laws).  You'll want to make sure you are complying with your own contracts as well as your statutory obligations.  Further, when dealing with third-party agents, you'll want to make sure they are well-versed in UKBA to the extent it could apply and that you are obtaining broad contractual protection from them as well.

5. Are you monitoring whether your business operations have or will change such that your organization becomes subject to UKBA?

Organizations that are expanding or changing their international business model and operations should have processes in place to make sure they are considering whether their compliance efforts should change as well.  Each country's risk profile is different, and a firm understanding of the risks specific to any one country (regardless of how much business is done there) should be assessed annually.  While many are used to assessing country-specific risks, they may be less in tune with assessing whether their business operations have changed in scope within a country.  Therefore, understanding intra-country changes is as important to understanding intercountry changes. 

6.  The UKBA has strict liability offense for organizations that do not have "adequate procedures".  Do you know what this means and whether what your organization is doing to meet this threshold test? 

Because it is unclear how broadly UKBA may be applied in its scope, it would be prudent to make sure that a defense is available to an organization in which UKBA may apply. Therefore, an organization may take the position that UKBA does not apply to it but may still choose to tailor its compliance program such that it would have a valid defense available if UKBA was found to apply.  Therefore, an organization that has any UK operations or employees or agents but believes UKBA would not apply may still decide to tailor its compliance program to be compliant with UKBA.  Doing so provides an organization with the ability to have a compliance program in place already if its business model changes, and an organization has comfort that a defense will be available should the organization's interpretation of UKBA prove wrong.

7.  Defenses that may be available to avoid an FCPA violation do not exist under the UK Bribery Act.  Does your FCPA policy permit conduct that may not be permissible if the UK Bribery Act applies? 

For example, under FCPA a local laws exception is available.  Namely, payments are allowed if they are expressly allowed under written laws or regulations of a foreign country.  While this is a limited exception, and one that should be considered very closely with legal counsel before relying upon it, there is no similar exception under UKBA.  No payments to a public official are allowed, unless part of a formal, publicized tendering or contracting process.

Similarly, many FCPA policies permit an individual to make a facilitating payment (often with a compliance officer's advance approval).  Facilitating payments are small payments to facilitate performance of a routine government action (i.e. expedited fee for non-discretionary task legally permissible to pay).  The most common example is an expedited fee for a non-discretionary visa approval.  There is no facilitation payment allowed under UKBA, though the Ministry of Justice has acknowledged that certain conditions (e.g. duress) may make prosecution less likely.

Understanding the answers to these questions is critical for businesses. 

First, consider the questions in the context of your own organization.  Do you know the answers?  Are these answers understood by those charged with business operations likely to be affected (board of directors, sales/procurement, accounting, those engaged with customs and freight forwarders, those who are engaging third-party agents on your behalf or those responsible for obtaining regulatory approvals)?

Second, review your policy, or if you do not have one, implement a policy that is tailored to your business organization and the universe of anti-corruption and anti-bribery laws that may apply.  Consider whether any adjustments should be made to the extent UKBA is found to apply with the universe of applicable laws. 

Finally, schedule your policy to be reviewed on an annual basis to consider whether changes are necessary or additional training is required.  The answers to the questions above, particularly question #3 can change over time (either due to new precedent or your organization's changing business).

Because the penalties for non-compliance for companies and individuals are severe and significant (civilly and criminally), those charged with compliance would be prudent to engage outside support in answering these questions and plan ahead.  Those following UKBA enforcement actions are still awaiting charges of a corporate organization for failure to prevent a bribe; however, those that wait for such action to be successful before taking UKBA seriously may be penny wise and pound foolish.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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