Guidance on Bribery Act Still Disappoints

The British government has begun to provide specific guidance on how companies can avoid prosecution under the country’s tough new anti-bribery laws, but it will be little comfort to compliance executives—especially those at U.S. companies, still unclear when they might face prosecution.

Britain passed its Bribery Act earlier this year, stung by criticism that the nation was not taking bribery and corruption seriously. The law established a string of new offenses, including a new corporate offense of failing to prevent bribery. And unlike the U.S. Foreign Corrupt Practices Act, the law also criminalizes bribes paid to businesses as well as public officials, with no exception for small “facilitation payments.”

To make that onerous regime easier for companies to swallow, the Bribery Act does give companies a statutory defense: They can’t be convicted for failing to prevent bribery if they had “adequate procedures” in place aimed at stopping it. The problem? Nobody knew precisely what adequate procedures they were supposed to have.

The British government tried to ease that fear last month when it published draft guidance explaining what kind of anti-bribery controls might be deemed “adequate.” The guidance takes the form of six broad principles. Companies should asses bribery risk, have a clear tone from the top, conduct due diligence, have clear and practical policies, go beyond “paper compliance,” and monitor their controls.

Those principles should be familiar to any compliance executive who knows his way around the FCPA and the related U.S. Sentencing Guidelines. But lawyers say the correct application of those principles in the context of the Bribery Act is not entirely clear. In particular, lawyers were hoping the guidance would do more to explain how the government wants prosecutors to interpret two contentious parts of the Bribery Act: its ban on facilitation payments, and the treatment of corporate hospitality.

The guidance simply says that facilitation payments are banned, and that companies paying or offering them will only be prosecuted if it is in the public interest. On hospitality, the guidance accepts that companies can provide “reasonable and proportionate” hospitality that seeks to improve the image of a business and is “an established part of doing business.” When a permissible corporate treat might cross the line into a criminal bribe depends on the circumstances, the guidance says.

That ambiguity set law firms around London firing off legal bulletins.

“The government has clearly struggled with this and it is unlikely that business will be satisfied by the response,” the Ashurst firm said in its bulletin, which described the guidance overall as “cold comfort” to businesses. “The draft guidance is broad ranging and it will be difficult for a company to be confident that the procedures they have in place are indeed adequate,” the bulletin went on to say.

The law firm Freshfields Bruckhaus Deringer diplomatically lamented that the guidance is “likely to disappoint those hoping for clarity.” The lack of specifics “may be seen as being of assistance to the prosecutor rather than the organization under investigation,” it said.

“Companies whose procedures incorporate the concepts of promotional expenses or facilitating payments may find, when push comes to shove, that their procedures are not viewed as adequate.”

—William Barry,

Partner,

Richards Kibbe & Orbe

Freshfields singled out the treatment of business partners and intermediaries—a primary worry in FCPA compliance—as particularly worrisome under the Bribery Act. According to the guidance, companies are expected to take a “zero tolerance” approach to third parties that don’t pledge to do business without bribery. “What this might mean in practice is not discussed,” the firm complained.

The guidance says that a company should extend its anti-bribery procedures to cover any person or business under its “control,” but doesn’t explain further. “That does not greatly assist with the issue many businesses are struggling with—namely, to which entities is it expected that their anti-bribery policies and procedures should apply?” Freshfields said in its bulletin.

The firm added: “There is a lack of clarity in the guidance on these issues, and the government does not seem to have grappled with the very real practical concerns as to what business can in fact really be expected to do.”

Barry

William Barry, partner at the law firm Richards Kibbe & Orbe in Washington, D.C., says facilitation payments could become quite a headache. Facilitation payments are a gray area of bribery law under the best of circumstances, but they are still legal under the FCPA. For global companies whose compliance programs are predicated on that legality, the Bribery Act’s ban against them creates a conflict.

“To protect themselves, companies may have to adapt their training and shift their corporate culture with respect to such payments,” he says. “Companies whose procedures incorporate the concepts of promotional expenses or facilitating payments may find, when push comes to shove, that their procedures are not viewed as adequate.”

MINISTRY CONSULTATION QUESTIONS

The Ministry of Justice has prepared a number of questions to help individuals provide feedback on the draft guidance. Questions are provided below:

Question 1. Are there principles other than those set out in the draft guidance that are relevant and important to the formulation of bribery prevention in commercial organizations? If so what are they and why do you think they are important?

Question 2. Are there any procedures other than those set out in the draft guidance that are relevant and important to a wide range of commercial organizations? If so what are they and why do you think they are important?

Question 3. Are there any ways in which the format of the draft guidance could be improved in order to be of more assistance to commercial organizations in determining how to apply the guidance to their particular circumstances?

Question 4. Are there any principles or procedures that are particularly relevant and important to small and medium sized enterprises that are not covered by the draft guidance and which should be? If so what are they and why do you think they are they important?

Question 5. In what ways, if any, could the principles in the draft guidance be improved in order to provide more assistance to small and medium sized enterprises in preventing bribery on their behalf?

The deadline for responses is 5:00 p.m. on Nov. 8, 2010, and answers may be submitted

by e-mail to: Bribery.Act@justice.gsi.gov.uk; or mailed to:

The Bribery Act Implementation Team,

Ministry of Justice, 7.42,

102 Petty France, London SW1H 9AJ

To access the online questionnaire, click here.

Source

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align="left">Ministry of Justice Bribery Act Questionnaire (2010).

Barry says U.S. companies should refocus anti-bribery training to clarify differences between the FCPA and the Bribery Act before the law goes into effect (which, by the way, is April 2011). “Personnel should understand that practices that may have been viewed as acceptable under the FCPA construct may now expose the firm to liability,” he says.

The guidance also does nothing to help U.S companies understand when their activities might fall under British jurisdiction. Akin to the FCPA, the Bribery Act has extra-territorial reach: Britain reserves the right to prosecute any company for failing to prevent bribery if it “carries on a business, or part of a business, in any part of the United Kingdom.”

The guidance is silent on how Crown prosecutors will interpret that point, which is a “most surprising” omission, the law firm Gibson Dunn said in a bulletin. “What precisely it means to carry on business in the U.K. remains shrouded in mystery. We still do not know what nexus with the territory of the U.K. will subject an organization to this aspect of the act,” the firm said.

Meanwhile, Barry says, “Merely doing business in the United Kingdom may expose you to liability in the event of misconduct, regardless of whether the problematic payment had any connection to the United Kingdom.”

The guidance is out for consultation until November, and the government has promised to publish a separate policy paper before the act takes effect, explaining how the prosecuting authorities will interpret it.

The Serious Fraud Office has tried to reassure companies that it will only prosecute “serious” breaches of the act. But that doesn’t impress Barry.

“It is difficult for U.S. companies to take much comfort from the SFO’s assurances regarding use of discretion,” he says. “Companies need to understand what the law is and how it is going to be enforced. A company cannot build a compliance regime on the premise that the government may sometimes ‘look the other way’ when a violation occurs.”