Most would agree that the payment of corporate bribes, for example, giving a sum of money to a foreign government official to win a lucrative contract should be illegal under UK law. But should the company be liable if its senior management have no idea what its agents on the other side of the world are doing? What about paying an official a small amount of extra cash to get a foreign visa issued more quickly? And should payments made by a non-UK company outside the UK come under the scope of UK law? And what about if the company doesn't pay an official any actual cash, but entertains them at a dinner or drinks reception instead? How about on an all-expenses paid holiday complete with private jet?
The Bribery Act 2010 was created to answer some of these questions. At the moment, such issues are dealt with through a complex mixture of statutory (contained in legislation passed by Parliament) and common law (contained in case law judgments), some of which is over a hundred years old. In their place , the Act clarifies two existing offences: bribery and receiving a bribe; and establishes two new offences: bribing a foreign official and (for organisations only) failing to prevent bribery.
Pressure to enact the legislation has come from OECD (Organisation for Economic Co-operation and Development) anti-corruption initiatives - the UK is bound as a signatory to its 1997 anti-corruption convention to take steps against corrupt practices. The Act has also been seen as a response to the BAE Systems bribery scandal, which saw the former Labour Government drop an investigation into accusations that the defence company had engaged in unethical practices while conducting deals in Saudi Arabia.
Where does the Act stand now?
The Act received royal assent last April, but following pressure from sections of British industry, its implementation date has been delayed. While expressing condemnation of corruption, a segment of British business led by the Confederation of British Industry (CBI) has protested that the legislation is unclear, which has led the Government to halt its commencement while they prepare further guidance.
The Act has also met criticism from some in the corporate world who feel that its provisions could hamper the ability of businesses to function at a crucial stage of the UK's economic recovery from recession. They argue that the new legislation will penalise some hospitality activities which should be legitimate. It's worth noting that the Act will make the UK's anti-corruption provisions some of the fiercest in the world.
What aspects of the Act are causing the most controversy?
The first is the ï¿½failure to prevent bribery" offence. The old legal position was that if one of the company's agents was found guilty of bribery, the company itself was unlikely to face any criminal liability unless a member of senior management was aware of the occurrence of the illegal acts. Now, even if no-one senior is aware that a bribe has been given, a company can still be found guilty if they are deemed to have failed to have put adequate anti-bribery provisions in place in their organisation.
The second aspect causing some consternation is the continued illegality of ï¿½facilitation payments". These are small payments made to a government official or business associate to ensure that a duty is performed - an example would be the paying of a sum of money to get a visa issued more quickly mentioned above. These are common in some parts of the world and the US legislative equivalent to the Bribery Act - the Foreign Corrupt Practices Act - has a ï¿½carve-out" (an exception specified in legislation or a contract) for small facilitation payments.
A third unpopular aspect of the Act is the fact that is has extra-territorial scope - which means that any company which carries out some of its business in the UK could be liable under the Act for its activities anywhere in the world.
As for whether hospitality activities such as a dinner, drinks reception or all-expenses paid holiday would be deemed to be bribes, lawyers have deemed the current law ambiguous. The test specified in the Act for whether hospitality is bribery is whether a company has an ï¿½intention" to influence an official and could be deemed to cover corporate entertainment most would find acceptable as well as catching that which is clearly not. Companies have been given ï¿½comfort" (that is, unofficial reassurance outside the legislation) that they will not be prosecuted for activity which isn't improper, but many companies are hoping that the government guidance will provide clearer parameters on this issue.
Next steps for the Act
The anxiety the Act has created is such that justice secretary Ken Clarke spoke out to put the Act into perspective last week, telling The Financial Times that its provisions should not alarm anyone involved in legitimate business. He also reminded corporates of the negative impact corruption has on global trade and of its damaging effects on the world's poor. However, the OECD's threat last month to place the UK on an export blacklist (with the likes of Nigeria and Russia) may provide the best incentive for UK's corporates to accept this perhaps currently unclear but essential legislation.