Global Financial Integrity Responds
The goal of FCPA Professor (see here) is to foster a forum for critical analysis and discussion of the FCPA (and related topics) among FCPA practitioners, business and compliance professionals, scholars and students, and other interested persons.
With that goal in mind, I asked Heather A. Lowe, Esq. (Legal Counsel & Director of Government Affairs, Global Financial Integrity (“GFI”)) to consider a guest post to respond to my criticism last week of certain of GFI’s statements in connection with the House FCPA hearing (see here for the prior post).
I am glad she accepted and below is Ms. Lowe’s guest post.
If other readers want to make their voice heard on the topic of FCPA reform as well, please consider FCPA Professor as a suitable forum.
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I appreciate the invitation from Prof. Koehler to provide some comments on this forum as a guest blogger.
On June 14, 2011, Prof. Koehler commented (here) on documents provided by Global Financial Integrity and other civil society organizations and GFI’s press release (here) circulated on Monday, prior to the House of Representatives’ hearing on the FCPA. Additional arguments are included in GFI’s formal submission (here) for the record at the hearing. Karen Lissakers, Director of the Revenue Watch Institute, and Corinna Gilfillan, Head of U.S. Office at Global Witness, each provided statements (see here and here) for the hearing record as well. I am sure readers will find our full submissions to be of interest.
One of the primary reasons that GFI wanted to provide a submission for the hearing was to ensure that Members of Congress were aware that (a) businesses and the Department of Justice were not the only stakeholders with views to be considered in this discussion, (b) proposed changes to the FCPA must be considered within an international context, and any changes will have international implications, and (c) there are strong economic arguments for carefully considering changes to the FCPA that might lead to a reduction in enforcement.
Anti-bribery laws are not enacted in this world without years of blood, sweat and tears from anti-corruption campaigners around the world, and I don’t expect that they will be willing to lose ground on this flagship anti-bribery legislation without making their voices heard. When I say “blood, sweat and tears” I literally mean blood, sweat and tears. There are activists around the world who have been threatened with violence, jailed and even killed over the years to achieve the progress that has been made. It would be inaccurate, therefore, to believe that corporations are the only ones with “skin” in this game.
GFI would not presume to speak on behalf of these organizations without their permission, but we did not want to miss the opportunity to provide at least one civil society submission as a place-holder for a critical group of stakeholders.
We appreciated Prof. Koehler’s comments on the documents he posted. We are trying to begin a meaningful dialogue on these issues that more civil society organizations with direct experience in the field, around the world, can join. His comments demonstrate that we have been successful in starting that conversation.
Prof. Koehler did not invite me to blog for my motivational comments, however. He would like me to respond to his post of June 14, 2011.
Apart from quoting the opinion of a former SEC Commissioner in a statement made 20 years ago
• during a hearing on bills proposing changes that the Professor considers to be similar to changes being proposed today,
• which were ultimately never adopted by Congress, and
• during a time preceding the international proliferation of anti-bribery conventions and national laws that we have to support our FCPA enforcement efforts today,
Prof. Koehler seems to be focusing on two main subjects: the proposed amendment to further define “foreign official” and the proposal to include a compliance defense in the FCPA.
The Professor refers to the UK Bribery Act Guidance to shore up his position in support of creating a compliance defense for companies. The U.S. Chamber refers to the UK Bribery Act (the “UK Act”) itself to support its position that a compliance defense is a reasonable amendment to request. The compliance defense in the UK Act should not be taken out of context, however. It must be viewed in light of the other provisions of the UK Act. The UK Bribery Act criminalizes ALL forms of commercial bribery. The FCPA criminalizes only payments made to foreign officials. The UK Act does not permit facilitation payments. The FCPA permits facilitation payments and has an express provision creating an affirmative defense for reasonable travel and lodging and other types of expenses one might incur as a “host” of a trading partner. The UK Act’s extraterritoriality provisions have been described as more far-reaching than the FCPA’s.
The U.S. Chamber’s proposals to amend the FCPA are entitled “Restoring Balance.” The UK Act’s compliance defense could conceivably be seen as an attempt to balance provisions that go well beyond those of the FCPA. A compliance defense in the FCPA would, in fact, be out of balance when viewed in full context. However, if there is a genuine move to bring the FCPA in line with the UK Bribery Act then let’s talk!
I also found it interesting that the Professor referenced the UK Bribery Act Guidance in his support of the compliance defense. The Guidance he refers to is the Guidance from the UK Ministry of Justice. At the very beginning of that document, in paragraph 4, the Ministry states, “The question of whether an organisation had adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts taking into account the particular facts and circumstances of the case. The onus will remain on the organisation, in any case where it seeks to rely on the defence, to prove that it had adequate procedures in place to prevent bribery. However, departures from the suggested procedures contained within the guidance will not of itself give rise to a presumption that an organisation does not have adequate procedures.”
So, what does a compliance defense actually accomplish in the UK? A company still has to prove that it had adequate procedures in place to prevent the criminal activity (which means all of the investigation into what actually took place must still be undertaken) and the matter still has to be adjudicated by the courts. Compliance in the UK is not an absolute defense that can be relied upon to avoid the cost of investigation and litigation at all, as seems to be the idea behind the U.S. Chambers’ proposal! The burden on a UK company is, in practical terms, the same as that of a company defending an FCPA violation under the current form of the statute.
Prof. Koehler characterized some of my statements as “unsophisticated” and “naïve,” so I was surprised by his argument that the real reason that companies want a clearer definition of “foreign official” is so that they can more easily determine who they can take out for a round of golf and a few drinks at the 19th without thinking too hard about it. While I do not doubt that this is something companies do have to think about, I stand by my statement that a clearer definition of foreign official can just as easily be used to determine who a company can bribe and who it can’t bribe and I am not naïve enough to think that this isn’t a frequent question. Let’s get on board with the UK on this one and just not bribe anyone.
I will say, however, that I think I have a fairly accurate view of what motivates corporations. Corporations are motivated by their bottom line and their cost/benefit analysis. There are externalities that also factor into decisions, like reputational risk, but in the end the externalities are quantified and factored in. This is not a bad thing – corporations exist to make money and are vital to support a strong economy.
For the reasons set forth in GFI’s submission, I don’t think that most companies set out to engage in bribery, unless they do not have the attributes to be truly competitive in the market they are entering in the first place (which should not be overlooked as a possible motivating factor). When faced with a bribe, however, the choice on the spot may be perceived to be one of paying a bribe or losing business worth many times the value of the bribe. A strongly enforced FCPA makes that bribe much more expensive in any cost/benefit analysis.
The perception that the choice a company is making is whether to pay a bribe or lose the business is where we should be focusing our energy, however. Many companies have created strategies, policies and outreach to governments in the countries in which they operate in order to ensure that it is understood by those with whom they do business that they are subject to the FCPA and cannot pay bribes. We are pretty sure that the whole notion of the FCPA isn’t a surprise to their business counterparts when the subject is raised.
As I stated in GFI’s submission for the hearing, “Some companies, like Newmont Mining, view the FCPA in a positive light. Newmont Mining, based in Colorado, is the second largest gold mining company in the world. Newmont’s Director Corporate & External Affairs for Africa, Chris Andersen, stated during a panel discussion at the Extractive Industries Transparency Initiative Global Conference in March of this year that,
“…Newmont’s experience, particularly in Africa, has been that FCPA has been an enormously valuable protective device for us…when you have a government person saying…‘we’ll give you that license if you buy us a car or something’…it’s not about look ‘I’m a mean guy and I don’t value our relationship, and therefore I’m not going to give it to you,’ you say ‘look, there’s a law out there that means I’m going to go to jail if I do that, I’m not going to go to jail for you or anybody else.’”
There are many more arguments to be made on all sides of this debate, I have no doubt. Let’s make sure that all relevant voices are being heard moving forward.
House Hearing – Pregame
Yesterday, Global Financial Integrity (“GFI”) and The Task Force on Financial Integrity and Economic Development issued identical press releases (here and here) regarding today’s House Judiciary subcommittee hearing on the FCPA (see here).
The releases, titled “Foreign Corrupt Practices Act Under Attack” portray today’s hearing as a U.S. Chamber of Commerce sponsored event and states as follows. “Among other things, the hearing will specifically consider amendments proposed to the act by the U.S. Chamber Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce, which FCPA-proponents charge will significantly weaken the anti-corruption legislation and undermine efforts to tackle corruption and illicit financial practices abroad. The Chamber’s proposed changes would seriously undermine one of the most important anti-corruption statues we have on the books. […] This is a blatant attempt by the business lobby to limit accountability and reduce a company’s risk of prosecution for paying bribes. It is a real threat to global efforts to stamp out corruption and foster economic development.”
GFI legislative affairs director and legal affairs council Heather Lowe states as follows. “With the exception of [the DOJ witness – Greg Andres], the witness lineup represents commercial interests. There is no witness on the panel representing those who are working to fight corruption without a commercial interest or government policy driving their testimony. Members of Congress need to have an opportunity to hear those voices as well.”
Attached to the releases are two documents.
The first document is titled “Concerns About the U.S. Chamber Institute of Legal Reform’s Proposals for Amending the FCPA.” (For a copy of the Chamber’s reform proposals – see here).
The document addresses five topics: (i) limiting liability of a parent company for acts of its subsidiaries; (ii) defining “foreign official”; (iii) allowing companies with compliance programs to escape liability (compliance as an affirmative defense); (iv) limiting the liability of a successor company for the prior acts of a company that has merged into it or that it has acquired; and (v) adding a “willfulness” requirement for corporate criminal liability.
As to “foreign official,” the document states as follows. “The U.S. Chamber is promoting the creation of a definition of “foreign official” so that companies have greater legal certainty. Greater certainty of what? Greater certainty of who they are permitted to bribe and who they are not permitted to bribe.”
In all due respect, this is a naive statement.
As I noted in this article, because of the enforcement agencies’ current interpretation of “foreign official,” those subject to the FCPA are spending significant time and money investigating the ownership structure of foreign customers and potential customers for any trace of foreign government ownership or control. Such a costly investigation, often involving lawyers and other investigative firms, is not motivated by the company’s desire to make improper payments to the foreign customer or potential customer to obtain or retain business should the investigation reveal no foreign government ownership or control. Rather, the costly investigation is often motivated for the simple reason that the company wants to treat these foreign customers the same as it treats its other customers. That means hosting such customers at corporate events in which some fun may take place (e.g., golf) or inviting such customers to an industry trade show—events that often take place in tourist locations. Companies fear providing such “things of value” to a “foreign official” (under the enforcement agencies’ interpretation) even though the company is legitimately and legally providing the exact same thing to its non- “foreign official” customers or potential customers. It is highly questionable whether Congress foresaw company lawyers being involved in the simple decision of whether to invite a particular customer to the company’s golf outing or trade show.
As to a potential compliance defense, the document states as follows. “If a company is found to be in violation of the FCPA, then the existence of a company’s compliance program must not have prevented the acts of bribery. So why should the existence of their compliance program be a defense to the charge of bribery?”
Again, an unsophisticated statement.
For instance, the U.K. Bribery Act Guidance (here) states as follows. “The objective of the Act is not to bring the full force of the criminal law to bear upon well run commercial organizations that experience an isolated incident of bribery on their behalf.”
“[N]o bribery prevention regime will be capable of preventing bribery at all times.”
“[A] commercial organization will have a full defense if it can show that despite a particular case of bribery, it nevertheless had adequate procedures in place to prevent persons associated with it from bribing.”
Similarly, in a 1981 FCPA speech (to be profiled in a future post) the SEC Chairman noted as follows. “The test of a company’s internal control system is not whether occasional failings can occur. Those will happen in the most ideally managed company. But, an adequate system of internal controls means that, when such breaches do arise, they will be isolated rather than systemic, and they will be subject to a reasonable likelihood of being uncovered in a timely manner and then remedied promptly. Barring, of course, the participation or complicity of senior company officials in the deed, when discovery and correction expeditiously follow, no failing in the company’s internal accounting system would have existed. To the contrary, routine discovery and correction would evidence its effectiveness.”
Elsewhere in the speech, the SEC Chairman stated as follows. “If a violation was committed by a low level employee, without the knowledge of top management, with an adequate system of internal control, and with appropriate corrective action taken by the issuer, we do not believe that any action against the company would be called for.”
This speech was given during the same general time frame when Congress was last seriously considering substantial FCPA reform in the 1980’s. Numerous FCPA reform bills included a specific defense which stated a company would not be held vicariously liable for a violation of the FCPA’s anti-bribery provisions by its employees or agents, who were not an officer or director, if the company established procedures reasonably designed to prevent and detect FCPA violations by employees and agents. An FCPA reform bill containing such a provision did pass the U.S. House.
In my forthcoming scholarship, “Revisiting an FCPA Compliance Defense” (to be presented at the Wisconsin Law Review symposium – see here), I argue that amending the FCPA to include a compliance defense (a defense found in the “FCPA-like” laws of other nations) will best incentivize corporate FCPA compliance and not put a company at risk of FCPA scrutiny, costly FCPA internal investigations, and the growing collateral consequences of FCPA inquiries should a non-executive employee engage in conduct contrary to a company’s pre-existing FCPA compliance policies and procedures and compliance culture.
The second document attached to the GFI releases is titled “The Foreign Corrupt Practices Act in Context.” The 2 page document ends with the following in red caps. “WE HAVE SHOWN THE WORLD THAT THE U.S. IS SERIOUS ABOUT COMBATING BRIBERY, AND THE WORLD IS FOLLOWING OUR LEAD. WEAKENING THE FCPA NOW WILL SEND A MESSAGE TO THE WORLD THAT THE U.S. IS SOFT ON CORRUPTION AND OUR COMPANIES ARE DEEP POCKETS FOR BRIBE-SEEKERS. THE U.S. SHOULD FOCUS ON ENCOURAGING WORLDWIDE ENFORCEMENT, NOT CRIPPLING A STATUTE THAT HAS BEEN THE MODEL FOR INTERNATIONAL ANTI-BRIBERY LEGISLATION.”
Enjoy today’s hearing.
Something To Think About
The holiday weekend is upon us and perhaps you have already left the office.
Here is something to think about over the long weekend.
India’s Chief Economic Adviser, the economist Kaushik Basu, recently posted a paper titled “Why, for a Class of Bribes, the Act of Giving a Bribe Should be Treated as Legal” (here).
The abstract is as follows.
“The paper puts forward a small but novel idea of how we can cut down the incidence of bribery. There are different kinds of bribes and what this paper is concerned with are bribes that people often have to give to get what they are legally entitled to. I shall call these harassment bribes. Suppose an income tax refund is held back from a taxpayer till he pays some cash to the officer. Suppose government allots subsidized land to a person but when the person goes to get her paperwork done and receive documents for this land, she is asked to pay a hefty bribe. These are all illustrations of harassment bribes. Harassment bribery is widespread in India and it plays a large role in breeding inefficiency and has a corrosive effect on civil society. The central message of this paper is that we should declare the act of giving a bribe in all such cases as legitimate activity. In other words the giver of a harassment bribe should have full immunity from any punitive action by the state.
It is argued that this will cause a sharp decline in the incidence of bribery. The reasoning is that once the law is altered in this manner, after the act of bribery is committed, the interests of the bribe giver and the bribe taker will be at divergence. The bribe giver will be willing to cooperate in getting the bribe taker caught. Knowing that this will happen, the bribe taker will be deterred from taking a bribe.
It should be emphasized that what is being argued in this paper is not a retrospective pardon for bribe-giving. Retrospective pardons are like amnesties. They encourage rather than discourage corrupt behavior by rewarding the corrupt. And, in the process, they corrode society‘s morals.”
See here for the recent CNN segment “What in the World” for more on Basu’s proposal as well as other innovative ideas to reduce bribery and corruption.
The solution Basu addresses would seem most applicable to domestic bribery where a prosecuting agency has jurisdiction over both the bribe payor and bribe recipient. That is not the case in a typical FCPA scenario, but Basu’s paper and proposal is indeed interesting, thought provoking material.
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Finally, a previous post (here) discussed customer rewards programs and the SEC’s interest in RAE Systems.
Turns out there is an interest in this general issue on the other side of the Atlantic as well.
The office of Richard Alderman (Director of the U.K. Serious Fraud Office) alerted me to a recent speech he gave (here) at the 2011 International Medical Device Industry Compliance Conference. In the speech, Alderman talked about the soon-to-go live Bribery Act, self reporting, and the SFO’s relationship with the DOJ.
Alderman also talked about “incentive payments” and stated as follows.
“What I am also seeing is corporates having a hard look at some of the arrangements that are in fact justifiable for commercial reasons but which have not been scrutinized before with a view to seeing whether or not there are risks of bribery. Let me give you an example. Incentive payments. These are a common feature of many industries and I suspect of your own as well. I know that a number of companies and a number of industry organisations have been looking at this issue in order to see whether there are risks when the Bribery Act comes into force. We have had a number of meetings in the SFO with corporates and industry bodies about this issue. We have been able to talk through the issues and offer reassurance.
Clearly, these incentive payments are normally designed for commercial reasons and are commercially justifiable. There are risks though. What we have been talking about with corporates is the need for transparency and, in particular, the need to know where the money goes and the fact that it is justifiable. We also talk about the need for a senior person at the corporate’s head office to have visibility of what is happening and to be satisfied that what is happening is justifiable.
This may well be a feature of your own industry (and indeed I imagine that it probably is) and it may be that this is something that you want to discuss.”
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A good weekend to all.
UK Bribery Act – Sensible and Senseless
The U.K. Bribery Act, set to go live on July 1st after much delay, has been the focus of much prognostication and the foundation for many marketing initiatives.
In this post, I highlight two recent events – one sensible, the other senseless.
Sensible
Mark Miller (a partner at Baker Botts – see here) recently published “The U.K. Bribery Act 2010 – Enforcement is the Rest of the Story” in BNA’s White Collar Crime Report. See here.
Miller sensibly notes as follows.
“Much of the commentary about the new U.K. Bribery Act 2010 has been filled with alarm that the new law will be even stricter—and therefore more dangerous—than the U.S. Foreign Corrupt Practices Act. Although there are ways in which the Bribery Act is stricter than the FCPA, that is not the whole story. The real measure of how dangerous the Bribery Act will be is not the provisions of the law itself but how that law will be enforced, and from indications so far, that is a big unknown.”
Countering alarmist commentary of the Bribery Act – including that it represents a major change in law because facilitating payments are not allowed – Miller rightly points out “the predecessors to the Bribery Act (the Prevention of Corruption Acts 1889 to 1916 and the Anti-Terrorism, Crime and Security Act 2001) did not have exceptions for facilitating payments either …”.
Indeed this same point was noted by the U.K. Ministry of Justice in its March 30th guidance (see here). Can anyone point to a prior U.K. enforcement action concerning facilitating payments?
Miller also notes as follows. “The other Bribery Act provision usually pointed to as being stricter than the FCPA is the new offense described in Section 7, failure of commercial organizations to prevent bribery.” However, Miller again sensibly notes as follows. “This appears to create a strict liability standard for companies whose employees, officers, or agents engage in bribery on their behalf. Although the FCPA itself contains no analogous provision, the standard in U.S. law for attributing criminal liability to corporate entities is similar. The more important distinction between the Bribery Act and U.S. law is that the former contains a defense for when the corporation is able to “prove that [it] had in place adequate procedures designed to prevent persons associated with [the corporation] from undertaking such conduct.'”
As to the Bribery Act’s coverage of purely commercial bribery, Miller states as follows. “Another aspect of the Bribery Act has been pointed to as being broader than the FCPA: its prohibition against bribery of nongovernmental officials.” Here again, Miller sensibly points out as follows. “True, the FCPA itself does not contain such a provision, but U.S. law does. The federal government routinely uses other statutes—such as the Travel Act and the mail and wire fraud statutes—to prosecute conduct that would not fall strictly within the FCPA’s prohibitions.”
Miller then notes as follows. “The real story here is not the Bribery Act itself, because there is nothing truly revolutionary about it – except possibly the publicity it has generated. The real story is enforcement, and how the SFO will carry out its duties remains a big question mark.” Miller then identifies several “reasons to believe that the SFO’s enforcement of the Bribery Act will turn out to be a less serious threat than U.S. enforcement.”
All sensible observations and consistent with my own observations that “the Bribery Act may turn out to be more lenient than the FCPA” (see here) and that “enforcement of the U.K. Bribery Act will be disciplined and measured.” (See here).
Senseless
The alarmist commentary Miller spoke of in the above article was on display last week as Deloitte issued a press release (here) stating that “few business professionals are familiar with UK Bribery Act taking effect July 1.”
According to Deloitte’s own survey results – results not actually released – 73% of “business professionals” participating in a Deloitte webcast “earlier this year” said “they are not familiar with provisions in the U.K. Bribery Act.” The leader of Deloitte’s FCPA “consulting services practice” is quoted as saying that “organizations should focus on expanding their anti-corruption programs beyond FCPA to fully address the new Bribery Act 2010 provisions.”
What Deloitte’s release doesn’t mention is that its own survey took place on January 18th (see here) – a time when it was uncertain if or when the Bribery Act would ever go live and a full two months before the U.K. Ministry of Justice released (here) extensive guidance and case studies on the Bribery Act.
Against this backdrop, it is surprising not that 73% of “business professionals” were not “familiar” with the Bribery Act, but that 27% of “business professionals” were familiar with the Bribery Act.
Is it often that the majority of “business professionals” are “familiar” with a foreign law months before the law is scheduled to go live?
Robert Amaee on U.K. Bribery Act Guidance
Yesterday, in a much anticipated development, the United Kingdom Ministry of Justice released (here) its long awaited guidance (here) as to the U.K. Bribery Act – a delayed law now set to go live on July 1, 2011.
The U.K. Serious Fraud Office, the U.K. law enforcement agency tasked with enforcing the Bribery Act, also issued a release (here) and prosecuting guidance (here).
In this guest post, Robert Amaee (the former Head of Anti-Corruption and Proceeds of Crime Unit at the U.K. Serious Fraud Office and current counsel with Covington & Burling LLP in London – see here) provides insight and analysis of the U.K. developments.
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The Bribery Act: Countdown to Implementation
The UK Ministry of Justice yesterday published its long awaited Bribery Act 2010 (the “Bribery Act”) guidance entitled “Guidance about procedures which relevant commercial organisations can put in place to prevent persons associated with them from bribing (section 9 of the Bribery Act 2010).” This publication marks the official start of a ninety day countdown to the implementation of the Bribery Act which will now be brought into force on 1 July 2011.
Companies that already have reviewed and updated their anti-bribery and corruption procedures will be ahead of the game but will still need to study the new guidance to see what, if any, further amendments may be required. Those who have yet to complete the process of updating their procedures to ensure compliance no doubt will draw a modicum of comfort from the fact that they have a further ninety days in which to digest and absorb the guidance and implement the necessary policies and procedures.
The comments made by the Minister of Justice, Ken Clarke QC MP, and the guidance itself aim to reassure companies that the Bribery Act will be enforced with common sense and pragmatism.
The Minister of Justice ushered in the guidance by saying that “[t]he ultimate aim of [the Bribery Act] is to make life difficult for the minority of organizations responsible for corruption, not to burden the vast majority of decent and law-abiding businesses.”
That is a message that prosecutors at the UK Serious Fraud Office (“SFO”) — the organisation tasked with leading enforcement efforts under the Bribery Act — have espoused for some time. What is less clear is whether the guidance provides any tangible assistance on some of the Bribery Act’s thorniest issues such as the UK’s jurisdiction over non-UK registered companies, the extent of liability for the actions of third parties and the boundary between acceptable corporate hospitality and a prosecutable bribe, particularly when foreign officials are concerned.
Government Policy and the Section 7 Corporate Offence
The guidance, as expected, focuses on six high level principles which companies will need to familiarise themselves with and which are supported by 11 case studies. It also sets out the Government policy in relation to the section 7 corporate offence stating that “[t]he objective of the [Bribery] 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 recognises that “no bribery prevention regime will be capable of preventing bribery at all times.” This part of the guidance already has attracted criticism from some respected quarters. (See here).
The guidance deals with the section 1 offences of bribing another person but the most noteworthy commentary relates to the section 6 offence (Bribery of foreign public officials). This section highlights the fact that bribery of a foreign public official could be prosecuted under the section 1 offence but that evidential difficulties in proving that a bribe was paid to a foreign public official with the intention to induce him or her to perform his or her role “improperly”, something the guidance calls “a mischief”, means that prosecutors would seek to rely on the section 6 offence which needs no such proof. The guidance goes on to make a number of assertions in relation to the interpretation of section 6 which bear closer scrutiny. The guidance says “…it is not the Government’s intention to criminalise behaviour where no such mischief occurs…” In other words it appears that the guidance may be advocating that the concept of “improper performance” be read into section 6. What is clear is that Parliament did not include any such wording in section 6 in clear contrast to section 1.
Corporate Hospitality and other Business Expenditure
In addressing the topic of corporate hospitality and other business expenditures, the guidance adopts what can only be described as a permissive tone. It codifies the comments that the Minister of Justice has made over the last few weeks and states that “[b]ona 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 goes on to endorse “reasonable” and “proportionate” hospitality and business expenditure.
In determining what is reasonable and proportionate, the guidance proposes taking into account “all of the surrounding circumstances” which include matters such as “the type and level of advantage offered, the manner and form in which the advantage is provide, and the level of influence the particular foreign public official has over awarding business”. It states that “the more lavish the hospitality or the higher the expenditure in relation to travel, accommodation or other similar business expenditure provided to a foreign public official, then, generally, the greater the inference that it is intended to influence the official to grant business or a business advantage in return.”
Much of this is elementary and already part of the mantra of compliance departments but the guidance goes further and appears to give the green light to certain interactions with foreign public officials which would, today, be closely and critically scrutinised by those responsible for compliance. As an example, the guidance envisages that the provision of flights, airport to hotel transfers, hotel accommodation, “fine dining” and tickets to an event for a foreign public official and his or her spouse are “unlikely to raise the necessary inference” to engage section 6 and therefore unlikely to violate the Act so long as there is a business rational for the trip.
A Question of Jurisdiction
The guidance makes it clear that “the courts will be the final arbiter as to whether an organisation ‘carries on a business’ in the UK taking into account of the particular facts in individual cases” and sets out the “Government’s intention” in relation to the phrase “carries on a business, or part of a business in the United Kingdom.” The thrust of the approach appears to be a reliance on a “common sense approach.”
In cases where there may be dispute, the guidance again defers to the courts as the final arbiter but says that “… the Government anticipates that applying a common sense approach would mean that organisations that do not have a demonstrable business presence in the United Kingdom would not be caught.” That much is uncontroversial but what follows has elicited a great deal of comment. The guidance states that “[t]he Government would not expect, for example, the mere fact that a company’s securities have been admitted to the UK Listing Authority’s Official list and therefore admitted to trading on the London Stock Exchange, in itself, to qualify that company as carrying on a business or part of a business in the UK and therefore falling within the definition of a ‘relevant commercial organisation’ for the purposes of section 7.” This commentary has been welcomed in some quarters but has been criticised by some as undermining the concept of a level playing field. (See here).
In the vast majority of cases, it will be clear whether a company is or is not carrying on a business or part of a business in the UK. There will, however, be cases where there is room for debate. If, for example, a non-UK registered company sets up a joint venture with a UK company and the joint venture is not registered in the UK, is the non-UK registered company carrying on a business or part of a business in the UK? What if the non-UK registered company then seconds an employee to work at the UK partner’s offices in London looking after the joint venture – is the non-UK registered company carrying on a business or part of a business in the UK? What if it sends 5 employees? Those are the type of intricacies that need to be worked through by company advisors and in the worst case prosecutors and the courts.
Associated Persons
When considering the potential liability imposed on a company by virtue of its supply chains or its involvement in a joint venture, the guidance introduces the concept of “the level of control”– a concept that does not appear in the Bribery Act — as one of the “relevant circumstances” that would be taken into account when seeking to determine if the person creating liability can be deemed to be an “associated person” i.e. someone who is performing services for or on behalf of a company that falls within the UK’s jurisdiction. The guidance states that “[t]he question of adequacy of bribery prevention procedures will depend in the final analysis on the facts of each case, including matters such as the level of control over the activities of the associated person and the degree of risk that requires mitigation.”
Facilitation Payments
In the run up to the publication of the guidance, there had been some suggestion that there may an attempt to ‘soften’ the approach to facilitation payments. This is not at all the case. While the Government has recognised the problems faced by commercial organisations in some parts of the world and in certain sectors, the guidance reiterates that there are no exemptions in the Act and sets out the OECD position that facilitation payments are corrosive and that exemptions create artificial distinctions that are “difficult to enforce, undermine corporate anti-bribery procedures, confuse anti-bribery communication with employees and other associated person, perpetuate an existing ‘culture’ of bribery and have the potential to be abused.” In circumstances where an individual has no alternative but to make a facilitation payment in order to “protect against loss of life, limb or liberty”, the guidance states that “the common law defence of duress is very likely to be available”. It stresses that it is a matter for prosecutorial discretion whether to prosecute an offence and defers to the Joint Prosecution Guidance when it comes to the “prosecution of facilitation payments.”
Conclusion
Companies will of course be pleased to have more guidance and will look to draw as much comfort as they can from the more ‘permissive’ tone of the MoJ guidance but global companies will not be looking at their UK exposure in isolation and will certainly not be rushing to relax their anti-bribery and corruption 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.