The UK Bribery Act

It is important to note that unlike the Department of Justice (DOJ) in the United States, the UK's Ministry of Justice (MoJ) does not have the ability to prosecute offenses under the new Bribery Act. The majority of the prosecutions will be brought by the Serious Fraud Office (SFO), which has been heavily involved to this point in explaining to businesses how their new powers are likely to be exercised. At a London panel event this author organized in March, Vivian Robinson, QC, the general counsel of the SFO, confirmed that the Office would look to examine each case on its facts. The prosecutors' guidelines reinforce this, saying that “The Act is not intended to penalize ethically run companies that encounter an isolated incident of bribery.” Prosecutors will employ a two-step test:

1. Is there sufficient evidence to provide a realistic prospect of conviction?
2. If so, is prosecution in the public interest?

For the SFO, the two main factors that are likely to influence whether or not a prosecution is in the public interest are whether the company has adequate procedures in place and whether it self-reported the issue to the SFO.

The following factors also indicate that a prosecution under the Act will be more likely:

• A conviction would bring a significant sentence.
• Offenses are premeditated.
• Offenses are committed in order to lead to more-serious offending.
• Those involved are in positions of authority or trust and take advantage of that position.

The prosecutors' guidelines also outline how their discretion should be issued when considering prosecutions for making facilitation payments. Factors likely to lead to prosecution include: 1) Large or repeated payments; 2) Facilitation payments that are planned for or accepted as part of a standard way of conducting business; 3) Payments that indicate an element of active corruption of the official in the way the offense was committed; and 4) Whether a commercial organization has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and these procedures have not been correctly followed.

It is this final factor that is likely to cause the most concern to companies that have made the effort to implement clear policies that have failed. However, the guidelines clarify that a single small payment is likely to result in only a nominal penalty. In addition, the SFO will also take into account self-reporting, the clarity of any policy in place and whether the payer was in a vulnerable position when a payment was sought.

The prosecutorial guidance also reinforces the MoJ guidance on hospitality. The guidelines state that the cost of the hospitality is only one factor, but little additional guidance is provided.

What Steps Should Businesses Consider Taking Now?

It is apparent that businesses should consider undertaking a thorough program of compliance with the new legislation, given the possibility of sanctions that include up to 10 years in prison. For most organizations, the period up to July 1 can be used efficiently to begin implementing at least the following five steps:

1. The review of any existing Ethics code, FCPA code or the like, to check its compliance with the UK legislation.

2. Communicating to employees what is expected of them. This would extend beyond people employed by a UK company or a UK subsidiary. It would also include those negotiating contracts in the UK and UK nationals employed by the organization wherever they work.

3. Consideration of whether to embed compliance programs in subsidiaries, whether wholly owned or not. For most organizations, this would likely involve a structured program of board meetings of subsidiary entities, with the new Bribery Act as an agenda item. Companies may also want to send a briefing note to all of the directors of the relevant subsidiaries beforehand, explaining their responsibilities and instructing them to develop an action plan to deal with the new law.

4. Implementation of a specific training session for affected employees. This might coincide with training the organization has already completed; for example, under the FCPA, showing again any online materials that are not inconsistent with the new UK legislation. Over time, corporations can build on this initial training, incorporating the MoJ's guidance.

5. A review of “associated persons.” The Bribery Act imposes obligations on a company to do due diligence on those with whom it does business. This would include consultants, agents, suppliers and others ' for example, a franchisor may want to check compliance at its franchisees.

Conclusion

Businesses now have a clear date to aim for with their compliance efforts. The deadlines are short but, given that the Act will be over a year old by the time it has come into force, most businesses will have done the ground work already. The mood of the prosecutors is that organizations have no excuse for not starting on their compliance efforts, although they may get some leniency if their efforts are not complete by the time an incident takes place. The UK's Lord Chancellor and Secretary of State for Justice Kenneth Clarke's announcement of the start date for the new legslation on March 30, and the publication of the Prosecutorial Guidelines, firmly puts an end to the rumors that were circulating that the Act would be changed. There was never any substance in these rumors. At best they were wishful thinking or ill-informed speculation from those who had not followed the long and winding passage of the legislation. The Act is a clear call to action for businesses large and small. They ignore it at their peril.

Jonathan P. Armstrong ([email protected]) is a partner in the London office of Duane Morris LLP. Armstrong practices in the area of corporate law with a concentration in technology and compliance, counseling multinational companies on matters involving risk, technology and compliance across Europe.

In last month's issue, we said that all General Counsel should be keenly aware of July 1, the date when the new UK bribery act will take effect. We warned that the Act has extra-territorial reach and will impact almost every corporation doing business internationally. We went on to discuss exactly what is included in the guidance.

We conclude this month with a look at what prosecutors are contemplating and what U.S. businesses should do.

What Are the Prosecutors Thinking?

It is important to note that unlike the Department of Justice (DOJ) in the United States, the UK's Ministry of Justice (MoJ) does not have the ability to prosecute offenses under the new Bribery Act. The majority of the prosecutions will be brought by the Serious Fraud Office (SFO), which has been heavily involved to this point in explaining to businesses how their new powers are likely to be exercised. At a London panel event this author organized in March, Vivian Robinson, QC, the general counsel of the SFO, confirmed that the Office would look to examine each case on its facts. The prosecutors' guidelines reinforce this, saying that “The Act is not intended to penalize ethically run companies that encounter an isolated incident of bribery.” Prosecutors will employ a two-step test:

1. Is there sufficient evidence to provide a realistic prospect of conviction?
2. If so, is prosecution in the public interest?

For the SFO, the two main factors that are likely to influence whether or not a prosecution is in the public interest are whether the company has adequate procedures in place and whether it self-reported the issue to the SFO.

The following factors also indicate that a prosecution under the Act will be more likely:

• A conviction would bring a significant sentence.
• Offenses are premeditated.
• Offenses are committed in order to lead to more-serious offending.
• Those involved are in positions of authority or trust and take advantage of that position.

The prosecutors' guidelines also outline how their discretion should be issued when considering prosecutions for making facilitation payments. Factors likely to lead to prosecution include: 1) Large or repeated payments; 2) Facilitation payments that are planned for or accepted as part of a standard way of conducting business; 3) Payments that indicate an element of active corruption of the official in the way the offense was committed; and 4) Whether a commercial organization has a clear and appropriate policy setting out procedures an individual should follow if facilitation payments are requested and these procedures have not been correctly followed.

It is this final factor that is likely to cause the most concern to companies that have made the effort to implement clear policies that have failed. However, the guidelines clarify that a single small payment is likely to result in only a nominal penalty. In addition, the SFO will also take into account self-reporting, the clarity of any policy in place and whether the payer was in a vulnerable position when a payment was sought.

The prosecutorial guidance also reinforces the MoJ guidance on hospitality. The guidelines state that the cost of the hospitality is only one factor, but little additional guidance is provided.

What Steps Should Businesses Consider Taking Now?

It is apparent that businesses should consider undertaking a thorough program of compliance with the new legislation, given the possibility of sanctions that include up to 10 years in prison. For most organizations, the period up to July 1 can be used efficiently to begin implementing at least the following five steps:

1. The review of any existing Ethics code, FCPA code or the like, to check its compliance with the UK legislation.

2. Communicating to employees what is expected of them. This would extend beyond people employed by a UK company or a UK subsidiary. It would also include those negotiating contracts in the UK and UK nationals employed by the organization wherever they work.

3. Consideration of whether to embed compliance programs in subsidiaries, whether wholly owned or not. For most organizations, this would likely involve a structured program of board meetings of subsidiary entities, with the new Bribery Act as an agenda item. Companies may also want to send a briefing note to all of the directors of the relevant subsidiaries beforehand, explaining their responsibilities and instructing them to develop an action plan to deal with the new law.

4. Implementation of a specific training session for affected employees. This might coincide with training the organization has already completed; for example, under the FCPA, showing again any online materials that are not inconsistent with the new UK legislation. Over time, corporations can build on this initial training, incorporating the MoJ's guidance.

5. A review of “associated persons.” The Bribery Act imposes obligations on a company to do due diligence on those with whom it does business. This would include consultants, agents, suppliers and others ' for example, a franchisor may want to check compliance at its franchisees.

Conclusion

Businesses now have a clear date to aim for with their compliance efforts. The deadlines are short but, given that the Act will be over a year old by the time it has come into force, most businesses will have done the ground work already. The mood of the prosecutors is that organizations have no excuse for not starting on their compliance efforts, although they may get some leniency if their efforts are not complete by the time an incident takes place. The UK's Lord Chancellor and Secretary of State for Justice Kenneth Clarke's announcement of the start date for the new legslation on March 30, and the publication of the Prosecutorial Guidelines, firmly puts an end to the rumors that were circulating that the Act would be changed. There was never any substance in these rumors. At best they were wishful thinking or ill-informed speculation from those who had not followed the long and winding passage of the legislation. The Act is a clear call to action for businesses large and small. They ignore it at their peril.

Jonathan P. Armstrong ([email protected]) is a partner in the London office of Duane Morris LLP. Armstrong practices in the area of corporate law with a concentration in technology and compliance, counseling multinational companies on matters involving risk, technology and compliance across Europe.