This article is written by Sahaja, from NALSAR University of Law, Hyderabad. This article briefly discusses the Anti Corruption legislation in the UK. The successes and the failures of the Bribery Act 2010 are stressed in this article.
Table of Contents
Introduction
The Bribery Act 2010 is a piece of legislation passed by the United Kingdom’s Parliament that addresses the criminal law around bribery. The Act replaces all pre-existing statutory and common law provisions relating to bribery with the crimes of bribery, being bribed, bribery of foreign public officials, and a business organization’s inability to prohibit bribery on its behalf.
The Bribery Act 2010 (the Act) was signed into law on April 8, 2010. It was passed to replace an old and disjointed legal system in which bribery was criminalized under common law and was also criminalized under the Prevention of Corruption Acts of 1889 to 1916.
The first step toward reforming the bribery law was taken in 1995 with the publication of the Nolan Committee’s Report on Standards in Public Life, which was formed in response to concerns about unethical conduct by public officials and proposed that the statutory criminal law of bribery be consolidated. The reason for consolidation was to do away with the inconsistencies of language and certain gaps in the wordings of the law itself.
In the Queen’s Speech of 2002, a preliminary Bribery Bill was announced, but the joint committee evaluating it rejected it.
In 2003, a preliminary Anti-Corruption Bill was created, but it failed due to a lack of broad support. There was debate about whether the old law’s agent/principal connection should be preserved as the basis of the violation.
In 2005, the government produced a second consultation document analyzing the committee’s concerns, before announcing in March that “there was considerable support for reform of the current law, but no consensus as to how this could be achieved.”
The UK then came under criticism for not implementing the OECD (Organization for Economic Co-operation and Development) Convention on Combating Bribery of Foreign Officials in International business transactions. This criticism heightened the need for a legislative reform concerning the anti-corruption laws. The OECD working group advised that the UK should take steps to implement comprehensive anti-bribery legislation that specifically addresses bribery of a foreign public official.
It was also pointed out that the absence of case law on the bribery of foreign officials makes it difficult to evaluate the dynamic of the current system concerning the scope of the legislation or its application.
The Law Commission’s Bribery Bill, Reforming Bribery, of November 2008 was ultimately chosen as the blueprint for the UK’s new anti-corruption legislation.
What is the Bribery Act, 2010
The UK Bribery Act which came into force on July 1, 2011, applies to England, Wales, Scotland, and Northern Ireland. In addition to raising the bar for anti-bribery and corruption legislation around the world, the Act has had a significant impact on how businesses approach compliance.
The Act has four specific different offences-
- A general offence of bribing
- A general offence of being bribed
- An offence of bribing a foreign public official
- Strict liability for commercial organizations that fail to prevent bribery by those acting on their behalf
Key provisions of the Act
An overview of the key provisions of the Act will be dealt with in the following sections:
General offences
“General bribery offences” are covered under Sections 1 to 5 of the Act. Bribery is defined in Section 1 as when someone offers, gives, or promises to give another person “financial or other advantages” in exchange for “improperly” executing a “relevant function or activity.”
Section 2 deals with the crime of bribery, which is defined as seeking, accepting, or agreeing to take a bribe in exchange for performing a function or activity unlawfully.
Section 3 explains what constitutes a “relevant function or activity,” which includes “any public function; any activity connected with a business, trade, or profession; any activity performed in the course of a person’s employment; or any activity performed by or on behalf of a body of persons, whether corporate or unincorporated.”
When the expectation of good faith or impartiality is breached, or when the function is conducted in a way not expected of a person in a position of trust, the activity shall be considered “improperly” performed under Section 4.
Section 5 states that the criteria for determining what would be expected of a person in such a position is what a reasonable person in the United Kingdom would expect.
Bribery of Foreign Public Official
Bribery of foreign public officials is classified as a separate offence under Section 6, in accordance with the OECD Anti-Bribery Convention.
According to this Section if a person promises, offers, or gives a financial or other advantages to a foreign public official, either directly or via a third party and if such an advantage is not legitimately due, they will be guilty of this offence.
Section 6(4) of the Act defines the term ‘a foreign public official’. Section 6 criminalizes only the briber, not the official who accepts or agrees to accept a bribe.
Failure of Commercial Organizations to Prevent Bribery
Section 7 establishes a “broad and new offence” for commercial organizations that fail to prohibit bribery on their behalf. This applies to all commercial enterprises doing business in the United Kingdom.
However, the Act provides a defence if the commercial organization can demonstrate that it has effective internal compliance programs in place to avoid bribery.
Extraterritoriality
The Act has a broad jurisdictional scope. The Act applies to England, Wales, Scotland, and Northern Ireland, according to Section 18; nevertheless, the Scottish Parliament’s agreement is normally required in such instances.
Section 12 defines the extent of the Act’s provisions. To be covered by the Act, someone must have either committed a crime in the United Kingdom or acted outside of the UK in a way that would have been considered a crime if it had occurred in the UK. For the latter to apply a “close relationship” to the United Kingdom is required, which includes being a British citizen, resident, or protected person, owning a company formed in the United Kingdom, or being a partner in a Scottish partnership.
Penalties
The penalties for persons and businesses found guilty of a crime are explained in Section 11. If someone is convicted of bribery as a summary offence, they could face up to a year in prison and a fine of up to $5,000. The maximum penalty for commercial organizations is an infinite fine, with specific collateral effects such as director disqualification, asset forfeiture, and ineligibility to bid on public contracts.
Achievements of the Bribery Act
The Bribery Act has undoubtedly had a positive impact on the whole realm of bribing and how it is deemed to be an offence. The Act has also added newer dimensions and is indeed a success in the corporate world. This is further discussed below.
Introduction to a plethora of offences
Before the Bribery Act came into force, the United Kingdom had a scattered bunch of bribery laws spanning centuries, consisting of a variety of statutory and common law offences. Even though the UK took the initial step towards aligning its laws with international norms by ratifying the OECD’s Convention in 1998, it remained behind the curve until the Act was passed in 2010.
The Act outperformed the FCPA (Foreign Corrupt Practices Act), 1977 of the US, and rose to become a gold standard for anti-corruption and bribery legislation. This is because it not only criminalized the paying of bribes to foreign public officials, but also to private citizens, and it made passive bribery illegal. The Act also went above and beyond the FCPA by placing severe liability on corporations for failing to prevent bribery by someone “connected” with them.
Simplified corporate criminal liability
The Act simplified and made it easier to establish corporate criminal liability. Before the Act was introduced in the UK, there had not been a single case where a company could be prosecuted for bribery. The crime under Section 7 of the Act avoided this difficulty by making it illegal for businesses to fail to prohibit bribery by connected parties.
Even though Section 7, which proposes strict liability, has not resulted in an increased amount of prosecution, it has indeed helped as an incentive to conclude Deferred Prosecution Agreements (“DPAs”) with the Serious Fraud Office (SFO).
The possibility of hefty penalties and other consequences as a result of potential liability for a Section 7 crime, as well as the relative ease with which the offence might be established, gives a strong incentive for businesses to spend in strengthening their compliance frameworks.
Global jurisdictional reach
Even though bribery of foreign officials is now illegal, the Act greatly broadens the scope of the law’s application. A commercial organization that “carries on a business, or part of a business” in the UK can be charged with failure to prevent bribery under Section 7 of the Act, regardless of where the corrupt conduct occurred.
Increased efforts by companies to reduce the scale of corruption activities
A commercial organization charged with failure to prevent an offence has only one defence: it had “sufficient processes” in place to prevent bribery. Section 7 of the Act has caused a significant shift in how businesses view and respond to corruption.
Businesses have a big responsibility under the Act to keep an eye out for bribery and take proactive efforts to stop it. Companies now pitch in extra effort, time, and resources to ensure that any corrupt activities are prevented from taking place.
Failures of the Bribery Act
The Bribery Act has indeed had a positive impact on the corporate world. But it is also important to notice and point out the failures that the Bribery Act has brought about ever since it came into force. Some of the most significant failures are discussed below.
Improperly defined adequate procedures
The Act has pushed most companies to comply with the provisions of the Act. However, the aspect that the Act fails to include is the direction that companies require to comply with the Act or the proper method that must be followed to comply with the Act.
Businesses attempting to comply with the Act are unable to determine if their current or proposed compliance programs reach the required standard.
Disconnected corporate resolutions and the subsequent prosecution of individuals
The gap between corporate resolutions under the Act and the following prosecution of individuals associated with corporate misbehaviours is perhaps the most noticeable aspect of the Act’s application.
The prosecution of the Act’s other offences has had uneven results. Section 6, bribery of a foreign public official, has remained unprosecuted because it overlaps with Section 1, bribery of another person, which is easier to prove.
The Crown Prosecution Service (“CPS”) and, to a lesser extent, the Serious Fraud Office (“SFO”) has launched a regular stream of charges under Sections 1 and 2 of the Bribery Act, but the total numbers available are underwhelming.
Heavy losses induced by multi-jurisdictional investigations
The Act gives an outward appearance of an ideal situation where the SFO can mitigate unsuccessful prosecutions and the companies can avoid reputational damage.
But this rules out the situation wherein a company is ready to face the risk of reputational damage. In such a case, if the prospect of a prosecution decreases then financial losses could be the consequence of submitting to a DPA.
Unsuccessful in producing individual convictions
The Act has led to unsuccessful individual convictions from a successful DPA (Deferred Prosecution Agreements). So far, no one has been successfully prosecuted for actions related to a DPA under the Bribery Act. Given that the DPAs’ primary premise is that offences under Sections 1 or 6 have been committed, the paucity of convictions is notable.
Conclusion
The Bribery Act in totality has had both negative and positive effects on the corporate world in the past 10 years. There have been many successes and likewise, failures as well. The Act has caused a stir in the companies in the UK and has made them more proactive when it comes to looking out for bribery offences.
The lack of guidance is one of the setbacks that could be done away with making a few amendments to the Act which would further make the scope and application of the Act clear to individuals and companies.
The lack of individual convictions under the Act implies that it may be an ineffectual and underutilized piece of legislation. Apart from a few setbacks as mentioned, the Act overall seems like a progressive piece of legislation whose role and objective is clear but needs a few corrections.
References
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