Law Times

Law Times • February 14, 2011 An online resource 1.800.263.3269 Focus On INTERNATIONAL/CROSS-BORDER LAW U.K. enacts 'far-reaching' anti-bribery act But implementation delayed pending detailed guidance to businesses BY JULIUS MELNITZER For Law Times B ritain's new Bribery Act, which re- ceived Royal assent and whose im- plementation has now been indefi - nitely delayed until the government issues further guidance to business, extends far beyond the British Isles. "Th e act is far-reaching, its scope is worldwide, its potential defences unclear, and its sanctions include prison terms of up to 10 years and unlimited fi nes," says Marc Hansen, a partner at Latham & Wat- kins LLP in London, England. While the legislation overlaps signifi - cantly with the U.S. Foreign Corrupt Prac- tices Act, it diverges in several important ways. For example, liability under the Brit- ish legislation attaches no matter where the off ence is committed so long as it's perpe- trated by a British resident, a corporation incorporated there or one that carries on any part of its business there. "It doesn't matter if the activities or functions that the bribe seeks to aff ect have no connection with the U.K.," says Greg Williams, a partner at Australian fi rm Clayton Utz. "It's also no defence that local custom doesn't require these activities to be performed impartially, unless the practice is enshrined in a written law." Otherwise, the British legislation ex- tends to the bribery of private citizens while the U.S. act does not. And unlike the U.S. counterpart, the Bribery Act doesn't require explicit knowledge of an illegal pay- ment as an element of criminal liability. Its language also more clearly covers payments made to secure favourable treatment other than the awarding of specifi c contracts. Finally, the Bribery Act doesn't provide a defence for reasonable and good-faith business expenses directly related to certain promotional activities and makes no excep- tions for "facilitating payments." Th e upshot is that Canadian companies operating in the United States and Britain would be in error in assuming that existing compliance policies related to the U.S. leg- islation will suffi ce under the Bribery Act. Generally speaking, the Bribery Act criminal- izes the giving or taking of a bribe by individuals in the public or private sectors. "Th e U.K. has become one of the fi rst countries to codify anti-corruption legislation in the private sector," Hansen says. But perhaps the most daunting aspect of the legislation is the new strict liability corporate off ence of failing to pre- vent bribery on the part of persons associated with the company. Th is means that international businesses will have to consider the extent to which they must moni- tor the activities of subsidiaries or joint- venture partners. "Traditionally, British law limits cor- the maintenance and enforcement of suit- able policies concern- ing payments, gifts, due diligence of agents and consultants, and proper monitoring of relevant company activities." Th e upshot is that 'The U.K. has become one of the first countries to codify anti-corruption legislation in the private sector,' says Marc Hansen. corporations will need to implement programs to prevent bribery. While the government has indicated it will issue guidance three months before the off ence pro- visions come into force, all appearances are that it won't be prescriptive. Rather, Lord Willy Bach, one of the Bribery Act's sponsors, has stated pub- licly that the guidelines will "set out relevant principles backed up by illustrative good practice examples." Bach also specifi cally referenced the Or- porate criminal liability to circumstances in which a person who is the 'directing mind' of the company is guilty of the of- fence," says Katherine Addleman, a partner at Haynes and Boone LLP in Dallas. "Th e Bribery Act, however, broadens corporate liability by making a company liable to criminal prosecution if anyone associated with it pays a bribe in connection with any aspect of its business." Unlike its sister provision in the U.S. act, this strict liability off ence attaches not only to large or unusual transactions but also to business as mundane as connecting a telephone line. However that may be, the U.K. legisla- tion allows companies to avoid liability by demonstrating the existence of adequate procedures to prevent bribery. "Th e Bribery Act does not provide detailed guidance concerning what con- stitutes adequate procedures," Addleman says. "But key issues likely to factor into the determination are a top-level com- mitment to anti-corruption eff orts and ganisation for Economic Co-operation and Development's good practice guidance on internal controls, ethics, and compliance and the anti-bribery strategies published by Transparency International and the Global Infrastructure Anti-Corruption Centre. Otherwise, the GC100, a group of general counsel from prominent U.K. companies, has already published a draft guidance that sets out its view of the key components of adequate procedures. A review of these materials reveals an emphasis on an appropriate tone at the top of the corporate hierarchy characterized by a statement of values; a code of conduct including clear policies regarding bribery, gifts, hospitality, political and charitable donations, and facilitation payments; vet- ting of agents, business partners, and other representatives; the hiring of a compliance offi cer; training and reporting procedures; disciplinary consequences; individualized risk assessments; appropriate risk manage- ment by way of monitoring and reassess- ment, including adaptation of accounting Get more online lawtimesnews.com canadianlawyermag.com Fresh Canadian legal news and analysis every week. Canadian Lawyer | Law Times | 4Students | InHouse | Legal Feeds www.lawtimesnews.com Visit Us Online 1-4-5X.indd 1 2/9/11 9:51:21 AM and fi nancial procedures; and whistleblow- ing mechanisms. Th e indications are, then, that the re- quirements for adequate procedures will resemble the sentencing guidelines for off ences under the U.S. act. Under these guidelines, it's not enough for companies to attempt to discourage bribery by having policies in place. Rather, companies seek- ing mitigation of sentence must actively at- tempt to detect and prevent it throughout the organization. Th ere are concerns, however, about the signifi cance of the government's delay in is- suing the guidelines. "Th ere's defi nitely a question mark over the content and there is defi nitely some political concern about them," says Daniel Smith of Latham & Watkins. In the meantime, Homer Moyer of Miller & Chevalier believes the adequate procedures defence is a double-edged sword. "On the one hand, there's nothing in the [U.S. act] that is such an explicit in- centive to good compliance," he says. "But the defence is also potentially a huge loop- hole for U.K. off enders." Despite the breadth of the Bribery Act, then, it is too early to assess its precise im- pact. Moyer observes, however, that British regulators have indicated they'll act reason- ably. "For example, it's quite clear that the U.K. will not be prosecuting companies for making the type of facilitating pay- ments that are exempt under the [U.S. law]," he says. Overall, Moyer expects enforcement patterns in Britain to approximate those in the United States. For example, because any domestic or foreign company listed in the United States is subject to prosecu- tion under the U.S. law, authorities could in theory prosecute a British company for paying a bribe in Malaysia. "But we haven't done that unless the issuer's conduct has signifi cant impact on the information provided to U.S. investors or some part of the illegal activity has oc- curred in the U.S.," Moyer says. LT PAGE 9

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