Appendix II: Frequently Asked Questions
What are the important differences between the Foreign Corrupt Practices Act (FCPA) and United Kingdom Bribery Act (UKBA)?
Setting aside the differences based on jurisdiction, there are several key differences between the UKBA and the FCPA. First, the UKBA criminalises bribery of commercial organisations as well as bribery of government officials. Second, liability under the UKBA also extends to the recipient of the bribe and not just the individual or organisation giving the bribe. Third, the UKBA holds commercial organisations strictly liable for failing to prevent bribery, but also provides an affirmative defence to the crime if the organisation can show that it had adequate procedures in place at the time, designed to prevent bribery. Finally, whereas the FCPA has a stand-alone offence for accounting violations comprising either having inadequate books and records or internal controls violations, the UKBA does not have an equivalent offence.
Is a non-UK company subject to the UKBA?
Yes, depending on the circumstances. Where the alleged misconduct occurred within the United Kingdom, the conduct is subject to the UKBA.
Further, for the corporate offence of Failure to Prevent Bribery, the UKBA applies to all acts of a “relevant commercial organisation,” which includes both a British incorporated entity and any company that “carries on a business or part of a business” in the United Kingdom.
The Bribery Act 2010 Guidance issued by the Ministry of Justice provides that courts should apply a “common sense approach” when interpreting whether an organisation “carries on a business or part of a business” in the United Kingdom. However, there is no case law addressing the concept, and its broad wording suggests that it may apply to any organisation that does business in the United Kingdom.
In addition, the Bribery Act applies to UK nationals or individuals with a “close connection” to the UK, regardless of where they are in the world. As a result, if a person meeting the nationality test under the UKBA commits an offence under the UKBA and he or she is the “directing mind and will of the company” (i.e., sufficiently senior), that company could also be liable under the UKBA.
What is the offence of failure to prevent bribery, and does it differ from a bribery offence under the UKBA?
The so-called “section 7” offence of failure to prevent bribery applies to “commercial organisations,” i.e., corporations, where a person or other corporation that performs services on behalf of the defendant commercial organisation bribes another person with the intent to obtain or retain business or a commercial advantage for the defendant commercial organisation.
The purpose of the offence is to broaden corporate liability under the UKBA beyond liability for actions taken by people who can be identified as the “directing will or mind of the company,” the general test for corporate criminal liability under English common law.
Unlike the substantive bribery offences, the section 7 failure to prevent bribery offence applies only to corporations, and it includes an affirmative defence for maintaining adequate procedures designed to prevent bribery being committed on the corporation’s behalf. However, the offences do not differ with respect to penalties, which may consist of unlimited fines, confiscation, and/or compensation.
However, it is important to remember that in order for the authorities to prosecute a section 7 offence, it must be demonstrated that the associated person is or would be guilty of a substantive offence under section 1 or section 6 of the UKBA.
Can a corporation be liable for acts of third parties under the UKBA?
Yes, section 7 of the UKBA applies to the actions of any persons “associated with” a corporation. A person is associated with a corporation if he or she performs services on the corporation’s behalf. However, in order for the company to be liable for the acts of the associated party, the bribe must be paid by the associated person to help the company win or retain business. Thus, suppliers could fall within the scope of the offence to the extent that they are performing services for or on behalf of the company and not simply acting as the seller of goods. Where a supply chain is involved, it is likely that the organisation will only exercise control over its relationship with its contractual counterparty, rather than all the sub-contractors or entities further down the supply chain. Nonetheless, to mitigate its own risks, the organisation may still consider requesting that its contractual counterparty adopt a similar approach to anti-bribery procedures with the next party in the chain.
Is a corporation liable for the acts of its joint venture partners under section 7 of the UKBA?
Potentially, yes.
Consider a joint venture (JV) partnership made up of JV Partner A and JV Partner B. The key question for determining if JV Partner A creates liability for JV Partner B is whether (1) JV Partner A or its employees or agents are performing services for JV Partner B, and (2) the bribe was paid for JV Partner B’s benefit. If the employees or agents of JV Partner A paid bribes only for the benefit of JV Partner A and not JV Partner B, then, generally speaking, JV Partner B will not be liable for the acts of JV Partner A or its employees or agents.
Are fines the only penalties that a corporation must consider in assessing exposure under the UKBA?
No. In addition to unlimited fines, the United Kingdom has strict laws around the confiscation of proceeds of crime as set out in the Proceeds of Crime Act 2002, which may result in the disgorgement of any proceeds that prosecutors can demonstrate are associated with a violation of the UKBA. Further, a court sentencing a corporation for a violation of the UKBA will consider whether it is appropriate to order the payment of compensation to victims under the Powers of Criminal Courts (Sentencing) Act 2000. A corporation will also face mandatory debarment from public contracts across the UK and EU if convicted of an offence under Sections 1, 2, or 6. Debarment is discretionary for a conviction under section 7.
Who enforces the UKBA?
The United Kingdom’s Serious Fraud Office (SFO) is the principal prosecution authority that enforces the UKBA’s international remit. The Crown Prosecution Service has also successfully brought prosecutions under the UKBA, but these have generally been limited to purely domestic offences. In 2014, the United Kingdom adopted a new framework for corporate bribery prosecutions and, in 2014, the SFO secured its first corporate conviction for a UKBA violation. In 2015, the SFO reached its first deferred prosecution agreement with a corporate defendant. Since then, a total of 12 DPAs relating to corrupt activity have been reached.
What are the maximum fines that can be assessed for violations of the UKBA?
The fines for violations of the UKBA are unlimited.
How is corporate criminal liability treated under the UKBA?
Under general principles of English criminal law, corporate criminal liability is more limited than under US criminal law. Corporate criminal liability requires that:
a person who can be identified as the directing mind and will of the organisation committed the offence; and
that person was acting on behalf of the corporation when committing the offence.
Therefore, a corporation can be criminally liable for individuals within the organisation who make a bribe or are bribed so long as the two requirements noted above are met. Recent case law has affirmed that the English courts will consider carefully issues of delegated responsibility and corporate governance when deciding who can legally be identified as the directing mind and will of an organisation.
Under section 7, a corporation can also be criminally liable if any person associated with the corporation and acting on its behalf, regardless of seniority, bribes to benefit the company. If that occurs, the company will be held strictly liable for those acts absent demonstrating that it had adequate procedures in place. Employees of a company are assumed to be associated persons of the company.