Liability Under UK Bribery Act

Executive Summary

The issues that are involved in the case scenario revolve around the incident of bribe giving by a business consultant on behalf of the company, Tech Solutions Plc. Tech Solutions Plc appointed Bob Webb as an intermediary business consultant to facilitate the expansion of its business in three countries, including Brazil. In the process of such facilitation, Bob Webb paid a bribe of $5000 to the Brazilian authorities who demanded such payment as a facilitation fee. The overarching question that arises from this is whether Tech Solutions Plc can be held liable for this offence of bribery under the provisions of the UK Bribery Act 2010. The relevant Sections of the Act for the purpose of this report are Sections 6 and 7. Section 6 makes it an offence to bribe a foreign official for the purpose of gaining or retaining business in the foreign country. Section 7 makes it an offence for the company to fail in preventing acts of bribery committed on its behalf by those associated with it. Both these provisions are engaged in this case scenario. This report is aimed at providing explanation of the provisions of the UK Bribery Act 2010 with reference to the problem posed to the Tech Solutions Plc due to the bribe paid on its behalf by the business consultant in Brazil. The report finds that there is a close enough link between Bob Webb and Tech Solutions Plc to allow the application of Section 7 of the UK Bribery Act 2010 to Tech Solutions Plc. The report recommends that Tech Solutions Plc should maintain and provide all the evidence, documentary and otherwise, that shows the measures that it took to prevent acts of bribery by its associates as it will be a defence for it if it is prosecuted under Section 7.

Discussion & Findings

The issue that is posed in this problem situation is whether there are legal liabilities that may attach to the Tech Solutions Plc for the acts of Bob Webb in paying a bribe in Brazil in order to get some favours for Tech Solutions Plc. The issue arises under the UK Bribery Act 2010. The Act defines certain offences relates to bribery giving or receiving, and some of these offences are attracted in the problem situation involving Tech Solutions Plc. This part of the report will consider the discussion on the offences that are defined in the UK Bribery Act 2010 and whether these offences are attracted in the case of Tech Solutions Plc.

The UK Bribery Act 2010 was enacted to regulate the actions of corporations and to penalise actions of corruption, including bribery. The UK Bribery Act 2010 is the primary legislation that governs the offence of bribery by UK companies or anyone associated with the companies. The offence of bribery under the UK Bribery Act 2010 includes the giving or the offering of bribes to foreign public officials as well as the giving or offering of bribes to private individuals. Soliciting of bribery or receiving of bribery by a public official or private citizen is also an offence under the UK Bribery Act 2010. The Act also includes a strict liability offence for which a corporation can be held liable in the event that it fails to prevent the offence of bribery. This is contained in Section 7 of the Act.

The Bribery Act 2010 is broad in jurisdiction and it covers companies, citizens, and residents of the UK and also other companies, citizens and residents that are involved with UK companies. Under the Act, the corporations that are involved in an offence under the Act, may be subject to an unlimited fine. There are two general offences that are covered in the Act, which are those of offering, promising or giving of a bribe, which is described as active bribery; and the requesting, agreeing to receive or accepting of a bribe, which is described as passive bribery. This problem scenario involves active bribery as Bob Webb gave bribery to the Brazilian authorities. This constitutes active bribery under Section 1.

There are two other offences that are also provided under the Act, specifically aimed at addressing commercial bribery: first, Section 6 provides that bribing of a foreign public official in order to obtain or retain business or an advantage in the conduct of business an offence relating to, is an offence; and second, Section 7 provides that failure to prevent actions of bribery on behalf of a commercial organisation is an offence that is committed by the commercial organisation. This case scenario involves both Section 6 and 7. Section 6 is engaged because Bob Webb bribed foreign government officials. Section 7 is engaged because Tech Solutions failed to take appropriate steps to prevent the bribery by Bob Webb through the establishment of procedures of risk assessment and mitigation as required by the Bribery Act 2010 and the Guidance.

Coming back to Section 7 of the Act, it may be noted that this provision does not require a close connection between the organisation with the UK. According to Section 7(3), a commercial organisation can be liable for conduct amounting to a Section 1 or 6 offence even if the person who committed the offence is not a UK national or resident in the UK, nor a body incorporated or formed in the UK. Moreover, Section 12(5) provides that it is irrelevant if the acts or omissions which form part of the Section 7 offence take part in the UK or in another country. Considering these provisions in light of the facts of the case scenario, Tech Solutions is a French company but it also has business in the UK. Moreover, Bob Webb is being investigated in the UK with respect to some of the business transactions that he conducted here.

The UK Bribery Act 2010 Guidance is also applicable here as this provides the understanding on the measures that companies can undertake to prevent people associated with them from bribing anyone on the behalf of the company. With reference to Section 6 of the UK Bribery Act 2010, the offence committed under this Section is that of bribery of a foreign public official. As per the Guidance, the offence under Section 6 is committed

“where a person offers, promises or gives a financial or other advantage to a foreign public official with the intention of influencing the official in the performance of his or her official functions. The person offering, promising or giving the advantage must also intend to obtain or retain business or an advantage in the conduct of business by doing so. However, the offence is not committed where the official is permitted or required by the applicable written law to be influenced by the advantage.”

Therefore, the offence of bribing a foreign official is committed where the person offering the bribery to the foreign official does so with the objective of receiving some advantage or retaining business for the organisation. For the purpose of this offence, the foreign public official will include elected or appointed officials holding legislative, administrative or judicial position in the country outside the UK where the offence is committed. Individuals who perform public functions in any branch of the national, local or municipal government of such foreign country are also included in the definition of foreign public officials. Professionals working for public health agencies and officers exercising public functions in state- owned enterprises are also included in the foreign public officials.

Section 7 of the Act provides that the commercial ‘organisation’, which would include a corporation, firm or business, would be in breach of the law if its executive bribes another person for obtaining or retaining business or an advantage for the organization. Section 7(5) defines ‘relevant commercial organisation’ as a body or partnership incorporated or formed in the UK. For the purpose of Section 7 offence, it is irrelevant where the relevant commercial organisation carry on a business if it is incorporated in the UK, and conversely if the relevant commercial organisation was incorporated outside of the UK if it carries out business in the UK. Tech Solutions Plc is not incorporated in the UK, but it has its offices in the UK and does business here. Therefore, for the purpose of this provision, Tech Solutions Plc can be prosecuted under the Act.

As this offence is committed when a person associated with the organisation commits an act of bribery, it is also important to define who such persons may be. As per Section 8, such associated persons are defined as those persons who perform services for or on behalf of the organisation. Such persons can be an individual or incorporated and unincorporated bodies. The capacity in which such persons perform functions for others is not relevant for the application of Section 8. Employees, agents and subsidiaries are included in the scope of persons who are associated with the organisation in a way that can make the organisation liable for offence under Section 7 if such person commits the act of bribery on behalf of the organisation. Section 8(4) provides that whether or not a person is associated with the organisation for the purpose of Section 7 offence can be decided with reference to all the relevant circumstances and not merely by reference to the nature of the relationship between that person and the organisation. The purpose of providing a wide definition of such associated persons is so that the whole range of persons connected to the organisation and who may be in the position to commit bribery on the organisation’s behalf can be included in the scope of the definition. Under the scope of this definition, contractors and suppliers can also be the persons associated with the organisation in the manner which allows the Act to penalise the organisation for its failure to prevent acts of bribery. The central or core issue is that the associated person must be performing services on behalf of or for the organisation that may also put the person in the place where they may be involved in bribery. Bob Webb is a business consultant who is working on behalf of Tech Solutions Plc. This can be taken to mean that there is a relationship between Tech Solutions Plc and Bob Webb which makes the latter an associate of the former and also make the former liable to prosecution under Section 7.

As noted above, there is an offence committed by the company or business if it fails to prevent the act of bribery by an official belonging to it. The liability under Section 7 of the UK Bribery Act 2010 is characterised as strict liability because the company is liable even when it is not directly involved in the offence. This would mean that the corporations and businesses should take precautions in order to ensure that its executives are not involved in any wrongdoing under the UK Bribery Act 2010, as taking such precautions can provide a defence to the company. In order to explain the scope of the Bribery Act, and the ways in which the Act will be attracted, the UK Bribery Act 2010 Guidance provides the explanation that can give an insight to corporations and businesses.

The commercial organisation may be implicated in an offence under the UK Bribery Act 2010, Section 7, which makes it a punishable offence for the organisation to have failed in preventing an act of bribery by its executive. However, as per the Guidance, such an organisation may be able to defend itself against such charges. The organisation may be able to do so if it can show that it had taken adequate procedures for the purpose of preventing bribery by persons associated with it acting on the behalf of the company. This can be done by following the six guiding principles provided in the Guidance, which are to be applied in the internal structures of the organisations. These six principles are not prescriptive in nature and the organisations may choose to apply these principles in the appropriate manner. However, it may be noted that the Guidance recommends that the companies or businesses should apply these principles in order to mitigate their corruption risk and avoid penalties under the Bribery Act 2010. The onus is put on the companies that they should take certain precautions or else face penalty.

Another important point that is made in the Guidance is that organisations should adopt a risk based approach to bribery. Such an approach would see the organisation adopt procedures that are proportionate to the risks faced by the organisation so that the organisation can make efforts to mitigate the risks of corruption and bribery. This is also seen in the first principle in the Guidance, which is ‘Proportionate procedures’. This requires the organisation to undertake assessments of risk in internal corporate governance. The second principle requires the strengthening of the ethical culture of the company and it provides the following:

“The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.”

The second principle therefore puts the responsibility on the company to create a wider framework in which the company’s internal corporate structure can be made to prevent acts of bribery. This is done in a top-down manner, with the top-level management of the organisation itself being involved in fostering an anti-corruption culture. The internal structures for creating an anti-corruption environment in the company are important because the external structures, included in legislation or policy, are not always effective in curbing corruption as the executives of the organisation may find ways of circumventing these external structures. Moreover, the transnational nature of business of many organisations makes it difficult to ascertain the external structures, that is, law and policy applicable in a case, thus allowing companies to be lax about development of internal mechanisms. This has led to allegations and investigations of bribery related offences with respect to companies based in the UK and a response in the UK Bribery Act with the inclusion of the strict liability for companies. The strict liability principle in the UK Bribery Act makes companies liable for bribery offences not only in the UK but also overseas and therefore, necessitates the need to ensure that companies adopt appropriate mechanisms to provide defence against prosecution. Organisations may include a formal code of ethics within the company for the purpose of preventing corruption, but these formal codes may also not always be effective in preventing unethical behaviour from the executives because such formal codes foster a ‘check off’ approach where the executives focus on the technicalities if the codes.

The third principle that is provided in the Guidance is that of ‘Risk Assessment’ and such risk assessment is required to be periodic, informed and documented. One of the risks that are included for the organisation’s attention is country risk, which is “evidenced by perceived high levels of corruption, an absence of effectively implemented anti-bribery legislation and a failure of the foreign government, media, local business community and civil society effectively to promote transparent procurement and investment policies.” Therefore, if the organisation has business in countries that do not have an effective anti-corruption or anti-bribery legislation, it should be mindful of the risks of its associated persons committing acts of bribery in those countries and evolve measures for safeguarding against such risks.

Principle four of the Guidance is related to due diligence and this principle requires the organisation to take the risk assessment and mitigation approach. Like with risk management, due diligence becomes especially relevant when the organisation selects an intermediary to assist in establishing a business in foreign markets.

Principle five of the Guidance provides that the bribery prevention policies and procedures that are established by it are communicated through internal and external communication, including training. Principle six provides that the organisation is required to monitor and review the procedures that are designed by it to prevent bribery by associated persons.

The Guidance on the UK Bribery Act 2010 is based on the premise that there can be mitigation of corruption if there is an effective leadership against corruption. The UK Bribery Act 2010 puts a positive duty on the companies to ensure that even those working on its behalf or those who are associated with the companies, are not committing an act of bribery on its behalf. This is so because there was an increase in bribery through subsidiaries, intermediaries and supply channels, for which now the liability can be put on the companies. When companies or organisations fail to perform this positive duty, this can be considered to be an offence under the Bribery Act. The company can only be defended under such charges as may be levied against it, when it is able to prove that it has taken all reasonable measures to prevent such actions by those who are working in its behalf or are associated with it as per the adequate procedures defence.

The UK Bribery Act does not clearly define bribery and the offence is evidentiary difficult to establish. However, based on the facts of a particular case scenario, the offence may be established. In this particular scenario, the board of Tech Solutions Plc contacted Bob Webb on 15th January 2016 to assist with their expansion agenda particularly with securing business licences in the three countries, one of these being Brazil. As Bob Webb was an experienced business consultant known for facilitating ‘brilliant’ business deals, the board approached him to facilitate the business expansion. Bob approached the Brazilian authorities on 23rd June 2016, but he was asked to pay a sum of $5,000 to ‘quicken’ the process. This facilitation fee was not required under the Brazilian law, therefore, the giving of the fee would be a bribe under the UK Bribery Act 2010, Section 6, which concerns the bribing of foreign officials. Bob requested Tech Solutions Plc to send him $5000 for “miscellaneous expenses” and the board complied with the request without demanding a full explanation and they transferred the money to Bob on 4th July 2016. This goes contrary to the Six Principles that are contained in the Guidance discussed above. To recall these principles again and locate the link with the actions of Tech Solutions Plc, it may be noted that the Guidance clearly requires certain risk mitigation strategies from the organisations that are involved in business dealings in foreign countries. Specifically, the third, and fourth principles are relevant in this case scenario. The third principle provides that the organisation must undertake ‘Risk Assessment’ which is periodic, informed and documented. In particular, it has been noted that country risk should be considered carefully and where the organisation has business in countries that do not have an effective anti-corruption or anti-bribery legislation, it should be mindful of the risks of its associated persons committing acts of bribery in those countries and evolve measures for safeguarding against such risks. In the present case scenario, Tech Solutions Plc failed to consider such country risks and also to respond to such risks when they complied with the request of Bob Webb to send a payment of $5000 without asking for the reasons for the request. Principle four of the Guidance is related to due diligence and the Guidance particularly mentions that if an organisation is in the process of selecting an intermediary to assist in establishing a business in foreign markets, then it should conduct a much higher level of due diligence to mitigate the risks of bribery on its behalf that can be committed by the intermediary. In the present case scenario, Tech Solutions Plc appointed Bob Webb, an intermediary to facilitate its business in Brazil. As such, it ought to have considered the risks of bribery by this intermediary in the third country. It failed to do so. Both these failures under principle three and four are significant failures which are directly related to the offence of bribery committed by Bob Webb.

In case Tech Solutions Plc are not able to provide evidence that they took all measures to mitigate risks of bribery, the penalty for the company is unlimited fine under Section 11 of the UK Bribery Act 2010.

Conclusion and recommendations

To conclude, Tech Solutions Plc are not directly involved in giving of bribes, therefore, Section 6 is not applicable to it. The provision that is relevant to this case is Section 7.

There are two recommendations that are made out for Tech Solutions Plc. First, they are advised to provide its documented evidence on the measures that it has taken to prevent associates giving bribe on their behalf in order to make out a defence to Section 7 of the UK Bribery Act 2010.

Second, Tech Solutions Plc is advised to conduct an immediate investigation into the alleged events or acts of bribery. This would allow the company to put into motion internal procedures for dealing with the issue, and will help build the case in favour of the company.

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