Brought to you by the Real Law Editorial Team
“We are not the ‘serious champagne office,’ ” said David Green, chief of the UK’s Serious Fraud Office (SFO). But Green says he is working to focus his agency on bigger cases of bribery and corruption. Green’s commitment, and the sweeping nature of the UK Bribery Act (UKBA), means that American companies with global reach should be on notice and be ready to adhere to some new standards.
UK Law on American Shores
Until recently, the U.S. Foreign Corrupt Practices Act (FCPA) has dominated international anti-corruption enforcement. Like the FCPA, the UKBA has considerable reach. Any commercial organization may be subject to prosecution if it carries on even part its business in the UK, regardless of where the alleged improper activity actually takes place.
Though the stated goals of the two pieces of legislation are similar, the UKBA’s standards could mean that behavior that may be permitted by U.S. laws may be forbidden by the UKBA. This means it might be unwise for companies to rely on their existing FCPA-based anti-corruption compliance for complete protection against liability under the UKBA.
Knowing the Distinctions
There are some distinctions between the FCPA and the UKBA that American companies should be aware of. For instance, the FCPA applies to dealings with government entities, but the UKBA also applies to exchanges with private businesses and nongovernmental entities. According to the UK Ministry of Justice [PDF], this means that payments to private persons designed to “induce conduct that amounts to a breach of an expectation that a person will act in good faith, impartially, or in accordance with a position of trust” are not allowed, and both the payer and the private recipient may be punished.
A Strict and Somewhat Guiding Hand
Under the FCPA, a company could be held vicariously liable for acts of its employees and agents. The UKBA takes a slightly different tack, creating a strict liability for corporations that fail to prevent bribery. This has meant that to help prevent potential issues, a company could establish “adequate procedures.” In the past, the UK Justice Ministry released guidance on what those procedures might include, based on six explicit principles. This might be a useful start for companies wanting to adjust their anti-bribery policies.
A potentially confusing detail is that the SFO seems to have now distanced itself from its own guidance—the SFO website says that it is “in no way responsible for the content.” This might be part of the change in the SFO’s priorities with the arrival of David Green in April 2012—prioritizing prosecutions over offering guidance and compromise.
In Theory, There Is No Difference Between Theory and Practice
In theory, the existence of this tough new set of regulations should have changed a lot. So how does this work in practice? Has the expansive UKBA come down hard on both domestic and foreign wrongdoers? Not quite, or at least not quite yet. The first prosecution under the act was of a court clerk who took a bribe to hide a speeding ticket. He received a six-year sentence, but that has since been reduced. According to Ernst & Young [PDF], four of the five completed cases in the first half of 2012 were prosecutions of individuals, with a further 11 individuals being sentenced. In practice, prosecuting large companies may raise some challenges.
The Organisation for Economic Co-operation and Development (OECD) praised the UKBA as the “most stringent anti-corruption laws of any country.” In sharp contrast, the United States has been on the receiving end of some harsh criticism from the OECD for its tolerance of facilitation payments. At this point, it’s difficult to predict which way the wind will blow for future anti-bribery laws. Like the OECD, The Economist likes the UKBA more than the FCPA, but The Wall Street Journal doesn’t. To be safe, more countries might be looking to enact laws that align their anti-corruption regulations with those of the United Kingdom.
Still, despite the lack of high-profile corporate prosecutions, no company will want to risk investigation by the SFO. Like with the FCPA, there’s a good chance that the costs of investigation and discovery may be higher than any potential penalties. Even the possibility of expensive investigations might encourage some self-correction on the part of companies—during the London Olympics, businesses were already avoiding activities that could even be perceived as inappropriate. On December 6, 2012, stories on an SFO investigation into Rolls-Royce were just kicking off. Perhaps we are already seeing theory and practice unite.