Guidance Issued for UK Bribery Act: Act Will Take Effect July 2011 and Could Reach U.S. Companies

International Trade & Customs Update

Date: April 06, 2011


The UK Ministry of Justice (MOJ) has issued a long-awaited guidance document (Guidance) concerning key provisions of the UK Bribery Act 2010 (Bribery Act). This Guidance, along with the MOJ's recently issued Joint Prosecution Guidance of the Director of the Serious Fraud Office and the Director of Public Prosecutions, clarifies many of the interpretative questions that had arisen when the Bribery Act was enacted. The Bribery Act was enacted a year ago, but its entry into force was put on hold pending the issuance of the Guidance. The Act will now take effect July 1, 2011.

Like the U.S. Foreign Corrupt Practices Act (FCPA), the Bribery Act prohibits a broad array of payments made with corrupt intent and provides stiff penalties for failing to prevent bribery by employees and other agents of a company. However, the Bribery Act differs in certain key respects from the FCPA, and thus U.S. businesses may need to reexamine and upgrade their anti-bribery policies.

Some of the key differences and similarities between the Bribery Act and the FCPA are:

  • Jurisdiction Over Corporations. The Bribery Act allows UK authorities to exercise jurisdiction over all UK companies and those carrying on "part of a business" in the UK. The Guidance does clarify that the mere fact that a non-UK company has a UK subsidiary "will not, in itself, mean that a parent company is carrying on a business in the UK." But beyond that, the Guidance does not offer much further insight into how far UK prosecuting authorities will assert what the Joint Prosecution Guidance referred to as the Act's "wide extra-territorial jurisdiction." By comparison, the FCPA allows the U.S. Department of Justice (DOJ) or Securities and Exchange Commission to assert jurisdiction where (a) the corrupt payment was made from a U.S. person or company acting anywhere, (b) the corrupt payment has a territorial nexus with the United States or (c) the company making the corrupt payment issues stock on a U.S. exchange.
  • Bribery of Foreign Officials. The Bribery Act prohibits making payments to foreign officials with the intent to obtain or retain business or a business advantage. The Guidance notes that this element focuses on the intent of the payor rather than the subsequent actions of the foreign official receiving the improper payment. This prohibition is almost identical to that of the FCPA, which prohibits payments to foreign officials to obtain or retain business and has been interpreted to include payments made with the intent to gain or retain an unfair business advantage. United States v. Kay, 359 F.3d 738 (5th Cir. 2004).
  • Private Bribery. The Bribery Act also covers payments to private businesses and nongovernmental entities to cause them to act "improperly": 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 prohibited. The private recipients of bribes may also be punished. The Guidance says that inviting clients to attend a sporting event to establish good relations or enhance knowledge about a company's business is "extremely unlikely" to be prosecuted unless there were other evidence that the event "was intended as a bribe." By contrast, the FCPA does not cover bribery of private officials (such conduct may be prohibited by other state or federal laws), but covers only improper payments to "foreign officials." Although DOJ has interpreted this to include private individuals acting on behalf of the foreign government and employees of a foreign state-owned enterprise, the FCPA's reach in this respect still is much narrower than that of the Bribery Act.
  • Liability for Actions of Agents. The Bribery Act applies to all payments made by "associated persons" of the corporation. The Guidance provides that this term could be interpreted to include contractors, suppliers or other entities within a supply chain, joint ventures and others who, under the circumstances, are "performing services" on behalf of the organization. This provision in effect creates a strict liability standard for corporations with respect to improper payments by its agents or other persons performing services on the corporation's behalf. By contrast, the FCPA holds the company liable for the actions of its agents only when the company knows or is "willfully blind" concerning a payment that will be given directly or indirectly to the recipient.
  • Affirmative Defenses.The UK Bribery Act creates an affirmative defense for businesses implementing "adequate procedures" to prevent bribery. The Guidance clarifies the meaning of this phrase by identifying six principles of bribery prevention:
    • Procedures proportionate to bribery risk
    • Commitment at the top to prevent bribery
    • Periodic risk assessment of the business practices
    • Due diligence concerning persons performing services on behalf of the business
    • Communication and training
    • Regular audits of procedures designed to prevent bribery

The FCPA contains no explicit affirmative defense for implementing adequate procedures. Nevertheless, implementation of what UK authorities consider adequate procedures could also reduce the risk of liability for a company under the FCPA, and such procedures are an important factor under the Federal Sentencing Guidelines pertaining to the sentencing of organizations.

  • Business Hospitality Payments. Hospitality payments to a foreign official for the promotion, demonstration or explanation of a company's products could cause problems under both the Bribery Act and the FCPA. The Guidance clarifies that under the Bribery Act hospitality payments that are "reasonable and proportionate" are permissible. The Guidance stresses that the particular facts of each case (i.e., whether the payments, location chosen, etc., were of "genuine mutual convenience" for the parties) will determine whether UK prosecuting authorities will pursue penalties. Similarly, the FCPA provides an explicit exception for "reasonable and bona fide" payments to reimburse travel, lodging, entertainment and dining expenses of foreign officials incurred during the sales, promotion, demonstration or explanation of a company's products. It is thus not clear how much (if at all) prosecuting authorities in the United States and the UK will treat hospitality payments differently.
  • Facilitation Payments. Unlike the FCPA, the Bribery Act contains no exception for payments to facilitate routine government action. The Guidance reiterates that the Bribery Act makes no exception for facilitation payments. However, the Joint Prosecution Guidance states that when deciding whether to prosecute violations of this prohibition, prosecuting authorities will consider certain key facts of a company's facilitation payments (e.g., the size and frequency of such payments, the circumstances in which they were demanded and whether permissible payments are defined and monitored in corporate policy and practice). By contrast, the FCPA permits payments to facilitate routine government action, although this exception has been interpreted narrowly by DOJ. Therefore, the extent to which the treatment of facilitation payments by U.S. and UK prosecuting authorities will differ remains to be seen.

In sum, as now interpreted by the recently issued Guidance and the Joint Prosecution Guidance, the UK Bribery Law will be broadly interpreted and vigorously, albeit not mechanically, enforced. Companies that have operations, do business or plan to do business in the UK should review their anti-bribery policies to ensure that they will be compliant with this comprehensive new law.