By Nigel Boardman
The new UK Bribery Act 2010 (“the Bribery Act”) came into force on 1 July 2011, and, according to the guidance issued by the UK Government (“the Government Guidance”; see The Bribery Act 2010: Guidance), is intended to contribute to wider international efforts to combat bribery.
While targeting all forms of bribery, the Bribery Act has significant implications for commercial organisations. In addition to the general offences of bribing another (section 1) and being bribed (section 2) (both of which may be committed by a company), the Bribery Act created two offences which target commercial bribery: under section 6, it is an offence to bribe a foreign public official with the intention of obtaining or retaining business or a business advantage; and section 7 makes it an offence for a “relevant commercial organisation” to fail to prevent an “associated person” from bribing another with the intention of obtaining or retaining business or a business advantage for the organisation.
Importantly, the Bribery Act has extra-territorial effect. Liability is imposed irrespective of whether the act or omission which forms part of the offence took place in the UK or elsewhere. Furthermore, the provisions of section 7 are not limited to companies and partnerships which are incorporated or formed in the UK, but extend to foreign companies and partnerships which carry on a business, or any part of a business, in any part of the UK.
The consequences of conviction for an offence under the Bribery Act are severe, and may include the payment of unlimited fines, debarment from EU government contracts and (for individuals) imprisonment for up to 14 years.
In his introduction to the Government Guidance, the UK Secretary of State for Justice, Kenneth Clarke, states that the Bribery Act’s provisions are aimed at “making life difficult for the mavericks responsible for corruption, not unduly burdening the vast majority of decent, law-abiding firms.” Nevertheless, any organisation which considers that it may be a “relevant commercial organisation” for the purposes of the Bribery Act would be well-advised to introduce internal anti-bribery procedures. If nothing else, the existence within an organisation of adequate procedures designed to combat bribery may serve as a defence to liability under section 7, which is otherwise strict.
The Government Guidance is focussed, in large part, on advising organisations on appropriate anti-bribery procedures. It expounds six key principles which are not prescriptive, but which, it is suggested, should form the basis of any business’ anti-bribery policy.
A rigorous anti-bribery policy, devised in accordance with the Government Guidance, will be imperative for those participating in M&A transactions, which can present considerable risks from bribery. Such transactions generally result in a commercial organisation acquiring new associated persons whose conduct may expose the acquirer to liability under the Bribery Act. In addition, joint venture partners are likely to fall within the meaning of “associated persons”, and thus each participant in the venture could be prosecuted for an offence committed by its partner.
As part of such a policy, due diligence should be carried out throughout the M&A procedure, in which the risks of bribery are identified and addressed, and parties to transactions may wish to negotiate additional contractual protections in the form of warranties and indemnities to reduce their exposure to liability under the Bribery Act for the conduct of their associates.
Clearly the nature and extent of an organisation’s exposure to bribery-related offences will depend on the form and circumstances of the deal in question. By way of example, an organisation should be cautious in respect of transactions in a country in which there is a high level of co