This week’s news that the newly elected U.K. government cracked under pressure from the business lobby and delayed implementing the Bribery Act until April 2011 was a setback for lots of reasons.
Opponents claimed they needed more guidance to help them comply with the new scheme. What will happen to the Bribery Act between now and next April is anyone’s guess. Many think the government is likely to water down its provisions if not kill the act altogether.
The new law was supposed to clarify a century-old patchwork of statutes and common law and extend compliance obligations in a way similar to the Foreign Corrupt Practices Act.
All new laws raise questions. “Don’t spit on the sidewalk” can induce the same sort of panic as the Bribery Act. What’s the definition of spit, do both feet need to be on the sidewalk, what about medically induced spitting, how about unconscious drooling? But very quickly judges, defendents, and lawyers figure out what laws mean, as happened with the FCPA and countless other decrees through the ages, and life and business go on.
The U.K. knee buckling means that 33 years after enactment of the FCPA, the U.S. is still nearly alone in the battle against global graft. But for the battle to be won, and for American companies to ever enjoy a level playing field, the U.S. needs allies. The U.K. was about to become the first full-fledged partner.
Meanwhile, the U.K.’s Serious Fraud Office — the agency responsible for prosecuting major cases of overseas corruption — is struggling against its own domestic opposition. The SFO’s ability to join the U.S. Justice Department in forging global settlements with global defendants in global anti-corruption prosecutions is up in the air.
In March this year, Britain’s second-ranking criminal judge said the $12.7 million fine the SFO agreed with a U.K. division of Innospec Inc. went beyond the SFO’s authority. Delaware-based Innospec had reached what it believed was a $40 million global settlement with U.S. prosecutors and the SFO. At Innospec’s hearing, however, Lord Justice Thomas, the deputy head of criminal justice in the U.K. courts, said: “I have concluded that the director of the SFO had no power to enter into the arrangements made and no such arrangements should be made again.”
A few weeks ago, the SFO’s director, Richard Alderman, tried to reassure the world that global settlements are still on the table. But he didn’t sound too sure himself. He said:
The question here is whether the SFO remains committed to taking part in global resolutions in cases where a corporate is subject to the jurisdiction of the authorities in a number of different countries. The answer to that emphatically is yes. We are very committed to this. Clearly we are feeling our way. Global resolutions in cases of concurrent jurisdiction are new and, until recently, our Judges have not had to consider the issues that arise in these cases. Innospec was our first global resolution and we obtained guidance on some of the issues from the Judge in that case.
As Trace has reported, of 515 outbound, or foreign enforcement actions, more than 75 percent are U.S. matters. The remaining 25 percent are the result of the combined efforts of 21 other nations. The United Kingdom ranks a distant second in the number of outbound bribery cases with 4.3 percent of the total.
Some help is better than none. But without real partners, America’s anti-corruption effort won’t be effective and over time will look more and more like legal bullying. It’s not a one-country fight but a global fight. Whether the U.K. is really part of that fight is now an open question.
This is too harsh on the UK authorities. I believe most of the Bribery Act has already taken effect. The delayed provision relates to when strict company liability (regardless of knowledge or intent) for foreign bribes kicks in. The only defense to that liability will be a showing of "adequate procedures" in place to prevent it. When the proposed law was being debated, the government committed to provide guidance as to what "adequate procedures" means before that provision takes effect. You can draw an analogy to agency rulemaking in the USA, following broad legislation…no reason to suspect any backsliding on this sweeping legislation.
Just to clarify the previous comment, no provisions of the new Act are coming into force until April 2011. While the delay to implementation is disappointing, the tone of this article is overly negative. Guidance on "adequate procedures" is expected for consultation in September and the Act is likely to get there in the end – just with the traditional British bumbling. It now seems likely that the previous Government did not have anything ready at the time of the election and the new Government has had to catch up. It should also be noted that the major enforcement bodies in the UK, the FSA and SFO, will be undergo significant restructurings in the near future.
Guilty as charged. We were disappointed with the delay and that may have / probably did color our reaction, too much to the negative side. Thanks to our readers for helping correct our course. We look forward to the UK’s full implementation of the Bribery Act, and the huge step that should be toward the level playing field. Keep writing to us, please.
Transparency International’s recent report on OECD enforcement of anti-bribery laws adds another perspective. Despite the well-known problems arising from Victorian and Edwardian bribery law in the UK, the SFO has managed to prosecute and convict two British companies, not counting BAE (NB – prosecute and convict, not deferred prosecution a la DoJ). Transparency International have duly moved the UK up into the top ‘active enforcement’ ranking, ahead of many of their OECD peers whose criticism led to the Bribery Act. .
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