By Michael Volkov
The year 2010 was another record-setting year for anti-bribery enforcement. Headline after headline reported yet another bribery scandal with the usual results: corporate fines, jail sentences, new and aggressive law enforcement strategies. Business anxiety is on the rise. Compliance is the new mantra for businesses.
The new year brings even greater concerns for businesses around the world – the UK Anti-Bribery Act is scheduled to become effective in April 2011. Fear of the new Act is on the rise. Contrary to the current hysteria, when all is said and done, the UK enforcers will act reasonably, build a track record and focus on egregious cases of bribery, with the focus on UK-based companies. While the law literally can be stretched to cover a number of far-out scenarios, commentators and law firm marketing agents forget about the most important factor – prosecutorial discretion.
A careful look at the issues and a fair consideration of the risks will help to reduce anxiety and focus organizations on what really needs to be done – a commitment and execution of real compliance.
The top three myths are easily addressed: (1) Extraterritorial Reach; (2) Strict Liability for Failing to Prevent Bribery; (3) The Absence of a Facilitation Payment Exception.
Lawyers, consultants and others have pushed this issue to the extreme. In the common scare scenario, a business which is headquartered outside the UK but conducts business in the UK will be found liable under the Act for bribery conduct which occurs entirely outside the UK. While it is true that such conduct may fall within the ambit of the Act, this scenario is unlikely to occur for two reasons – first, the Serious Fraud Office (SFO) recognizes that it has the authority to prosecute such a scenario but will decline to do so for political and precedential reasons. When asked about this scenario, Richard Alderman, the head of the SFO, has suggested that they would not prosecute such a case; second, such a prosecution would raise political concerns and the SFO recognizes that the last issue it needs to contend with is political inquiries. In fact, I expect the SFO will initially enforce the Act conservatively against UK-based companies.
Strict Liability For Failing to Prevent Bribery
A second issue of great concern is the new corporate offense for failing to prevent bribery. Under the Act, a company can raise a defense that it had “adequate procedures” to prevent the bribe. The SFO is in the process of issuing guidance on what constitutes “adequate procedures.” Commentator after commentator has been raising questions concerning this issue. But the answer boils down to a simple equation – if the company institutes a basic compliance program, which is designed to include the basic elements outlined in the United States Sentencing Guidelines, the organization will be fine. If the effort is half-hearted or disingenuous, then the organization will be in trouble. This is not rocket science and there is no need to try to characterize it any other way. But those self-interested parties seeking to promote fear and possible liability will not tell companies what really needs to be done.
The Absence of a Facilitation Payment Exception
Another issue which companies have heard about is the absence of a facilitation payment exception. Under the Foreign Practices Act, there is an exception which allows companies to make payments to foreign officials for routine services which the company needs to provide the government with a good or service. This exception is rarely relevant given the scale of the government’s investigations and prosecutions. However, for some reason, there are some who believe that the absence of such an exception under the UK Anti-Bribery Act will lead to significant liability for such actions. Again, such claims ring hollow in the face of reality – does anyone really believe that the SFO will initiate prosecutions for such payments which are by definition made without the requisite intent to illegally influence the recipient of the payment? I find it hard to believe that the SFO will no be focused on more serious allegations of corruption and bribery, working in close coordination with other international regulators, including the Securities and Exchange Commission and the Department of Justice in the United States.
While I am tempted to join the chorus of doomsayers on the upcoming implementation of the UK Anti-Bribery Act, I consider it more important to adhere to a belief based on my own 17 years as a federal prosecutor in the United States – prosecutors will reasonably interpret the law, prosecute cases that are strong and appropriate, and exercise discretion in a way to minimize political interference or backlash. My comments, however, should not be taken as to minimize or excuse companies from designing and implementing appropriate compliance programs.
Michael Volkov is a partner at Mayer Brown LLP in Washington, D.C. His practice focuses on white collar defense, compliance and litigation. He regularly counsels and represents clients on FCPA and UK Anti-Bribery Act issues. He can be contacted here.