SFO To Foreign Companies: Watch Out

By Barry Vitou and Richard Kovalevsky QC

Michael Volkov recently wrote an excellent post The UK Bribery Act: Let’s cool down the hysteria. 

This year, there has been nothing short of a media frenzy in the U.K. about the Bribery Act as April 1 and its entry into force nears.

In recent days much media energy has focused on the impact of the Bribery Act and the claim that when it comes into force it will make U.K. PLC uncompetitive with countries whose laws are weaker or less strictly enforced than the U.K.’s law.

Against this backdrop readers could be forgiven if, when casting their minds back to the U.K.’s own track record not so long ago, the case of Pot vs. Kettle sprang to mind.

In light of this we were delighted to read Michael’s reasoned and considered post advocating a measured and realistic approach to the new law. We agree with all of it. With one exception.

In the article Michael highlights the example of a business headquartered outside the U.K. but which conducts business in the U.K. and the risk that it could be found liable under the Bribery Act for bribery occurring outside the UK. Michael says:

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….second, such a prosecution would raise political concerns and the SFO recognizes that the last issue it needs to contend with is political inquiries.

We disagree.

The SFO have said unequivocally that they intend to use the long arm jurisdiction under the Bribery Act. In June last year Richard Alderman the Director of the SFO spelt out his intention:

I shall have jurisdiction in respect of corruption committed by those corporates anywhere in the world even if the corruption is not taking place through the business presence of the corporate in this jurisdiction. What this means is this. Assume a foreign corporate with a number of outlets here. Assume that quite separately that foreign corporate is involved in corruption in a third country. We have jurisdiction over that corruption. This is novel and is a very significant addition to the powers of the SFO.

I have to say that in the SFO it is an extension that we are very excited about.  This is because it will help us answer the question I referred to earlier from corporates along the following lines. They tell me that they believe that they have lost contracts in other countries to competitors based elsewhere who have used bribery. They have asked me what I propose to do to support them.  The new legislation will give me jurisdiction if those other corporates have a business presence here.

He repeated it again earlier this month when he stressed that he wants to prosecute foreign companies with operations in the U.K. who use corruption elsewhere to obtain contracts undercutting U.K. companies.

In prosecuting overseas businesses the SFO will be following in the footsteps of the DOJ’s FCPA enforcement and will silence the UK critics of the Bribery Act who say that the new law will only harm U.K. business.

The SFO has put down a clear marker. 

Overseas corporates who violate the Bribery Act to the detriment of a U.K. business ignore the SFO’s message at their peril.

Barry Vitou and Richard Kovalevsky QC write thebriberyact.com.