If you don’t know where you are going, you might wind up someplace else. — Yogi Berra
The U.K. Bribery Act will be effective on July 1 and companies must now decide how to comply. That wasn’t made any easier last week by the Guidance from the Ministry of Justice.
Application to non-UK companies: As written, the Bribery Act applies to any company that “carries on a business or part of a business” in the U.K., regardless of its place of incorporation or primary location. To comfort concerns about the wide application of the Act to non-U.K. companies, the Guidance points out that determination of this issue will be decided by the U.K. courts.
It also says:
a. “the mere fact” that a company’s securities have been listed on the London Stock Exchange will not subject it to the Bribery Act’s jurisdiction; and
b. having a U.K. subsidiary would not, “in itself,” be sufficient to subject a parent company or its affiliates to the Bribery Act’s jurisdiction, “since a subsidiary may act independently of its parent or other group companies.”
Notwithstanding the two scenarios, which aren’t entirely realistic in any case, if a non-U.K. company engaged in any serious bribery, the courts there can be counted on to find that the perpetrator’s activities in the U.K. were sufficient to fall within the jurisdictional requirement.
Corporate entertainment and promotional expenditures: The Bribery Act prohibits the kinds of entertainment and promotional expenditures that are routinely made by most companies. The Guidance says prosecutors will not act against hospitality or promotional expenditures that are reasonable, proportionate and made in good faith and are an established and important part of doing business.
Where will the line be drawn between “reasonable, proportionate and good faith” expenditures and prohibited hospitality? Again, the failure to guide leads to more uncertainty for businesses and punts the issue to prosecutors and the courts.
Adequate procedures defense to corporate strict liability for failure to prevent bribery: The Act creates the complete defense of “adequate [compliance] procedures” to a corporate charge of “failure to prevent.” The Guidance says “no bribery prevention regime will be capable of preventing bribery at all times,” and “well run commercial organizations that experience an isolated incident of bribery on their behalf” won’t face large-scale sanctions.
The Prosecution Guidance issued on the same day by the directors of the Serious Fraud Office and Public Prosecutions said “a single instance of bribery does not necessarily mean that an organization’s procedures are inadequate.” For example, the actions of an agent or employee may be willfully contrary to very robust corporate contractual requirements, instructions or guidance.”
Again, this provides little comfort. Most prosecutors in the U.K. were as likely before the Guidance as after to decline a case where there was a “single” or “isolated” occurrence of bribery, especially when it occurred despite a robust compliance program.
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What now? Companies need to review existing anti-corruption programs and make sure U.K. compliance is covered. Because one fact has always been certain: No one wants to become known as the first defendant in a prosecution under the Bribery Act.
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.