Two years after the Bribery Act 2010 came into force, the hysteria surrounding the Act has abated. There are fewer media pundits pronouncing the end of UK plc as we know it and there are fewer newly invented “legal experts” opining on an area they knew little or nothing about but which they saw as a potential earner to fill the gaping hole left by declining litigation and commercial transactions.
Of course, this may change when we see the first large prosecution by the Serious Fraud Office (SFO), though that is probably still some way off. The Act has not been in force long and is not retrospective; this means that criminal conduct has to occur, has to be discovered, has to be investigated and, once investigated, for a prosecution to follow, there needs to be sufficient evidence to give rise to a realistic prospect of success and the prosecution needs to be in the public interest.
Added to which of course, is the fact that the new director of the SFO, David Green QC, and the judiciary have raised the bar by shutting the door on deals. This means that if and when a case is brought, conviction will have to be as close to a certainty as any criminal process can be. The SFO could not survive another high profile failure.
So has the Act, in the absence of a prosecution, had a discernible impact on the way in which UK multinationals conduct their business? And if so, in what way?
The answer to the general question, for our clients at least, is no. Most, if not all, were subject to FCPA jurisdiction and therefore had in place extensive “adequate procedures,” albeit by another name. Some sectors such as insurance and shipping companies were notable exceptions, and in some areas such as private banking there was more form than substance. But generally the Act has driven refinement and a degree of greater engagement rather than a revolution in business practices or processes among major multinationals.
There has been one discernible exception to this general theme, and that relates to mergers and acquisitions, where we have seen a great deal more attention being paid to pre-acquisition anti-bribery due diligence.
A recent case makes the point.
We acted for a major resource company that was entering into a joint venture with an offshore entity which had the rights to explore and exploit reserves should they be found. Our client was clearly concerned by the risk of successor liability pursuant to the FCPA. But it was equally concerned by the Bribery Act and the guidance issued by the Ministry of Justice in relation to the operation of joint ventures. Specifically, they felt that they would be without a defense under the Act if they had done no due diligence prior to entering into the transaction. Their procedures would be “inadequate.”
Happily, in this particular case, we were able to point to an open and transparent process, appropriate skills and resources within the joint venture partners, ownership and management structure and a lack of connection to any foreign government official.
While David Green QC has publicly stated that he will not give pre-transaction clearance, he has emphasised the code for prosecution. Specifically, he has said that in circumstances where there is a potential merger or acquisition and where historical conduct which might have breached the then law is discovered, if that conduct has been terminated and there has been a change of management, policies and procedures, it is unlikely that even if the evidential test were met that it would be in the public interest to prosecute the company or its successor.
His approach is sensible and it reflects the U.S.’s position. In 2012 the Department of Justice issued its own guidance in which it stated that enforcement action based on successor liability is unlikely unless there are “egregious and sustained violations” and, in so doing, recognised that society benefits when good corporations take over bad ones.
The answer then as to why the Act has had an impact in this area is that clients recognize that anti-bribery due diligence has a value in mergers and acquisitions and that conversely, a failure to undertake due diligence, risks them having no section 7 defense and being accused of egregious and sustained conduct if subject to U.K. enforcement scrutiny.
Without wishing to reignite the hysteria which accompanied the enactment of the Act, I think it is right to say that carrying out a merger or acquisition without anti-bribery due diligence may well provide David Green QC with the slam dunk he is looking for and our clients know that.
A full version of the article from which this post is adapted can be viewed here.
Bill Waite is a contributing editor of the FCPA Blog. He’s one of the founders of The Risk Advisory Group, established in 1997 with the objective of building Europe’s leading independent risk management consultancy. He serves as the group’s CEO and general counsel. He formerly practiced as a criminal barrister before joining the U.K. Serious Fraud Office in 1991 as a prosecutor. He can be contacted here.
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