On its face, the Section 7 “Failure to prevent bribery” corporate offense under the UK Bribery Act 2010 extends to bribes paid where there is some kind of UK nexus and so has a potentially broad reach. But how broad is “broad”?
To recap, a relevant commercial organization (i.e., one that carries on a business or part of a business in the UK) commits an offense under Section 7 where an associated person (i.e., an employee or person who provides services for or on behalf of the organization) pays or offers a bribe intending to benefit the organization. A more detailed explanation of the Section 7 offense is provided here.
As there is no territorial restriction on (i) the associated person; (ii) where they perform the services; or (iii) where the bribery allegedly took place, the jurisdictional scope of the Section 7 offense appears very broad. The person paying the bribe may have no link to the UK, and the bribe could be paid anywhere in the world.
But two crucial points are often misunderstood:
- The “organization” which commits the offense refers only to a single commercial entity (as opposed to a group of entities), and
- The associated person’s intention must be to benefit the single relevant commercial entity to which it is associated.
In practice, many common overseas bribery scenarios do not appear to fall squarely within the Section 7 offense because the person paying the bribe is not “an associated person of an entity carrying on a business, or part of a business in the UK,” but instead, is an associated person of a non-UK entity which may be part of a wider group which does business in the UK.
Here are two examples of this:
A bribe is paid by the associated person of a non-UK subsidiary (with no operations in the UK) which has a UK parent company.
Absent any involvement of the UK parent company, its employees, or officers, the Section 7 offense does not apply in this scenario unless it can be said that the “relevant commercial organization” is the UK company and the subsidiary as the UK parent’s associated person itself paid the bribe. This would likely require showing that an employee or officer of the subsidiary, so senior as to be the embodiment of the subsidiary, was involved in the bribery (i.e., the identification or “directing mind and will” principle). Identifying an individual to represent the company has been very narrowly drawn by the English courts. In most cases of bribery, such a senior employee or officer may not be involved.
Even if this were proven, it would also have to be shown that the bribe was paid with the specific intention of benefiting the UK parent company. Therefore, the prosecution must prove (by inference if necessary) that the bribe was paid with either a deliberate desire to benefit the UK parent, or by showing such a benefit having been foreseen as being virtually certain by the party paying the bribe. Although this point has not been decided in case law, according to the Ministry of Justice Guidance, the fact that the parent benefits indirectly from a bribe is very unlikely, in itself, to amount to proof of the specific intention required by the offense:
“Without proof of the required intention, liability will not accrue through only the simple corporate ownership or investment, or through the payment of dividends or the provision of loans by a subsidiary to its parent.”
Although the parent might benefit from the bribe being paid, the offense requires proof that the benefit was virtually certain and specifically foreseen at the time, at the very least.
A bribe is paid by an agent of a non-UK subsidiary (with no operations in the UK), which has a non-UK incorporated parent company that has a UK subsidiary.
Again, absent any involvement of the parent or UK companies, or their employees and officers, Section 7 arguably does not apply to the actions of the agent because the entity with which it is associated, i.e., the non-UK subsidiary, does not carry on business or part of a business in the UK.
Even if it can be said that the non-UK subsidiary itself paid the bribe, it would have to be shown that the bribe was paid with the intention of benefitting the parent company.
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While it may be unattractive in some circumstances to run jurisdictional arguments — and there may be overriding commercial imperatives to accept jurisdiction and enter into a Deferred Prosecution Agreement — great care should be taken to understand first whether the alleged bribe truly falls within the jurisdiction of Section 7 because it has been paid with the intention of benefiting a company which itself is doing business in the UK.
Andrew Reeves, pictured above left, is a Counsel based in Norton Rose Fulbright’s London office. He represents corporates, financial institutions and senior executives in relation to a range of major regulatory and criminal investigations, including those brought by the UK Serious Fraud Office, Financial Conduct Authority, Prudential Regulation Authority, as well as U.S. and various local regulators and prosecutors. He can be reached here.
Claudia Culley, above right, is an associate based in Norton Rose Fulbright’s London office, focusing on white-collar criminal defense work and investigations. Claudia has experience of advising both companies and senior executives on a range of internal, criminal and regulatory investigations and enforcement, including major bribery and corruption and fraud investigations and prosecutions brought by the UK Serious Fraud Office. She can be reached here.