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Richard Cooke - Birketts LLP - ICE Bribery Act Presentation

A copy of the slides from Richard Cooke of Birketts LLP presentation on the Bribery Act 2010 as presentated top ICE members on the evening of Tuesday 11th January 2011.

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Richard Cooke - Birketts LLP - ICE Bribery Act Presentation

  1. 1. The Bribery Act 2010 ICE East of England - 11 January 2011 at Anglia Ruskin University Richard Cooke, Partner - Construction, Engineering and Projects
  2. 2. Contents Background to the Bribery Act International Perspectives on Bribery Development of the Bribery Act Bribery Act 2010 Why the Act can’t be ignored What the Act covers Consequences of breaching the Act Areas of particular risk Likely Scale of Fines Adequate Procedures Resources Summary and Conclusion
  3. 3. Background to the Bribery Act
  4. 4. Background to the Bribery Act Have you personally ever been offered a bribe or incentive to engage in corrupt practice? (Corruption in the UK Construction Industry - CIOB Survey 2006)
  5. 5. Background to the Bribery Act
  6. 6. Background to the Bribery Act Perceived frequency with which bribery and corruption practices are used to gain contracts or commercial advantages abroad (Overseas Bribery and Corruption Survey – KPMG 2007)
  7. 7. International Perspectives on Bribery International Pressures Organisation for Economic Co-operation and Development (OECD) 1961 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997 (OECD Anti-Bribery Convention) Council of Europe Criminal Law Convention on Corruption 1999 United Nations Convention Against Corruption 2003 Transparency International Corruption Perception Index Bribe Payers Index Annual Progress Reports
  8. 8. International Perspectives on Bribery
  9. 9. International Perspectives on Bribery Transparency International 20 15 4 UK Investigations 2008 2007 2006 0 0 0 UK Prosecutions 69 60 55 US Investigations 103 67 50 US Prosecutions
  10. 10. International Perspectives on Bribery Siemens AG Between 2001 and 2007 falsified corporate books and records Allegedly used bribes and kickbacks worth more than $1.3 billion to influence public procurement decisions in France, Turkey and Venezuela, contracts for mobile telephones in Bangladesh, and in relation to the UN oil-for-food programme in Iraq Siemens subject to US regulations because listed on NYSE Plea agreement with Department of Justice re breaches of the Foreign Corrupt Practices Act $450 million to Department of Justice $350 million to Securities and Exchange Commission € 395 million to Munich Public Prosecutor’s Office
  11. 11. International Perspectives on Bribery Transparency International Annual Progress Report 2008 Major investigations …but no cases… Little or no enforcement in UK…unsatisfactory… Lack of access to information about cases/investigations… no publicly accessible register or database “ The key problem is the prolonged lack of progress in enacting a new bribery law that would make it easier to prosecute foreign bribery. There is a lack of criminal liability of legal persons in the context of active and passive bribery”
  12. 12. International Perspectives on Bribery Photo: Tim Beach on
  13. 13. International Perspectives on Bribery SFO inquiry into £50 billion Al Yamamah deal halted Public interest grounds; to safeguard national and international security; damage to UK-Saudi relations Daily Telegraph – “Britain seen as corrupt since BAE decision” “ Britain is perceived internationally as more corrupt than at any time in the last 13 years because of the Government's decision to pull a probe into arms contracts with Saudi Arabia…” Transparency International “…a damaging setback for the Convention…compounded prior concerns about lack of UK commitment…” OECD “…unconvinced that (the UK) had acted in accordance with OECD anti-bribery convention and was worried by shortcomings of British law”.
  14. 14. Development of the Bribery Act UK Legislation Public Bodies Corrupt Practices Act 1889 Prevention of Corruption Acts 1906 and 1916 Law Commission Report on Reforming Bribery, November 2008 Corruption Bill -> Bribery Bill Bribery Act 2010 Enacted 8 April 2010 Effective from April 2011
  15. 15. Development of the Bribery Act Photo: Fighting Irish 1977 on
  16. 16. Development of the Bribery Act Autumn 2008 Balfour Beatty Self reporting in relation to the Alexandrina Bibliotheca project in Egypt Unlawful conduct, inaccurate accounting records (Section 221 Companies Act 1985) in joint venture with Egyptian company SFO Civil Recovery Order for £2.25m under the Proceeds of Crime Act 2002 Full cooperation by Balfour Beatty Voluntarily agreed to introduce compliance systems and agreed external monitoring
  17. 17. Bribery Act 2010 Why this Act can’t be ignored International pressures on UK to clean up corruption General recognition that UK Construction is one of the UK sectors where corruption exists (OFT Cover Pricing prosecutions) Anticipate Government desire to flex muscles of new Bribery Act Within UK Internationally New offences For individuals For organisations Potentially high fines and imprisonment Potential damage to reputation and brand image
  18. 18. Bribery Act 2010 Repeals old legislation Public Bodies Corrupt Practices Act 1889 Prevention of Corruption Acts 1906 and 1916 Specific sections of other Acts Clear bribery offences Bribing another person – the active offence (Section 1) the promise or giving of an advantage with the intention of inducing or rewarding the improper performance of a relevant function or activity Being bribed – the passive offence (Section 2) the receipt or acceptance of an advantage for the improper performance of a relevant function or activity Improper performance (Sections 4 and 5) breach of expectation of impartiality, good faith or trust. Test is whether act breaches what would be expected by a reasonable person in the UK
  19. 19. Bribery Act 2010 New offences Bribing a foreign public official (Section 6) Failing of a commercial organisation to prevent bribery (Section 7) A commercial organisation can be held liable for the act of associated persons committing an act of bribery whilst acting on behalf of the organisation Strict liability … but potential defence at Section 7(2) Act applies to: All UK companies, partnerships, citizens and residents All foreign companies operating in the UK Non UK persons where any part of the offence takes part in the UK Applies to public and private sectors
  20. 20. Bribery Act 2010 Areas of particular risk Associated persons (Section 8) Use of agents Subsidiaries Joint venture partners Acquisitions and mergers Require effective due diligence Corporate hospitality and gifts Charitable and political donations Facilitation payments
  21. 21. Bribery Act 2010 Consequences of breaching the Act (Section 11) Criminal conviction Fines and/or Imprisonment up to 10 years Senior officers liable if “consent or connivance” Debarred from tendering public sector contracts Public Contracts Regulations 2006 Banned from holding Directorships Proceeds of Crime Act 2002 Money Laundering Regulations
  22. 22. Likely Scale of Fines Photo: Matt Lilek on
  23. 23. Likely Scale of Fines Aon Limited and FSA Principles of Business 8 January 2009, FSA Final Notice Breach of Principle 3 of FSA’s Principles of Business Failure to take reasonable care to establish and maintain effective anti-bribery and corruption systems and controls Payments of approximately $7 million to overseas firms and individuals in Bahrain, Bangladesh, Bulgaria, Burma, Indonesia and Vietnam Identified by Aon and self-reporting to Serious Organised Crime Agency and FSA Aon Limited fined £5.25 million Fine would have been £7.5 million but 30% reduction in penalty for pro-active determination of senior management
  24. 24. Likely Scale of Fines R v Innospec Limited at Southwalk Crown Court 18 March 2010 Innospec Limited plead guilty to charge of conspiracy to corrupt Innospec Limited wanted to stop planned legislation banning Tetraethyl Lead (TEL) Between February 2002 and December 2006 there was systematic bribery of senior government officials in Indonesia totalling approximately $8 million Department of Justice (DoJ) and SFO investigations Full admission and cooperation lead to global settlement of $40 million including an £8.3 million fine Both the SFO and DoJ agreed that the fines and other penalties which might be imposed in the US and UK might exceed $400m in the US and $150m in the UK
  25. 25. Adequate Procedures Defence to Section 7 offence – Failure of commercial organisation to prevent bribery “ But it is a defence for C to prove that C had in place adequate procedures designed to prevent persons associated with C from undertaking such conduct” Section 7(2) Ministry of Justice - Consultation on guidance about commercial organisations preventing bribery (section 9 of the Bribery Act 2010) Began 14 September 2010 Ended 8 November 2010 Final guidance due early 2011 The 2010 UK Bribery Act Adequate Procedures – Transparency International
  26. 26. Adequate Procedures Six Principles within the Ministry of Justice Guidance: Risk Assessment Top Level Commitment Due Diligence Clear, Practical and Accessible Policies and Procedures Effective Implementation Monitoring and Review
  27. 27. Adequate Procedures Anti-corruption policy likely to include: Anti corruption policy statement (for inclusion on website) Code of Conduct Policy on Corrupt Payments (including facilitation payments) Policies on Gifts, Hospitality and Expenses Policies on Charitable and Political Donations and Sponsorships Policy on Business Relationships Due Diligence Procedure Reporting Procedure for Suspicious Behaviour (setting out nominated officers etc). Whistleblowing Procedure (to include individuals and companies). Accounting and business record requirements
  28. 28. Resources Bribery Act 2010 Draft Guidance: Consultation on guidance about commercial organisations preventing bribery (section 9 of the Bribery Act 2010) published by the Ministry of Justice The 2010 UK Bribery Act Adequate Procedures published by Transparency International
  29. 29. Summary and Conclusion Richard Cooke e: t: 01245 211 375