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The Bribery Act 2010 ICE East of England - 11 January 2011 at Anglia Ruskin University Richard Cooke, Partner - Construction, Engineering and Projects

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Contents <ul><li>Background to the Bribery Act </li></ul><ul><li>International Perspectives on Bribery </li></ul><ul><li>Development of the Bribery Act </li></ul><ul><li>Bribery Act 2010 </li></ul><ul><li>Why the Act can’t be ignored </li></ul><ul><li>What the Act covers </li></ul><ul><li>Consequences of breaching the Act </li></ul><ul><li>Areas of particular risk </li></ul><ul><li>Likely Scale of Fines </li></ul><ul><li>Adequate Procedures </li></ul><ul><li>Resources </li></ul><ul><li>Summary and Conclusion </li></ul>

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Background to the Bribery Act

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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)

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Background to the Bribery Act

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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)

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International Perspectives on Bribery <ul><li>International Pressures </li></ul><ul><ul><li>Organisation for Economic Co-operation and Development (OECD) 1961 </li></ul></ul><ul><ul><ul><li>Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997 (OECD Anti-Bribery Convention) </li></ul></ul></ul><ul><ul><li>Council of Europe </li></ul></ul><ul><ul><ul><li>Criminal Law Convention on Corruption 1999 </li></ul></ul></ul><ul><ul><li>United Nations </li></ul></ul><ul><ul><ul><li>Convention Against Corruption 2003 </li></ul></ul></ul><ul><ul><li>Transparency International </li></ul></ul><ul><ul><ul><li>Corruption Perception Index </li></ul></ul></ul><ul><ul><ul><li>Bribe Payers Index </li></ul></ul></ul><ul><ul><ul><li>Annual Progress Reports </li></ul></ul></ul>

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International Perspectives on Bribery

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International Perspectives on Bribery <ul><li>Transparency International </li></ul>20 15 4 UK Investigations 2008 2007 2006 0 0 0 UK Prosecutions 69 60 55 US Investigations 103 67 50 US Prosecutions

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International Perspectives on Bribery <ul><li>Siemens AG </li></ul><ul><ul><li>Between 2001 and 2007 falsified corporate books and records </li></ul></ul><ul><ul><li>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 </li></ul></ul><ul><ul><li>Siemens subject to US regulations because listed on NYSE </li></ul></ul><ul><ul><li>Plea agreement with Department of Justice re breaches of the Foreign Corrupt Practices Act </li></ul></ul><ul><ul><ul><li>$450 million to Department of Justice </li></ul></ul></ul><ul><ul><ul><li>$350 million to Securities and Exchange Commission </li></ul></ul></ul><ul><ul><ul><li>€ 395 million to Munich Public Prosecutor’s Office </li></ul></ul></ul>

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International Perspectives on Bribery <ul><li>Transparency International Annual Progress Report 2008 </li></ul><ul><ul><ul><li>Major investigations …but no cases… </li></ul></ul></ul><ul><ul><ul><li>Little or no enforcement in UK…unsatisfactory… </li></ul></ul></ul><ul><ul><ul><li>Lack of access to information about cases/investigations… no publicly accessible register or database </li></ul></ul></ul><ul><ul><ul><li>“ 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” </li></ul></ul></ul>

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International Perspectives on Bribery Photo: Tim Beach on FreeDigitalPhotos.net http://www.freedigitalphotos.net/images/Aircraft_g72-RAF_Eurofighter_Typhoon_T1_p7842.html

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International Perspectives on Bribery <ul><li>SFO inquiry into £50 billion Al Yamamah deal halted </li></ul><ul><ul><ul><li>Public interest grounds; to safeguard national and international security; damage to UK-Saudi relations </li></ul></ul></ul><ul><ul><ul><li>Daily Telegraph – “Britain seen as corrupt since BAE decision” </li></ul></ul></ul><ul><ul><ul><ul><li>“ 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…” </li></ul></ul></ul></ul><ul><ul><ul><li>Transparency International “…a damaging setback for the Convention…compounded prior concerns about lack of UK commitment…” </li></ul></ul></ul><ul><ul><ul><li>OECD “…unconvinced that (the UK) had acted in accordance with OECD anti-bribery convention and was worried by shortcomings of British law”. </li></ul></ul></ul>

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Development of the Bribery Act <ul><li>UK Legislation </li></ul><ul><ul><li>Public Bodies Corrupt Practices Act 1889 </li></ul></ul><ul><ul><li>Prevention of Corruption Acts 1906 and 1916 </li></ul></ul><ul><li>Law Commission </li></ul><ul><ul><li>Report on Reforming Bribery, November 2008 </li></ul></ul><ul><ul><li>Corruption Bill </li></ul></ul><ul><ul><li>-> Bribery Bill </li></ul></ul><ul><ul><li>Bribery Act 2010 </li></ul></ul><ul><ul><ul><li>Enacted 8 April 2010 </li></ul></ul></ul><ul><ul><ul><li>Effective from April 2011 </li></ul></ul></ul>

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Development of the Bribery Act Photo: Fighting Irish 1977 on flikr.com/creativecommons

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Development of the Bribery Act <ul><li>Autumn 2008 Balfour Beatty </li></ul><ul><ul><li>Self reporting in relation to the Alexandrina Bibliotheca project in Egypt </li></ul></ul><ul><ul><li>Unlawful conduct, inaccurate accounting records (Section 221 Companies Act 1985) in joint venture with Egyptian company </li></ul></ul><ul><ul><li>SFO Civil Recovery Order for £2.25m under the Proceeds of Crime Act 2002 </li></ul></ul><ul><ul><li>Full cooperation by Balfour Beatty </li></ul></ul><ul><ul><li>Voluntarily agreed to introduce compliance systems and agreed external monitoring </li></ul></ul>

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Bribery Act 2010 <ul><li>Why this Act can’t be ignored </li></ul><ul><ul><li>International pressures on UK to clean up corruption </li></ul></ul><ul><ul><li>General recognition that UK Construction is one of the UK sectors where corruption exists </li></ul></ul><ul><ul><li>(OFT Cover Pricing prosecutions) </li></ul></ul><ul><ul><li>Anticipate Government desire to flex muscles of new Bribery Act </li></ul></ul><ul><ul><ul><li>Within UK </li></ul></ul></ul><ul><ul><ul><li>Internationally </li></ul></ul></ul><ul><ul><li>New offences </li></ul></ul><ul><ul><ul><li>For individuals </li></ul></ul></ul><ul><ul><ul><li>For organisations </li></ul></ul></ul><ul><ul><li>Potentially high fines and imprisonment </li></ul></ul><ul><ul><li>Potential damage to reputation and brand image </li></ul></ul>

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Bribery Act 2010 <ul><li>Repeals old legislation </li></ul><ul><ul><li>Public Bodies Corrupt Practices Act 1889 </li></ul></ul><ul><ul><li>Prevention of Corruption Acts 1906 and 1916 </li></ul></ul><ul><ul><li>Specific sections of other Acts </li></ul></ul><ul><li>Clear bribery offences </li></ul><ul><ul><li>Bribing another person – the active offence (Section 1) </li></ul></ul><ul><ul><ul><li>the promise or giving of an advantage with the intention of inducing or rewarding the improper performance of a relevant function or activity </li></ul></ul></ul><ul><ul><li>Being bribed – the passive offence (Section 2) </li></ul></ul><ul><ul><ul><li>the receipt or acceptance of an advantage for the improper performance of a relevant function or activity </li></ul></ul></ul><ul><ul><li>Improper performance (Sections 4 and 5) </li></ul></ul><ul><ul><ul><li>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 </li></ul></ul></ul>

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Bribery Act 2010 <ul><li>New offences </li></ul><ul><ul><li>Bribing a foreign public official (Section 6) </li></ul></ul><ul><ul><li>Failing of a commercial organisation to prevent bribery (Section 7) </li></ul></ul><ul><ul><ul><li>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 </li></ul></ul></ul><ul><ul><ul><li>Strict liability </li></ul></ul></ul><ul><ul><ul><li>… but potential defence at Section 7(2) </li></ul></ul></ul><ul><li>Act applies to: </li></ul><ul><ul><li>All UK companies, partnerships, citizens and residents </li></ul></ul><ul><ul><li>All foreign companies operating in the UK </li></ul></ul><ul><ul><li>Non UK persons where any part of the offence takes part in the UK </li></ul></ul><ul><li>Applies to public and private sectors </li></ul>

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Bribery Act 2010 <ul><li>Areas of particular risk </li></ul><ul><ul><li>Associated persons (Section 8) </li></ul></ul><ul><ul><ul><li>Use of agents </li></ul></ul></ul><ul><ul><ul><li>Subsidiaries </li></ul></ul></ul><ul><ul><ul><li>Joint venture partners </li></ul></ul></ul><ul><ul><li>Acquisitions and mergers </li></ul></ul><ul><ul><ul><li>Require effective due diligence </li></ul></ul></ul><ul><ul><li>Corporate hospitality and gifts </li></ul></ul><ul><ul><li>Charitable and political donations </li></ul></ul><ul><ul><li>Facilitation payments </li></ul></ul>

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Bribery Act 2010 <ul><li>Consequences of breaching the Act (Section 11) </li></ul><ul><ul><li>Criminal conviction </li></ul></ul><ul><ul><li>Fines and/or </li></ul></ul><ul><ul><li>Imprisonment up to 10 years </li></ul></ul><ul><ul><li>Senior officers liable if “consent or connivance” </li></ul></ul><ul><ul><li>Debarred from tendering public sector contracts </li></ul></ul><ul><ul><ul><li>Public Contracts Regulations 2006 </li></ul></ul></ul><ul><ul><li>Banned from holding Directorships </li></ul></ul><ul><ul><li>Proceeds of Crime Act 2002 </li></ul></ul><ul><ul><li>Money Laundering Regulations </li></ul></ul>

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Likely Scale of Fines Photo: Matt Lilek on flikr.com/creativecommons

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Likely Scale of Fines <ul><li>Aon Limited and FSA Principles of Business </li></ul><ul><ul><li>8 January 2009, FSA Final Notice </li></ul></ul><ul><ul><li>Breach of Principle 3 of FSA’s Principles of Business </li></ul></ul><ul><ul><li>Failure to take reasonable care to establish and maintain effective anti-bribery and corruption systems and controls </li></ul></ul><ul><ul><li>Payments of approximately $7 million to overseas firms and individuals in Bahrain, Bangladesh, Bulgaria, Burma, Indonesia and Vietnam </li></ul></ul><ul><ul><li>Identified by Aon and self-reporting to Serious Organised Crime Agency and FSA </li></ul></ul><ul><ul><li>Aon Limited fined £5.25 million </li></ul></ul><ul><ul><li>Fine would have been £7.5 million but 30% reduction in penalty for pro-active determination of senior management </li></ul></ul>

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Likely Scale of Fines <ul><li>R v Innospec Limited at Southwalk Crown Court </li></ul><ul><ul><li>18 March 2010 Innospec Limited plead guilty to charge of conspiracy to corrupt </li></ul></ul><ul><ul><li>Innospec Limited wanted to stop planned legislation banning Tetraethyl Lead (TEL) </li></ul></ul><ul><ul><li>Between February 2002 and December 2006 there was systematic bribery of senior government officials in Indonesia totalling approximately $8 million </li></ul></ul><ul><ul><li>Department of Justice (DoJ) and SFO investigations </li></ul></ul><ul><ul><li>Full admission and cooperation lead to global settlement of $40 million including an £8.3 million fine </li></ul></ul><ul><ul><li>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 </li></ul></ul>

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Adequate Procedures <ul><li>Defence to Section 7 offence – Failure of commercial organisation to prevent bribery </li></ul><ul><ul><li>“ 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) </li></ul></ul><ul><li>Ministry of Justice - Consultation on guidance about commercial organisations preventing bribery (section 9 of the Bribery Act 2010) </li></ul><ul><ul><li>Began 14 September 2010 </li></ul></ul><ul><ul><li>Ended 8 November 2010 </li></ul></ul><ul><ul><li>Final guidance due early 2011 </li></ul></ul><ul><li>The 2010 UK Bribery Act Adequate Procedures – Transparency International </li></ul>

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Adequate Procedures <ul><li>Six Principles within the Ministry of Justice Guidance: </li></ul><ul><ul><li>Risk Assessment </li></ul></ul><ul><ul><li>Top Level Commitment </li></ul></ul><ul><ul><li>Due Diligence </li></ul></ul><ul><ul><li>Clear, Practical and Accessible Policies and Procedures </li></ul></ul><ul><ul><li>Effective Implementation </li></ul></ul><ul><ul><li>Monitoring and Review </li></ul></ul>

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Adequate Procedures <ul><li>Anti-corruption policy likely to include: </li></ul><ul><ul><li>Anti corruption policy statement (for inclusion on website) </li></ul></ul><ul><ul><li>Code of Conduct </li></ul></ul><ul><ul><li>Policy on Corrupt Payments (including facilitation payments) </li></ul></ul><ul><ul><li>Policies on Gifts, Hospitality and Expenses </li></ul></ul><ul><ul><li>Policies on Charitable and Political Donations and Sponsorships </li></ul></ul><ul><ul><li>Policy on Business Relationships </li></ul></ul><ul><ul><li>Due Diligence Procedure </li></ul></ul><ul><ul><li>Reporting Procedure for Suspicious Behaviour (setting out nominated officers etc). </li></ul></ul><ul><ul><li>Whistleblowing Procedure (to include individuals and companies). </li></ul></ul><ul><ul><li>Accounting and business record requirements </li></ul></ul>

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Resources <ul><ul><li>Bribery Act 2010 </li></ul></ul><ul><ul><ul><li>http://www.opsi.gov.uk/acts/acts2010/pdf/ukpga_20100023_en.pdf </li></ul></ul></ul><ul><ul><li>Draft Guidance: Consultation on guidance about commercial organisations preventing bribery (section 9 of the Bribery Act 2010) published by the Ministry of Justice </li></ul></ul><ul><ul><ul><li>http://www.justice.gov.uk/consultations/docs/bribery-act-guidance-consultation1.pdf </li></ul></ul></ul><ul><ul><li>The 2010 UK Bribery Act Adequate Procedures published by Transparency International </li></ul></ul><ul><ul><ul><li>http://www.transparency.org.uk/working-with-companies/adequate-procedures </li></ul></ul></ul>

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Summary and Conclusion <ul><li>Richard Cooke </li></ul><ul><li>e: richard-cooke@birketts.co.uk </li></ul><ul><li>t: 01245 211 375 </li></ul>