uk bribery act - latham & watkins

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UK Bribery ActWhat Every Business Needs To Know

“Bribery is a serious offence. There is an inherit public interest in bribery being prosecuted in order to give practical effect to Parliament’s criminalisation of such behaviour.”

— Richard Alderman, Director of the UK Serious Fraud Office Keir Starmer QC, UK Director of Public Prosecution

Latham & Watkins | UK Bribery Act | What Every Business Needs To Know

ContentsAnti-Bribery and Corruption ............................................................................. 1

The UK Bribery Act 2010

The Business Risks ........................................................................................... 2

What Bribery and Corruption Can Do

The Upside ......................................................................................................... 3

Prevention is Even Better Than Cure

The Legal Context ............................................................................................. 4 What are the Offences and Where Do They Apply?

Adequate Prodecures ....................................................................................... 5 Preventing Bribery and Reducing Liability

Next Steps .......................................................................................................... 6

What Latham & Watkins Can Offer You

Contacts .............................................................................................................. 7

Global Resources .............................................................................................. 8

Offices

“Bribery blights lives. Its immediate victims include firms that lose out unfairly. The wider victims are government and society, undermined by a weakened rule of law and damaged social and economic development. At stake is the principle of free and fair competition, which stands diminished by each bribe offered or accepted.”

— Kenneth Clarke, UK Secretary of State for Justice

Latham & Watkins | UK Bribery Act | What Every Business Needs To Know 1

Anti-Bribery and CorruptionThe UK Bribery Act 2010The law on bribery and corruption is changing radically. The Bribery Act 2010 will be the flagship of the UK’s fight against bribery and corruption worldwide. And it has set sail.

The Bribery Act is something which no business can afford to ignore. Some elements of a business might escape its jurisdictional reach, but many will not. Businesses should consider now the extent to which the Bribery Act will apply to them, and consider what they might do to best protect themselves against bribery.

This Bribery Act came into force on 1 July 2011. It created new offences of significant scope and extra-territorial reach:

• It will criminalise both active and passive bribery, i.e. both bribing and being bribed

• It will criminalise not just bribery of public officials, but also bribery entirely in the private sphere

• It does not require proof of dishonesty or corruption

• It will criminalise the failure to prevent bribery taking place

• It will, effectively, require those carrying on business in the UK to have in place “adequate procedures” to prevent bribery taking place, even if the bribery is unconnected with the UK

• The offences will have extensive extra-territorial reach, criminalising activities which may take place entirely outside the UK

• Committing offences could lead to imprisonment for up to 10 years (for individuals) and/or unlimited fines (for individuals and corporate bodies)

• There is no exception for “facilitation payments”

• “Local customs and practices” will not necessarily provide a defence

Latham & Watkins is able to navigate you through these issues and help you avoid their concealed dangers. We are able to advise you on your risk assessments, your policies and procedures, implementation throughout your organisation, and how the law might affect your business deals. We are also on hand to assist you in dealing with potential problems should they arise.

This area of law is novel and complex. It varies in material respects from legislation overseas, most notably the US’s Foreign Corrupt Practices Act. It might present a number of difficult choices for businesses worldwide. This briefing is designed to enable you to understand, at a business level, the risks which bribery and corruption might present to your business, and the benefits which might flow from working to eliminate them. We hope it will assist you in deciding what steps you consider you may need to take in order to prepare for the new law.

We would be delighted to discuss this with you – please contact any of the listed contacts or your usual Latham & Watkins contact.

2 Latham & Watkins | UK Bribery Act | What Every Business Needs To Know

The Business RisksWhat Bribery and Corruption Can DoBribery and corruption is not merely a legal issue, although that is a serious consequence which cannot be ignored. It can have a serious impact on your business in a variety of ways.

The risks which your business might face include:

Convictions: Your company may face a prosecution and conviction in the English Courts, as may individuals (e.g. partners, directors, employees, or agents). This may lead to unlimited fines for both individuals and corporate bodies, and/or imprisonment for individuals, of up to 10 years. You may also be committing offences under the laws of other jurisdictions.

Regulatory Consequences: If you are regulated, for example by the FSA or by a professional body, you may face investigation and sanction.

Debarment / Exclusion: You may be prevented from tendering or contracting, for example under relevant rules of international finance or export credit, or under the EU Public Procurement and Utilities Directives.

Further Wrongdoing: The bribery might taint other transactions, e.g. the fruits of any bribery might contravene money laundering laws.

“Casino Risk”: Your contracts might be unenforceable if they are tainted by wrongdoing.

Defence Costs: You may have to bear the cost of dealing with internal or external investigations, and of defending prosecutions.

Remedial Costs: You may need to incur costs improving your systems and establishing (possibly to the satisfaction of an external reviewer) that wrongdoing will not recur. Your insurance premiums might also rise.

Loss of Goodwill: All of this may take place in the public spotlight. You may face loss of business, even if you are never convicted.

Reputational Damage: You may suffer less “tangible” losses. Even suspicion of wrongdoing can harm your relations with employees or business associates.

Third Party Claims: You may need to defend claims if others contend that you have caused them loss.

Loss of Money: Your resources may well have been used to fund the bribery. You might also have made investments, or expanded your business, into an unexpectedly costly venture. You might need to incur costs if you want to get back what you have lost.

“Corruption, the abuse of entrusted power for private gain, is the single greatest obstacle to economic and social development around the world. It distorts markets, stifles economic growth, debases democracy and undermines the rule of law.”

— ICC & Transparency International


The UpsidePrevention is Even Better Than CureThere are clear advantages to be gained by taking steps to prevent bribery and corruption. These advantages are not only a case of preventing a potentially costly drain on your resources and avoiding prosecutions and other legal consequences, although these advantages can be significant. They can improve your business and your standing in the business community, for example:

Cost Reduction: Your day-to-day business costs may reduce significantly.

Investor Interest: You could be in a position to attract more ethical investors, and obtain more favourable prospects of obtaining international finance.

Goodwill: Your standing in the market may improve, potentially reinforcing or expanding your customer base.

Trustworthiness: Your business partners may see additional advantages in dealing with you. They may want to see that you have adequate procedures in place.

Reliability: You may significantly improve your relationship with regulatory bodies or other authorities relevant to your business, and potentially reduce the prospect of investigations.

Leadership: You may be in a better position to attract or retain highly principled employees.

“Countering corruption makes business sense — it lowers cost of operation, improves staff morale and accountability, protects a company’s reputation and above all creates a level playing field for fair and stable markets and competition.”

— International Business Leaders Forum

“While making a corrupt payment can enable a company to win profitable business in the near term, it ultimately destroys value, both at a macroeconomic level and at an individual company level. … Corruption destabilises the political process and promotes conflict. It also raises the cost of doing business and deters investment. For investors with exposure across the market, this reduces overall returns by interfering with the allocation of capital to its “highest and best use””

— International Corporate Governance Network


The Legal ContextWhat are the Offences and Where Do They Apply?The Act aims to reform criminal liability for bribery and corruption, replacing existing common law and statutory offences with a new consolidated scheme of five bribery offences. The first two are the “General Offences”, covering bribery in both the private and public sphere. The third targets bribery specifically in the public sphere. The fourth targets the complicity of senior officers of corporate bodies which have committed bribery. The fifth — perhaps most concerning for corporate bodies — covers their failure to prevent bribery, no matter where in the world the bribery takes place.

All of these offences apply not only to behaviour in the UK, but also potentially to behaviour by individuals and corporate bodies all over the world.

These are the principal elements of each offence, and the territorial reach of each of them. We do not seek to set out here a full account of the new offences: these are summaries, and we recommend you take detailed legal advice in each case before proceeding.

Offence What could it cover? Where does it apply?

Bribing Another Person

• Offering, promising, or giving a financial or other advantage

• Intending to induce or reward the improper performance of a relevant function or activity OR knowing that accepting the advantage is improper

• Any acts committed in the UK• Any acts committed anywhere in the world by

a person with a “close connection” with the UK (among others, a UK company or a British citizen or resident)

Being Bribed • Requesting, agreeing to receive, or receiving a financial or other advantage

• Intending a relevant function or activity to be improperly performed OR rewarding improper performance OR where accepting the advantage is improper


a person with a “close connection” with the UK

Bribing a Foreign Public Official

• Offering, promising, or giving a financial or other advantage

• Intending to influence the FPO in their official capacity

• Intending to obtain or retain a business advantage • Where the FPO is neither permitted nor required

to be influenced


a person with a “close connection” with the UK

Senior Officer Offence

• The corporate body has bribed or has been bribed• The senior officer has consented to or connived in

the bribery

• Acts committed by any senior officer with a “close connection” with the UK.

• Acts committed any senior officer, if the bribery takes place in the UK

Failure to Prevent Bribery

• A person associated with a commercial organisation bribes someone else

• Intending to obtain or retain a business advantage for the organisation

• The organisation did not have in place “adequate procedures”

• Where the commercial organisation is a UK company or partnership

• Where the commercial organisation carries on all or part or its business in the UK


Adequate ProceduresPreventing Bribery and Reducing LiabilityOne of the more novel features of the Bribery Act is the offence of failing to prevent bribery. This is an offence which does not require proof that the corporate body did anything, nor that it was dishonest: merely that a person who performs services for the corporate body bribed someone else to gain a business advantage. Corporate bodies could be liable for bribery they know absolutely nothing about. This has the potential to cause serious embarrassment and heavy fines.

The Bribery Act provides for one defence to this: that the corporate body had in place “adequate procedures” to prevent the bribery from taking place. The nature of these adequate procedures is not set down by law. Each corporate body will need to decide for itself what it will put in place. The following are key features of what might constitute “adequate procedures”, although we recommend you take detailed legal advice in each case before proceeding.

What is it? What might it involve?

Top-Level Commitment• The commitment by top level management of a commercial organisation

(be it a board of directors, the owners or any other equivalent body or person) to preventing bribery by persons associated with it

• Fostering a culture within the organisation in which bribery is never acceptable

• Statement of the organisation’s anti-bribery stance• Management involvement in anti-bribery prodecures• Internal and external communication

Risk Assessment• Periodic, informed and documented assessment of the nature and

extent of a commercial organisation’s exposure to potential external and internal risks of bribery on its behalf by persons associated with it

• Risk assessment procedures• Appropriate resourcing• Identification of information sources• Documentation of risk assessment

Proportionate Procedures• Procedures to prevent bribery by persons associated with a commercial

organisation which are proportionate to the bribery risk it faces and to the nature, scale and complexity of its activites

• Clear, practical, accessible procedures that are effectively implemented and enforced

• Anti-bribery policy• Ancillary policies and procedures• Incident management prodecures

Due Diligence• Application of due diligence prodecures, taking a proportionate and

risk based approach, in respect of persons who perform or will perfrom services on behalf of the organisation, in order to mitigate indentified bribery risks

• Assessment of who is an “associated person”• Direct enquiries• Verification and independent research• Engagement with associated persons

Communication (including training)• Ensuring anti-bribery policies and procedures are embedded and

understood throughout the organisation• Internal and external communication, including training proportionate to

the risks the organisation faces

• Implementation of policies• Staff engagement and training• Enquiry hotlines and “speak up” procedures

Monitoring and Review• Monitoring and reviewing procedures designed to prevent bribery by

persons associated with it• Making improvements to procedures where necessary

• Internal and external reporting mechanisms• Auditing implementation• External verification• Regular review processes


Next StepsWhat Latham & Watkins Can Offer YouLatham & Watkins is committed to providing its clients with the best possible service. With approximately 2,000 lawyers in 31 offices worldwide, covering all the major aspects of commercial law, Latham & Watkins is one of the world’s premier law firms, able to deliver client focused, seamless, representation at a local and global level.

We have one of the world’s leading global corporate governance and white collar crime practices, with practitioners drawn from a variety of backgrounds including enforcement and government agencies.

We are able to provide expertise from the London office in areas of corporate governance, white collar crime, litigation and dispute resolution, corporate, finance, and employment. We can assist you in all aspects of anti-bribery and anti-corruption measures, for example:

Legal Understanding

• Assisting you in understanding the legal position, both in the UK and in other jurisdictions, and advising on the cross-jurisdictional impact of relevant legislation

Implementing Procedures

• Assessing your business and your bribery and corruption risks

• Advising you in devising internal procedures

• Reviewing your existing procedures for compliance with the Bribery Act

• Assisting you in embedding your procedures at all levels

• Training your personnel

Transactional Advice

• Assessing your commercial contracts and supply chain management

• Advising you on ethical due diligence in corporate and financing transactions

Investigations

• Advising you on potential problems — an independent “sounding board”

• Advising and acting for you in internal investigations and self-reporting

• Advising and acting for you in dealing with external investigations and prosecutions

• Advising and acting for you in relation to any disputes or litigation which might arise, including pursuing or defending claims, and potential insurance claims

• Advising you if you have lost out on a business opportunity as a result of bribery

We would be delighted to discuss this with you, please contact any of the listed contacts or your usual Latham & Watkins contact.


Contacts

John Hull Partner +44.20.7710.3015 [email protected]

Omar Shah Partner +44.20.7710.1103 [email protected]

Marc Hansen Partner +44.20.7710.1094 [email protected]

Daniel Smith Associate +44.20.7710.1028 [email protected]

Global Offices

LW.com

* In association with the Law office of Mohammed A. Al-Sheikh

This guide is published by Latham & Watkins as a news reporting service to clients and other friends. The information contained in this publication should not be construed as legal advice. Should further analysis or explanation of the subject matter be required, please contact the attorneys listed above or the attorney whom you normally consult.

Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United Kingdom, France, Italy and Singapore and as affiliated partnerships conducting the practice in Hong Kong and Japan. Latham & Watkins practices in Saudi Arabia in association with the Law Office of Mohammed Al-Sheikh. © Copyright 2011 Latham & Watkins. All Rights Reserved.

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