Under the British Bribery Act, the authorities can charge any British bank with committing bribery or allowing "associated persons" to do so on its behalf. Relationship managers are at the forefront of banks' efforts to comply. This is especially true as there is no “mental element” to the crime; the only defence is the maintenance of an effective program by bank staff.

When the Act was enacted in 2010, with government guidance to follow, lawyers in the City of London were rubbing their hands at the prospect of fresh business and proclaiming that a ‘new gold standard’ had been created. This might turn out to be something of an exaggeration, but there are still dangers ahead for US companies that trade with the UK and indeed much of Europe.

Cases, so far, are rare. The Serious Fraud Office has stated that only two prosecutions have occurred to date under the new Act. The first one concerned a Magistrates’ Court clerk who took £500 (£753) in exchange for cancelling someone’s speeding charge; the second revolved around an offer of £300 from someone who wanted to pass a driving test. No corporation has been charged so far, nor has any foreigner.

It is also true that the Act has not set up a regulatory regime as such. The SFO and the Crown Prosecution Service are the only agencies that can prosecute anyone for bribery according to Section 10 and they do publish guidance, but this falls short of regulation.

The legislation, in the words of The Economist on 11 July 2011, was “conceived by the previous Labor government in response to the scandal of BAE bribes in Saudi Arabia” but no case involving a public official has yet come to light.

The likelihood of a US target

The new Act, however, should not be discounted as a mere paper tiger; all new legislation has to be “bedded in”. The US authorities, for their part, prosecuted nobody at all under the Foreign Corrupt Practices Act 1977 during its first two years of life. Speculation is rife about the ground on which the SFO will choose to fight its first test case.

Richard Lissack QC, drawing from his knowledge of that body, said that he expected a case against a foreign corporation which, through a bribe, had secured an advantage in a situation where a rival British company did not pay the bribe. He thought that this would “tick a lot of boxes”, especially since it would be good for the image of British businesses. This strategy could be popular in government circles at the moment in view of the recent swingeing fines that US regulators have levied – some say in a nationally targeted way – on UK banks such as HSBC, Barclays and RBS over money-laundering controls and LIBOR. Lissack also thought that the SFO wanted to prosecute small multinationals – possibly US, once again – that lacked the resources for good controls.

The FCPA v the Bribery Act: two different viewpoints

US companies that deal with the UK are used to running compliance systems in accordance with their Foreign Corrupt Practices Act, but many are struggling to take in the provisions of the new UK statute. The FCPA prohibits the payment of any amount of money or “anything of value” (the case law interprets this to mean meals, drinks and travel as well as solid presents) to a foreign (i.e. non-US) official in order to influence him in his official capacity or to secure any other improper advantage in order to obtain or retain business.

US people and businesses (“domestic concerns”) are prohibited from doing this, but in some cases foreign entities can be as well. Every foreign public company (15 USC § 78dd-1) is forbidden to make such payments if it is are listed on a US stock exchange or obliged in some way to report to the Securities and Exchange Commission, which shares prosecuting rights with the Department of Justice for this crime. These “issuer” companies’ people – including shareholders and agents – can also be found guilty. Foreign people and entities can also be liable if they do anything to further corrupt payments while in the US (15 USC § 78dd-3). The FCPA applies to bribes paid anywhere in the world.

There are considerable grey areas in the courts’ interpretation of “foreign official”; one case included doctors who spent only some of their time working for a nationalized healthcare service.

The Act also bans the falsification of accounts, books and records (15 USC § 78dd-1) and requires “issuers” (but no-one else) to run adequate internal accounting control systems. This is because many bribes are hidden on the books as expenses, consulting fees and other things. The British statute, by contrast, governs more activity and is capable of punishing more entities.

Sections 1 and 2 contain the active and passive offences of bribery; s6 contains a standalone offence of bribing a foreign public official; and s7 makes it an offence for a UK commercial organization to prevent bribery on its behalf or to allow “associated persons” who act on its behalf (s8) to commit it. This last is a strict liability offence, the only defence to which is the upkeep of good anti-bribery systems in line with “guidance” which the Ministry of Justice issued in 2011 under s9. All individuals and companies anywhere in the world can be found guilty of breaking ss1, 2 and 6 as long as they or their misdeeds are sufficiently well connected with the UK. The Act affects every company in the UK. Directors and officers can be found personally liable with unlimited fines and 10 years in jail. US companies that deal with the UK would do well to remember this.

Bribery of non-officials

Business-to-business bribery – which the FCPA does not cover except at its extreme fringes – is expected to be the main target of future prosecutions. To face charges for such purely commercial bribery a UK company, or an American company when dealing with the UK, has to offer an advantage – which need not be a business advantage – to someone performing a “relevant function” or to play the passive partner in such bribery. Section 3(2)(d) says that a relevant function is any activity performed by or on behalf of a body of persons whether corporate or not – a very wide definition indeed. Anything to do with business or the person’s employment is obviously included.

This is more extensive than anything in the FCPA, even though that Act does ban some activity that strays beyond the public sphere, as in the case of the semi-private doctors. It is also wider than in the s6 offence against a public official. In such a case, the briber must be hoping to obtain a business advantage; this is not true of purely commercial bribery.

Most of the UK Bribery Act applies to public and private bribery alike – for example, s7’s guidance about how a company should stop its associates from bribing – and many global law firms count this as one reason why the UK’s new regime is so sweeping. However, more countries have business-to-business bribery regimes than is generally thought.

Business-to-business bribery is banned by the anti-corruption legislation of practically all countries in the European Economic Area, although it is legal in certain circumstances in Italy. It is also outlawed in China, Hong Kong, Singapore and South Africa. In the UAE purely commercial bribery is an offence but the person who offers the bribe cannot be charged. In Jordan it is against the law only if a publicly-traded company commits it. In Iraq, which is heavily influenced by the US, it is not an offence generally although it can be if the government owns at least some of the business involved.

The harsh mental element: purely commercial bribery v official bribery

Under the FCPA the briber, if an individual, can only be criminally liable if he acts “wilfuly.” This means that he must have a “bad purpose” (US v Kay, 513 F.3d 432, 448 (5th Cir. 2007)). If the defendant is a company, the prosecution need not prove wilfulness. It must, however, also prove that the briber, whether a human or a corporation, is offering the bribe “corruptly.” This has a bearing on the mental element in the crime as, according to the US Congress when enacting the FCPA, the word “corruptly” means an intent or desire to wrongfully induce the recipient to misuse his official position. The US federal courts interpret this to mean that there must be a quid pro quo, i.e. the briber makes the favor contingent upon the misuse. An executive who authorizes others to pay “whoever you need to” in a foreign government to obtain a contract has broken the law, even if no actual offer or payment takes place. To put it another way, for a prosecution to be successful there must be corrupt intent. The motivation to obtain or retain business, otherwise known as the “business purpose test,” must always be present in US law.

The UK’s legislation is not hedged around with the same mental requirements. It is true that when committing a s6 offence against a foreign official, the briber must be hoping to obtain a business advantage if he is to be found guilty. For bribing and being bribed under ss1 and 2, however, the defendant need only intend some advantage to accrue and it need not be a monetary one. The intention must be also to cause the improper performance of a relevant function. This is also true when the very acceptance of the advantage constitutes such improper performance. The mirror image of this comes when the bribed party agrees to accept the advantage and knows that this is improper performance in itself. It is immaterial whether the bribed party wants the advantage for himself or not.

This applies to business-to-business bribery but there is nothing in the Act to stop it also applying to the bribery of foreign officials, quite independently of the provisions of s6. The SFO has often said that s1 might be used more often than s6 in foreign official bribery cases. US companies whose operations are connected with the UK must therefore tread more carefully than s6 suggests.

Facilitation payments

Unlike its British counterpart, the American Act allows “facilitation payments” (sometimes known in the US as “grease” payments) whereby the payer tries to induce the payee to perform a function that he ought to be performing anyway as his official duty. Such payments have always been illegal in British law and the guidance that the MoJ issued goes out of its way to describe them as bribes. US companies that operate in the UK ought to beware of this.

Even here, though, there seems to be leeway. An article in the London Financial Times (25 February 2011) describes the strenuous last-minute efforts that HM Government was making to withdraw 200 British citizens who were stranded in Libya at the beginning of the civil war. The government had been tardier than others in doing this and therefore felt obliged to pay monies above and beyond the usual price of bookings to various officials at Tripoli airport to ensure a speedy evacuation.

The paper quotes the Foreign Office: “We categorically deny accusations earlier that British officials have paid ‘bribes’ to Libyan officials. Officials at Tripoli airport charge fees for services, such as aircraft handling. These charges are applied to all countries and carriers seeking to fly in or out of Tripoli airport. In the current situation, these fees have increased.”

When cornered about this at a conference the Bribery Act’s draftsman rushed to the government’s defence with an assertion that the payments were “fast-track fees.” The Act and the guidance never mention this term. The so-called “quick start guide” that comes with the guidance, which itself has legal status as a supporting document, says that “you can continue to pay for legally required administrative fees or fast-track services. These are not facilitation payments.” If the incident were to happen today the government would therefore presumably hold that the Libyan officials were demanding money in a “legally required way”.

This is a relevant point as many global corporations might have to snatch their staff out of unfavorable jurisdictions from time to time. To help the process along, the guidance (point 48) adds: “It is recognized that there are circumstances in which individuals are left with no alternative but to make payments in order to protect against loss of life, limb or liberty. The common law defence of duress is very likely to be available in such circumstances.”

Most countries in the European Economic Area do not tolerate grease payments. Danish law allows small ones if they involve Danish firms but take place outside Denmark. Hungary (under certain circumstances) and Spain allow them, although they do not when the giver or receiver is an official.

Territorial reach for official bribery

The FCPA applies to conduct anywhere in the world. As is usual with federal crimes, it is an offence for bribe-related activity to cross a state line and this is true of telephone calls and emails.

Foreigners – although not “issuers” or “domestic concerns” – may be prosecuted under the FCPA if they try to further corrupt payments while on US soil even if their bribery schemes have nothing to do with the US. Also, US citizens can be found guilty under the FCPA even if they are acting outside the US. Under s3 of the UK’s Bribery Act, meanwhile, a function or activity (which the briber is trying to influence) is relevant even if it does not happen in the UK and indeed has no connection at all with the UK.

The US Act does, however, contain a “local law” defence. This guarantees that if the payment in question is lawful under the written laws and regulations of the foreign official’s country, no crime is committed (15 USC §§ 78dd-2(c)(1), 78dd-3(c)(1)). The UK’s Bribery Act offers this type of defence under s6 in the case of bribing foreign officials. The official cannot be said to have been bribed if he is allowed to be swayed by the gift according to the written laws that apply to him.

Territorial reach for business-to-business bribery

This defence is not, however, available for the business-to-business offences. Here, the bribed party must be breaching a “relevant expectation” which he ought to be fulfilling impartially or in good faith (ss3-4). Section 5 states than when a jury evaluates the validity of such an expectation it must look at “what a reasonable person in the UK would expect in relation to the performance of the type of function or activity concerned.” This tendency to apply UK standards all over the world is present in other criminal statutes such as the Money Laundering Regulations and is increasing with time.

Draconian measures: the new normal

These facts do not, however, mean that the UK Act is the “new gold standard” or that US companies have more to fear in the UK than elsewhere in the world. Draconian bribery legislation is sweeping the planet; the chairman of the Organization for Economic Control and Development’s anti-bribery working group recently described the UK’s Bribery Act as “pretty middle-of-the-road”.

Various “high risk” countries have over-reacted to the threat of bribery, producing severe laws that arguably go too far. In Romania, pressure from the European Union has resulted in some severe stultification. Every tender for certain types of contract must be opened in front of all the officers of the approval committee; consequently it can take weeks to get the right people together in the same room. In China, meanwhile, anyone who takes bribes exceeding RMB100,000 ($16,130) can face a firing squad. Wu Zhiming, the former General Secretary of the Communist Party in Jiangxi Province, was sentenced to death in December. He took over RMB47 million yuan ($7.5 million) in bribes and doled out jobs and contracts in exchange.

Nightmare on Elm Street?

The new head of the SFO, David Green, also seems to be steeling his organization for a fight. In October he announced that companies – including US companies that have “sufficient connection” with the UK – that admit failings under the Act’s self-reporting regime could no longer be sure of exemption from criminal penalties. Watch this space.