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Reforming Bribery201111035016

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                                            Reforming Bribery
N Bridge and J Seager ( SJ Berwin LLP )
Nicola Bridge (pictured) is a Partner at SJ Berwin where she is a member of the Fraud &
Investigations group. Nicola acts for a range of clients on a broad spectrum of commercial
litigation including general contractual disputes, shareholder and agency disputes, fraud and
asset tracing claims and IT and media litigation. Joel Seager is an associate in the Commercial
Litigation and Dispute Resolution Department at SJ Berwin. He advises a broad range of
clients on general contractual disputes, financial services related matters, media disputes and
in relation to alternative dispute resolution. Joel is also member of SJ Berwin's Fraud &
Investigations group. His work related to this group includes acting for clients in a
multi-jurisdictional fraud dispute due to go to trial early in 2009.
Date: 09/01/2009
Subject Area: Crime

Summary: The Law Commission’s report "Reforming Bribery" makes recommendations to repeal the
present outdated laws on bribery and to introduce a more coherent and effective set of offences
designed to tackle modern day bribery. Should the report’s draft bill become law, legal advisors and
in-house counsel will have to consider how best to approach and implement anti-bribery measures
within their organisations

The Law Commission’s report entitled Reforming Bribery was published on 20 November 2008.
Amongst its recommendations are new offences that will undoubtedly impact on businesses in the UK
and foreign companies with registered offices in England and Wales. The report’s recommendations
propose to repeal the present outdated laws on bribery in England and Wales and introduce a more
coherent and effective set of offences designed to tackle modern day bribery. Should the report’s
draft bill become law, legal advisors and in-house counsel will have to consider carefully how best to
approach and implement anti-bribery measures within their organisations.
In summary, the report proposes:
•        the introduction of two general offences of bribery;

•        a discrete offence designed to counter the bribery of foreign public officials;

•        an offence relating to bribery committed outside England and Wales; and

•        a new corporate offence of negligently failing to prevent bribery, applicable to companies and
         limited liability partnerships.

The general offences
The two general offences of bribery are designed to codify the existing law and to tackle the conduct
of both the "payer" and the "recipient" of a bribe. The offences are subject to a "threshold condition"
limiting them to conduct undertaken in connection with activities or functions of a public nature, or in
connection with a trade, professional, employment or business activity, or activities undertaken on
behalf of a body of persons. The threshold condition seeks to amalgamate and simplify the present
distinction in statute and in common law between those committing bribery in public office or in a
private capacity.
The basic element of the proposed offences criminalises the conduct of those giving or accepting
financial or other advantages in return for improper behaviour. The payer commits an offence if he
offers or gives an advantage to someone, intending to induce that person to do something improper
or to reward that person for improper behaviour. The recipient commits an offence if he requests or
agrees to receive an advantage as a reward for improper behaviour. The offences relate to past as
well as present activities. The wrongfulness element of these offences involves "improper" conduct,
which is described by the report as meaning conduct "either contrary to an expectation that the
recipient would act in good faith or impartially, or conduct involving a betrayal of a position of trust".
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The report states that the expectations in question should be considered objectively, i.e. being those
expectations that a person of moral integrity would have. However, it also recommends that whether
or not there is a relevant expectation should be directed by judges or magistrates as appropriate.

Bribery of foreign public officials
The proposed offence of bribery of foreign public officials (or "FPOs") goes further than previous
reforms under the Anti-terrorism, Crime and Security Act 2001. The report highlights that this offence
is specifically recommended to meet the UK’s international obligations to deter and punish corrupt
transactions in an international business context. The Law Commission’s approach has drawn on
comparative jurisprudence, including mirroring language in the US Foreign Corrupt Practices Act
1977 that the payer of a bribe must "intend to obtain or retain business or an advantage in the course
of business". The offence is wide-ranging and encompasses bribes offered to FPOs, through third
parties to FPOs, or bribes given to third parties at the FPO’s request.
As a defence, the payer of the bribe to the FPO will have to prove that he reasonably believed what
he did was required or permitted under the law applicable to the FPO. The report suggests that
regard should be had to the steps the payer took to discover the true legal position under the law of
the country in question. As the burden of proof is on the payer, individuals and businesses and their
legal advisors may need to think about undertaking greater legal due diligence in anticipation of
transactions with foreign officials to establish the risk of an offence being committed.

Bribery committed outside England and Wales
Both general offences and the offence of bribery of an FPO extend to acts performed outside England
and Wales. The extra-territorial application of these offences means that acts of bribery committed
outside England and Wales by UK companies, British citizens or foreign nationals who are ordinarily
resident in the UK are equally as liable to prosecution as those who commit the same offences in the
UK.

The corporate offence
In light of the report, UK companies and foreign companies who have subsidiaries with registered
offices in England and Wales may need to consider how to guard against the offence of negligently
failing to prevent bribery committed on their behalf. In this regard, under the proposed offence,
companies may be found criminally liable for the negligence of someone connected with or employed
by the organisation that has responsibility for preventing bribery who fails to prevent the conduct of
the person who carries out the bribery on behalf of the organisation. Although the responsible person,
be it a director or an employee, would have no personal liability unless they were complicit with the
bribery, this clearly raises a number of corporate governance issues (another of the report’s
recommendations is to hold company officers individually liable if they consent to or connive with the
commission of bribery by a company or limited liability partnership). Moreover, the defence to this
offence also raises important corporate governance issues as the company in question has to prove
that it had "adequate procedures designed to prevent bribery being committed on its behalf".
Clearly, therefore, if the new offence becomes law, companies will need to take the necessary steps
to ensure that bribery is not committed by those acting on their behalf and that those responsible for
preventing bribery from taking place, have the adequate procedures in place. Whether fresh training,
updated staff handbooks or other measures for employees and company officers are introduced, this
legislation should be carefully considered by the risk committees, in-house lawyers and compliance
officers of multi-jurisdictional companies in particular, to establish their degree of exposure to
bribe-taking and whether their anti-bribery procedures will be adequate if the draft bill becomes law.

Penalties
For reasons of uniformity and simplicity, the Law Commission has proposed that the potential
penalties for bribery should be broadly the same as for fraud. The recommended penalty following
conviction on indictment for the general offices or for bribery of an FPO is up to 10 years
imprisonment and/or a fine. Significantly, only a company may be guilty of the proposed corporate
offence of failing to prevent bribery, for which the recommended penalty on a conviction on indictment
is a fine.

Summary

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In light of criticism by organisations such as the Organisation for Economic Co-operation and
Development (the "OECD"), the Law Commission’s recommendations seek to implement a more
effective legal framework to combat both domestic and foreign bribery and achieve a greater level of
compliance with the UK’s international obligations, such as those under the OECD Anti-Bribery
Convention. If the Law Commission’s draft bill becomes law in its present form, the UK will have taken
a significant legislative step towards achieving this. However, as the report acknowledges, the next
stage will be for the relevant authorities to successfully enforce the law by investigating and
prosecuting the new offences.
For further information, please contact Nicola Bridge (nicola.bridge@sjberwin.com) or Joel Seager
(joel.seager@sjberwin.com).



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