Bribery And Corruption Reform: Proposed Modern UK Laws Target Companies And LLPS

After blowing hot and cold for more than 10 years over the

need to radically reform and modernise the UK's criminal

anti-bribery and corruption laws, the Government finally appears to

be moving towards a simplified body of new laws that would include

unlimited fines for a new corporate criminal offence of failure to

prevent bribery and corruption at home and abroad. In the lead time

before the introduction of these new criminal laws, potentially

affected businesses should be reducing their risk exposure by

beginning to implement anti-bribery and corruption procedures

now.

Introduction

Whilst UK anti-corruption laws have largely evolved to combat

abuse of powers by public officials, international anti-corruption

initiatives have gained considerable momentum in targeting

corporations and corruption in business.

A very recent and high-profile example of the growing global

anti-corruption crackdown on corporations by prosecutors and

regulators, including fines in two different jurisdictions,

involves the case of the German engineering group, Siemens. On 15

December 2008, after a year of negotiations and plea bargaining,

the group reached a settlement with the US Department of Justice in

the amount of approximately $450 million in relation to charges of

bribery and attempts to falsify corporate records. At the same

time, the group agreed to pay $350 million to the Securities and

Exchange Commission in relation to similar charges under the

Foreign Corrupt Practices Act 1977 ("FCPA 1977"). In

addition, Siemens agreed to pay a fine of €395 million as

part of its settlement with the Munich prosecutor in connection

with corruption charges involving the failure of the former board

to fulfil its duties of supervision.

Bribery has been described by the English Court as "an evil

practice which threatens the foundations of any civilised

society",1 and which "corrupts not only the

recipient but also the giver of the bribe".2 Given

these judicial sentiments, one would expect to find a modern and

efficient set of bribery and corruption laws to combat this

"evil". However, UK criminal law has long been out of

date; it provides for corruption offences in three statutes dating

from the 19th and early 20th centuries, whilst the common law

offence of bribery of a person in public office is even older.

Current UK criminal law is also fragmented and complex.

Slow pace of UK law reform

To date the UK has been very slow to catch up in seeking to

align itself with international developments. Indeed, it has been

sharply criticised by the Organisation for Economic

Co‑operation and Development

("OECD")3 for its failure to bring its

anti-bribery laws into line with its international obligations

under the OECD Convention on Combating Bribery of Foreign Public

Officials in International Business Transactions (the

"Convention"). The OECD has stated that it is

"disappointed and seriously concerned" about the UK's

continued failure to address deficiencies in its laws on bribery of

foreign public officials and on corporate liability for foreign

bribery4, and has continually urged the rapid

introduction of new legislation.

Although the UK ratified the Convention in December 1998, which

then came into force on 15 February 1999, it has so far failed to

prosecute successfully any bribery case against a company. At the

time of the Convention's ratification, the Law Commission

recommended updating the UK's existing law and consolidating

the existing offences in one statute providing for new offences

(Report 248 – Legislating the Criminal Code:

Corruption, 1998), which eventually led to a draft Bill being

published in March 2003. However, the Bill was heavily criticised,

subjected to a further consultation process, and then quietly

withdrawn in early 2007.

US anti-corruption laws: trailblazing

As a result of SEC investigations in the mid-1970s, more than

400 US companies admitted making questionable or illegal payments

in excess of $300,000,000 to foreign government officials,

politicians and political parties. As a result, Congress enacted

FCPA 1977 to bring a halt to the bribery of foreign officials and

to restore public confidence in the integrity of the US business

system.

In stark contrast to the pace of reform in the UK, Congress

commenced negotiations with the OECD in 1988 to obtain the

agreement of the US's major trading partners to enact

legislation similar to FCPA 1977. Therefore, the Convention was

substantially driven by the US in order to establish international

measures similar to those contained in FCPA 1977. Congress was

motivated by its concern that following the passage of FCPA 1977,

US companies were operating at a disadvantage to foreign companies

which routinely paid bribes and, in some countries, were permitted

to deduct the cost of bribes as business expenses against their

taxes. When the US subsequently ratified the Convention in 1998 it

made significant amendments to FCPA 1977, including an extension of

its jurisdiction to foreign individuals or companies acting in

furtherance of corruption whilst in the US. For example, the

provisions of FCPA 1977 cover any overseas company that has traded

on an exchange or raised capital in the US.

The significant extra-territorial reach of the US authorities is

no more evident than in a recent case in which, on 8 January 2009,

the US Department of Justice filed a forfeiture action against

accounts located in Singapore that allegedly contained the proceeds

of a conspiracy to bribe public officials in Bangladesh. According

to the US authorities this action "shows the lengths to which

US law enforcement will go to recover the proceeds of foreign

corruption" and that the US would continue "to use [its]

forfeiture laws to recapture the illicit facilitating payments

.....".5

The UK's latest proposals for reform

As if stung by the recent OECD criticisms, the Law Commission

published its latest recommendations (Report 313 -Law

Com) for reforming the law of bribery on 20 November 2008. The

Law Commission recognised that the effective combating of corrupt

practices requires an effective law of bribery, whilst current UK

laws are riddled with uncertainty and in need of

rationalisation.

At the heart of the Law Commission proposals, is the replacement

of the patchwork of offences with the following:

two general offences of bribery, one concerned with giving

bribes and one concerned with taking them;

a new offence of bribing a foreign public official; and

a new corporate offence applicable to companies and LLPs of

negligently failing to prevent bribery by an employee or

agent.

It is also recommended that the law of bribery be extended to

cover foreign nationals who reside in the UK or who conduct their

business in the UK.

Attached to the Law Commission Report, is a draft Bill; and...