Ten years of the Bribery Act – A success?
Welcome to our new series of blog posts exploring The Rule of Ten. In this first post we reflect on ten years’ operation of the Bribery Act 2010. Later posts will consider the ten deferred prosecution agreements agreed since they became available in the UK; ten lessons learned about bribery compliance; and, finally, some crystal-ball gazing as to what may be in store for bribery compliance in the next ten years.
1 July 2021 marks ten years since the introduction of the Bribery Act 2010 (the “Act”). In this blog post, we examine the offences and key defence that make up the Act, the enforcement since its inception and consider whether it has been an overall success.
Most of our readers will be familiar with the four offences set out in the Act:
- Bribing another person (section 1) and being bribed (section 2): briefly, it is an offence to offer, promise or give an advantage, or to request, agree to receive or accept an advantage where it relates to the improper performance of a relevant activity (sections 3-5)
- Bribing a foreign public official (section 6)
- A strict liability corporate offence of failure to prevent bribery to obtain or retain business or a business advantage (section 7).
The long arm of the law
One undeniable success of the Act has been to extend the reach of UK law. While the introduction of the Act did not dramatically alter the position regarding the principal bribery offences (which will only be committed by an individual or company if the relevant conduct takes place within the UK or if the individual or company has a "close connection" with the UK), the introduction of the corporate offence was bolstered with extra-territorial effect.
A commercial organisation may commit the section 7 offence as a result of conduct carried out by an "associated person” if it is either a company incorporated in the UK or a partnership formed in the UK, or carries on a business, or part of a business, in any part of the UK, regardless of where it was incorporated or formed (section 7(5)). The "associated person" is a person who performs services for, or on behalf of, the relevant company (section 8), which is to be determined by reference to all the relevant circumstances and not merely the nature of its relationship with the company.
In practice, this means that a company incorporated overseas, which has business operations or a subsidiary located in the UK, may be at risk of committing the corporate offence if a person “associated” with it bribes another person anywhere in the world with the intention of obtaining or retaining business or an advantage in the conduct of business for the company.
As we will discuss in our next post, this extra-territorial reach is clearly seen in the relevant deferred prosecution agreements (“DPAs”) agreed to date, which have often involved both UK and non-UK companies. It has also had the positive impact of compelling organisations with a UK presence to strengthen their global compliance frameworks.
We consider below how successfully the new section 7 offence has been prosecuted but it is worth noting here that it must have been deemed a success by government at least, as it was mirrored in the Criminal Finances Act 2017 with the failure to prevent the facilitation of tax evasion offences (sections 45 and 46). Although proposed reforms to introduce a failure to prevent economic crime offence into the Financial Services Act 2021 were dropped, it remains to be seen whether a general failure to prevent offence will be introduced once the Law Commission’s review of corporate criminal liability has concluded. We will consider this issue further in our final post in the series.
Beyond modernising the previous statutory and common law bribery offences, the Act’s biggest success is often cited to be the invention of the new “adequate procedures” defence. It is a full defence to a section 7 charge for companies to show they had adequate procedures in place to prevent bribery (section 7(2)). This has in turn encouraged - some might say, forced - companies to address their compliance processes and pay more attention to the risks of bribery and corruption they face in the conduct of their everyday business.
On the other hand, critics of the Act point to this defence as introducing a requirement for burdensome compliance measures and criticise the Ministry of Justice (“MOJ”) guidance for lacking specificity. Often, organisations have to “fill in the gaps” in the MOJ’s guidance with sectoral rules and publications (such as the Financial Conduct Authority’s Financial Crime guide), learnings from the DPAs published to date, as well as materials published by NGOs and industry bodies. Further, the one contested section 7 case of Skansen Interiors Ltd illustrates that small and medium sized enterprises will be treated no differently from large commercial companies when it comes to assessing the issues that anti-bribery policies and procedures should address. However, that case did not advance our understanding of what “adequate” means in practice. Although company directors had pleaded guilty to offences under both sections 1 and 2 of the Act, the company defended the action against it, arguing that it had had adequate procedures in place to prevent bribery. The jury did not agree and found Skansen's procedures to be wanting.
The case law
So what do the cases pursued under the Act so far say about its success? If the number of successful prosecutions is anything to go by, perhaps it has not been as successful as had been first envisaged. The first three prosecutions under the Act were brought by the Crown Prosecution Service ("CPS") and were of individuals accepting or offering small bribes for misconduct such as deleting traffic penalties from a database, falsifying the results of a test for a taxi driving licence and increasing the mark for a university dissertation. Since then individuals have been prosecuted for bribery in relation to English football and international cricket, banking fraud and commercial transactions.
These are not the serious and complex corporate bribery cases that it had initially been expected the Act would address. In fact, the Serious Fraud Office (“SFO”) did not exercise its powers under the Act until 2014, when it successfully prosecuted two former directors of Sustainable AgroEnergy plc under sections 1 and 2 for giving and receiving bribes in connection with the promotion and selling of “biofuel” investment products to UK investors.
However, since that date, as well as obtaining a handful of convictions of individuals for bribery offences related to the obtaining of commercial contracts, the SFO has made increasing use of the new corporate offence under section 7 of failing to prevent bribery. In December 2015 it reached its first DPA with Standard Bank PLC, in the first use of the section 7 offence by any prosecutor. A year later the SFO secured its first conviction under section 7, when Sweett Group PLC pleaded guilty to failing to prevent bribery by its Dubai subsidiary and was ordered to pay £2.25 million by way of fine, confiscation and costs. It is true that the SFO has not so far pursued any contested section 7 case to conviction (the Skansen case was prosecuted by the CPS). However, seven of the ten DPAs so far agreed have related to allegations of failing to prevent bribery under section 7.
So 8/10 then?
There is no escaping the fact that the number of prosecutions under the Act is low. This is partly because of the length of time such complex investigations take to progress to a charging decision. The impact of the DPA process on potential prosecutions of bribery will be considered in more detail later in our “The Rule of Ten” series. However, had the section 7 cases settled by way of DPA instead been contested at trial, the success or otherwise of the Act might be viewed differently.
In two respects, however, it is clear that the Act has had considerable success and impact.
Firstly, it is widely accepted to have set the gold standard globally for law and compliance in the bribery arena, with its provisions being emulated, or at the very least influential, in the development of other jurisdictions’ law and practice, its influence surpassing even that of the US Foreign Corrupt Practices Act. Aligned to that, the Act’s far-reaching extra-territorial effect has raised awareness of the damage that is caused by bribery and corruption in economies across the globe, leading to a greater understanding of the need to tackle this pervasive threat.
Secondly, it has compelled businesses to address their own internal compliance processes and “up their game” as they look to protect themselves against a potential offence under section 7. In so doing, they have promoted the anti-bribery and corruption agenda even more effectively, perhaps, than the government could ever do alone.
In the second article in our “The Rule of Ten” series we will look at the ten DPAs agreed so far and examine what we have learnt as the regime has matured.