The Bribery Act 2010 - Issues for non-UK companies with a business presence in the UK

The UK Bribery Act 2010 came into force on 1 July 2011 and is the most far reaching of any EU or US anti-corruption legislation. Penalties under the Act are up to ten years in prison and unlimited fines. Corporates convicted can find themselves barred from all EU Public Procurement Work.

The Act has wide extra-territorial reach and can catch organisations that are incorporated outside of the United Kingdom.

The Act applies to a "commercial organisation" which is either:

a) incorporated/formed in the UK; or
b) carries on a business or part of a business in the UK.

The UK Regulator, the Serious Fraud Office, has indicated it will be looking very closely at non UK businesses to see if they are carrying on part of their business in the UK through their subsidiaries, branches and agencies etc and will not automatically view the subsidiaries as being wholly independent.

The biggest risk to non UK organisations is that they can commit the new corporate offence of "failing to prevent bribery by an associated person''. An associated person is someone who performs services for or on behalf of the organisation, typically an employee, agent or subsidiary.

This offence has no territorial limits at all and any non UK company can be attacked if it has a demonstrable UK trading presence as in (b) above.

To give some examples:

1. Head Group Company 'HGC', incorporated in Spain, has two subsidiary companies, one operating in Venezuela 'A' and one operating in the UK 'B'.

a)   Bribery by B in the UK or elsewhere on behalf of HGC could lead to HGC committing the Corporate Offence. Subsidiaries are not automatically deemed as 'part of the business' of the HGC and much depends on how independent the UK company is. If it acts as a "funnel" or "rubber stamp" for the parent, as a result of which the parent benefits in some way, it is likely to expose the parent to prosecution since B is undoubtedly an "associated person".

b)   Bribery by A could also lead to HGC committing the corporate offence if HGC is viewed as carrying on business in the UK through B, if HGC receives some benefit, and if A is an associated person.

c)  Bribery by HGC on its own account in Spain could be caught if it is viewed as carrying on business in the UK through B.

2. HGC has two branches, one operating in China 'C' and one operating in the UK 'D'. As branches, both C and D are viewed as the same legal entity as HGC. The usual example is that of a bank's branch network.

HGC is carrying on part of its business in the UK through D. Bribery by C or D could lead to offences being committed by HGC prosecutable in the UK.

In practical terms, the SFO is only likely to prosecute HGC if the UK operation (whether that be a subsidiary or a branch) obtains an advantage or if any other UK business has been disadvantaged by any corrupt activity of HGC offshore.

A number of non-UK organisations will have incorporated ''anti-corruption and bribery'' procedures across their group operations. However, historic anti-corruption policies should be treated with caution because of the new definitions and prohibited practices under the Act. For example, "facilitation payments" of any kind or size are banned.

The only defence to the corporate offence is to demonstrate that the organisation has "adequate procedures" in place designed to prevent bribery by associated persons.

UK Government guidance sets out 6 key components of adequate procedures:

• Proportionate Procedures - bribery prevention policies and procedures;
• Top-level Commitment - board level statements & top level involvement to prevent bribery;
• Risk Assessment - procedures to identify and prioritise risks faced;
• Due Diligence - proportionate to identified risks;
• Communication (including training) - ensuring policies are embedded and understood throughout the organisation; and
• Monitoring and Review - monitoring and reviewing procedures and implementing improvements.

Organisations with operations in the UK should ensure, as a minimum, that the UK operations and the non-UK holding company have a tailored set of anti-corruption procedures that are compliant with the Act. Some multi-national companies will no doubt go further and put in place group-wide anti-bribery policies. Corporate structures should be reviewed to ensure that the Holding Company is run demonstrably independently from its operating subsidiaries.

For more information on the Bribery Act 2010 and its application to non-UK companies please contact Kerry Gwyther at TLT on +44 117 917 7901 or kerry.gwyther@tltsolicitors.com. Kerry is Head of Regulatory and specialises in Regulatory law and has substantial experience in compliance and incident management, investigations and prosecutions by all of the major UK regulators. Kerry has advised a number of non-UK based companies on compliance with the Bribery Act 2010.