ADVISORY White Collar

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1 ADVISORY White Collar March 31, 2010 THE CURRENT STATUS OF THE UK BRIBERY BILL Summary This memorandum summarises the current status of the UK Bribery Bill (the Bill ) and describes the bribery offences contained in the Bill. It also describes a number of likely future developments, including the likelihood of further material amendments and when the Bill is likely to be approved and become effective. Finally, this memorandum includes a brief discussion of the UK Government s Foreign Bribery Strategy, which was published in January The bribery offences and penalties in the Bill have not been substantially amended since the Bill was introduced in Parliament on 19 November Prior to becoming law, the Bill will be further debated in the House of Commons before being returned to the House of Lords so that the House of Lords can consider the amendments to the Bill that have been proposed by the House of Commons. The final Bill is unlikely to vary dramatically from the current version of the Bill. Once the two chambers have reached agreement on the Bill, it will receive Royal Assent. The Bill is expected to receive Royal Assent before the General Election in the United Kingdom, which must occur on or before 3 June The Bill is unlikely fully to come into force until the Autumn/Winter 2010 because the Government will be required after the Bill has received Royal Assent to issue guidance regarding the adequate procedures that companies and partnerships must adopt to prevent bribes being paid on their behalf and establish prosecutorial policies governing the Bill s implementation. Analysis Progress of the Bill Through Parliament The Bill was introduced in Parliament on 19 November 2009, at which time the Bill received its First Reading in the House of Lords. The Second Reading in the House of Lords occurred on 9 December 2009 and, thereafter, the Bill underwent a line-by-line examination during the Grand Committee Phase in January On 2 February 2010 the Bill underwent a further line-by-line BEIJING BRUSSELS LONDON NEW YORK SAN DIEGO SAN FRANCISCO SILICON VALLEY WASHINGTON

2 examination by the House of Lords in the Report Phase, after which the Bill was reprinted to incorporate a number of amendments agreed by the Members of the House of Lords. The amended Bill received its Third Reading in the House of Lords on 8 February The Bill was introduced in the House of Commons on 9 February 2010, at which time it received its First Reading. The Bill was debated for the first time by the Members of the House of Commons during the Bill s Second Reading on 3 March The Bill underwent a detailed examination during the recent House of Commons Committee Stage, which began on 16 March 2010 and ended on 23 March The Bill was reprinted on 24 March 2010 to incorporate a number of amendments made by the Public Bill Committee of the House of Commons. The Public Bill Committee has not yet announced a date for reporting its findings to the House of Commons. The Current Version of the Bill The current version of the Bill contains a number of amendments to previous versions of the Bill. First, the Bill has been amended to apply to Scotland. Second, the mechanism whereby the Secretary of State or, in urgent cases, another senior member of the Civil or Diplomatic Service could have pre-approved activity by the intelligence services and/or the armed forces that otherwise violates the provisions of the Bill has been deleted. Third, the scope of the defence for the intelligence services and/or the armed forces to give or receive an advantage otherwise prohibited by the Bill to achieve their legitimate functions has been altered. The bribery offences and penalty provisions of the Bill as introduced in Parliament on 19 November 2009 remain materially unchanged. 1. Giving and Receiving Bribes The Bill continues to make it an offence for a person to offer, promise or give an advantage to someone with the intention of inducing that person to behave improperly, as a reward for that person behaving in an improper manner or knowing or believing that the recipient s acceptance of the advantage would constitute improper behaviour. The offence continues expressly to apply to circumstances in which an agent is used to pay a bribe. Further, the Bill continues to prohibit the making of facilitation payments. The Bill also makes the recipients of bribes guilty of an offence if they request, agree to receive or accept an advantage (1) with the intention that they or another will behave improperly, (2) as a reward for them or another person behaving in an improper manner, (3) when the request, agreement or acceptance itself constitutes improper behaviour, or (4) when they or another person have/has behaved improperly either in anticipation or as a consequence of the request, 2

3 agreement to receive or acceptance of an advantage. Whether the advantage is for the benefit of the recipient and/or whether the recipient requested, agreed to receive or accepted the advantage directly is immaterial. In circumstances (2), (3) and (4), whether the recipient knows or believes that the behaviour in question was improper also is irrelevant. The test for improper behaviour under the Bill involves an assessment of whether the person performing the relevant function/activity was expected to perform it in good faith, expected to perform it impartially or was in a position of trust and, in turn, whether that person s performance was in breach of the relevant expectation. A relevant function/activity does not need to have a connection with the UK. The relevant expectation is what a reasonable person in the UK would expect. Local custom or practice would be disregarded unless the advantage that is given is permitted or required in writing by local legislation, the governing constitution or case law. An advantage continues to include both financial and other benefits. 2. Bribery of Foreign Public Officials The Bill retains a separate offence of bribing a foreign public official. A person will be guilty of this offence if he/she offers, promises or gives an advantage to a foreign public official that is not permitted or required to influence that person in his/her capacity as a foreign public official under the written constitution, legislation or case law of the official s country (or, in the case of an official of a public international organisation, the written rules of that organisation). Giving an advantage to another person with the official s permission, or at his or her request, also would constitute an offence. For this offence to be committed, the advantage would have to be intended to influence the person in his or her capacity as a foreign public official or obtain or retain business or some other advantage in the conduct of business. A person charged with the foregoing offence would not be permitted to claim a lack of knowledge that the foreign public official might act improperly. An intention to influence would be sufficient. The Bill defines a foreign public official to include those working for a foreign government and those working for international organisations. Such officials will be considered to have been influenced if they fail to exercise their official functions or seek to use their official position to a particular end, even if acting outside the scope of their authority when doing so. 3. Applicability of the Offences of Giving and Receiving Bribes or Bribing a Foreign Public Official The offences of giving and receiving bribes and bribing foreign public officials apply to UK companies, UK partnerships, UK citizens and individuals ordinarily resident in the UK regardless 3

4 of where the relevant act occurs. They also apply to non-uk nationals, companies and partnerships if an act or omission forming part of the offence takes place within the UK. 4. Failure of Commercial Organisations To Prevent Bribery The draft Bribery Bill that was published in March 2009 proposed the creation of a corporate offence of negligently failing to prevent bribery. Following pre-legislative scrutiny, it was decided that this should be recast as a strict liability offence. Consequently, the present version of the Bill would make companies and partnerships strictly liable for their failure to prevent bribes being paid on their behalf. This corporate/partnership offence created by the Bill would be committed if a person who is performing services on behalf of a company or partnership bribes another person with the intent of obtaining or retaining business or obtaining some other advantage in the conduct of business for the company/partnership and the company/partnership did not have adequate procedures to prevent people performing services on its behalf from engaging in bribery. The Bill requires the Government to publish guidance on the procedures that commercial organisations should consider adopting to prevent persons associated with them from committing bribery. For the purpose of the foregoing offence, in what capacity a person acts on behalf of a company or partnership would be immaterial. The Bill creates a rebuttable presumption that an employee has acted on behalf of his/her employer. In other circumstances, this issue will be determined from an assessment of all relevant circumstances, not merely the nature of the relationship between the person and the company or partnership. For a company or partnership to be held to be liable for failing to prevent bribery, the employee or agent who or subsidiary that actually offered or gave the bribe would not have to be charged with or be convicted of bribery. The prosecution would have to demonstrate only that the employee, agent or subsidiary promised, offered or gave a bribe. The offence of failing to prevent bribery will apply to all companies and partnerships that carry on any part of their business in the UK, whether they are incorporated in the UK or elsewhere. 5. Criminal Liability of Senior Management Directors, managers, corporate secretaries and other similar officers of companies and partnerships who consent to or assist in the commission of a bribery offence by their company or partnership will continue to face personal criminal liability provided they have a close connection to the UK (e.g., they are a British citizen or are ordinarily resident in the UK). 4

5 6. Penalties The maximum penalty for having committed one of the bribery offences in the Bill is ten years imprisonment and an unlimited fine for an individual and an unlimited fine for a company or partnership. Further Steps and Prognosis Before being submitted for Royal Assent, the Bill must undergo a Report Stage in the House of Commons. This stage provides a further opportunity for amendments. Although a date for the Report Stage has not yet been announced, it is likely to occur in an accelerated manner shortly after the Easter recess in April The Bill then will undergo a Third Reading in the House of Commons. Both Houses of Parliament must agree on the exact wording of the Bill. As the Public Bill Committee has amended the Bill that was approved by the House of Lords, the Bill will have to be returned to the House of Lords so that the Members of the House of Lords can review the amendments. While several provisions of the Bill are likely to be debated further in the House of Commons, it is unlikely that the final version of the Bill will vary dramatically from the current version. Once the wording of the Bill has been finalised, the Bill will receive Royal Assent and become an Act of Parliament. The best current estimate for completion of this step is mid-april 2010 and, in any event, prior to the General Election that is scheduled to occur on or before 3 June The date on which the Bill will enter into force is less certain. The Bill has cross-party support and its implementation is therefore unlikely to be impeded by any change of Government following the General Election. Prior to coming into force, however, the Government will be required to issue guidance regarding the adequate procedures that companies and partnerships will have to adopt to guard against the corporate offence of failing to prevent bribery and establish the prosecutorial policies that are to govern the Bill s implementation. We understand that the development of guidance and prosecutorial policies is at an early stage. An implementation date of the Autumn/Winter 2010 currently is being discussed within the Serious Fraud Office, which will be the lead UK enforcement agency under the Bill. Whether the Government will be able to complete those tasks by the Autumn/Winter 2010 remains, of course, to be seen. 5

6 There has been some discussion concerning the desirability of implementing the Bill in stages to allow companies to implement adequate procedures ahead of the Bill s coming into force. If a phased approach to implementation ultimately is taken, some provisions of the Bill are likely to be implemented in June 2010 and the remaining provisions are likely to be implemented in the Autumn/Winter Other Pertinent Recent Developments In January 2010, the UK Government published its UK Foreign Bribery Strategy (the Strategy ). The Strategy describes several government initiatives to reduce the involvement of UK nationals and companies in foreign bribery. The Strategy seeks to build on the Government's anti-corruption work over the past three years. In particular, the Strategy aims to pursue Royal Assent for the Bill and coordinate the Bill s implementation by law enforcement and prosecuting authorities; encourage and support ethical business by raising awareness within key industry sectors and promoting self-reporting and remedial action; enforce the law against foreign bribery by enhancing mechanisms for intelligence gathering and detection as well as developing more effective structures for case allocation and crossagency collaboration; and reduce the demand for bribes through international cooperation and capacity building. If you have any questions concerning the material discussed in this client alert, please contact the following members of our white collar practice group: John Rupp +44.(0) jrupp@cov.com Alexandra Melia +44.(0) amelia@cov.com This information is not intended as legal advice. Readers should seek specific legal advice before acting with regard to the subjects mentioned herein. Covington & Burling LLP, an international law firm, provides corporate, litigation and regulatory expertise to enable clients to achieve their goals. This communication is intended to bring relevant developments to our clients and other interested colleagues. Please send an to unsubscribe@cov.com if you do not wish to receive future s or electronic alerts Covington & Burling LLP, 265 Strand, London WC2R 1BH. All rights reserved. 6