Comparison of UK Bribery and US Foreign Corrupt Practices Acts

1. Comparison of UK Bribery and US Foreign Corrupt Practices Acts s Richard LissackQ.C.

2. Outer Temple Chambers • www.outertemple.com • 71 barristers including 14 silks • Listed as a leading set in • pensions • banking & financial regulation • employment • personal injury • clinical negligence • professional discipline, regulatory law, public inquiries • with practitioners listed in chancery / commercial / ADR

3. Richard Lissack Q.C. • Head of Strategic Development at Outer Temple Chambers • Repeatedly recognised as a leading practitioner in nine separate work areas across the current legal directories including commercial, banking and financial services, fraud, and public law • He is a starred practitioner in Chambers and Partners • Described as “a silk nonpareil" and a "supreme advocate and great tactician” • Full details of his practice are at www.rlqc.com

4. Reprise of UK Bribery Act (“UK BA”) • Broadly, the UK BA creates four categories of offence: • bribing a person (section 1); • being bribed (section 2); • bribing foreign public officials (section 6); and • failure by a commercial organisation or partnership to prevent bribery (section 7) • There is liability for senior officers of a body corporate (or persons purporting to act in that capacity) where • offences under sections 1,2 or 6 are committed by a body corporate; • the offence is proved to have been committed with their consent or connivance (section 14)

5. UK BA: Corporate Liability It is an offence committed by a relevant commercial organisation if a person associated with it bribes another person, intending to obtain or retain business for that organisation or to obtain or retain an advantage in the conduct of business for that organisation (section 7)

6. UK BA: Sentences - section 11 • Individual: For an offence under section 1, 2 or 6 — • (a) on summary conviction, to imprisonment for a term not exceeding 12 months, or to a fine not exceeding the statutory maximum, or to both, • (b) on conviction on indictment, to imprisonment for a term not exceeding 10 years, or to a fine, or to both. • A person guilty of an offence under section 7 : unlimited fine • So, for a corporate entity = financial and/or reputational ruin

7. The Foreign Corrupt Practices Act • The US Foreign Corrupt Practices Act 1977(“the FCPA”) has long been the vanguard in relation to the compliance and ethical conduct of international businesses • Following the enactment of the FCPA in 1977 as part of the 1934 Securities Exchange Act, and the 1988 and 1998 amendments, the anti-bribery provision made it unlawful to bribe foreign government officials in order to obtain or retain business • The anti-bribery provision made it unlawful to bribe foreign government officials in order to obtain or retain business (narrower than the UK BA which also applies to bribery of private citizens).

8. The FCPA (2) • The FCPA potentially applies to any individual, firm, officer, director, employee, or agent of a firm and any stockholder acting on behalf of a firm • Individuals and firms may also be penalised if they order, authorise, or assist someone else to violate the anti-bribery provisions or if they conspire to violate those provisions

9. The FCPA (3) • Jurisdiction is not limited to the US • conduct outside of the US in furtherance of a corrupt payment by US issuers of securities and domestic concerns and • conduct within the US in furtherance of a corrupt payment by other individuals including foreign non-issuers and foreign nationals • US parent corporations may also be held liable for the acts of foreign subsidiaries where they authorised, directed, or controlled the activity in question • This also applies to domestic concerns, which were employed by, or were acting on behalf of, such foreign-incorporated subsidiaries

10. Comparison of the Acts (1): Knowledge • The FCPA’s anti-bribery provisions require knowledge (or at least a firm belief) of a commercial agent’s conduct in order for liability to attach to the corporation. • The UK BA provides for strict liability for commercial organisations in the actions of their agents, subject to the express defence of having adequate safeguards in place.

11. Comparison of the Acts (2): Territorial Reach • Arguably, the UK BA extends further than the FCPA as it provides extra-territorial jurisdiction to prosecute offences where the conduct occurred outside the UK • Section 7 UK BA : there is no requirement for the conduct to occur in the UK and the conduct need have no connection with the UK • Consequently, for a non-UK body carrying on business in the UK, prosecution may result where all conduct relating to the bribe occurs outside the UK

12. Comparison of the Acts (3): Penalties • The penalties under the UK BA are more severe than the FCPA. • Maximum prison sentence • FCPA: 5 years. • UK BA: 10 years. • Fines: • FCPA: • Individuals = fines of up to $250,000, and civil penalties of up to $10,000 per violation, plus restitution and forfeiture. • Companies = criminal fines of up to $2,000,000 per violation, and civil penalties of up to $10,000 per violation, plus restitution and forfeiture. • UK BA: individuals and companies face unlimited fines (on indictment).

13. Comparison of the Acts (4): Defences – FCPA • The FCPA provides three defences: • the payment was reasonable and bona fide expenditure directly related to the promotion, demonstration or explanation of products or services or the execution or performance of a contract with a foreign government or its agency; • it was facilitating or expediting routine governmental action; or • it was permitted by local written law.

14. Comparison of the Acts (4): Defences – FCPA (cont.) • Examples of payments to facilitate or expedite performance of a "routine governmental action” are: • obtaining permits, licenses, or other official documents; • processing governmental papers, such as visas and work orders; providing police protection, mail pick-up and delivery; • providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products; and • scheduling inspections associated with contracts performance or transit of good across country. • Actions "similar" to these are also covered by this exception

15. Comparison of the Acts (4): Defences – FCPA (cont.) • The existence of an effective compliance programme is not a defence to a charge under the FCPA, • But, the SEC and the Department of Justice can take such matters into account in determining whether to prosecute, and it is included within the US sentencing guidelines as a mitigating feature.

16. Comparison of the Acts (5): Defences – UK BA • The Limited Corporate Defence (section 7) • The organisation must prove (on the balance of probabilities) • that it had in place • “adequate procedures” • designed to prevent associated persons from undertaking such conduct • No defence for bona fide expenditure or facilitation expenditure. • However, it would be a defence to the offence of bribing a foreign official where the foreign official is permitted by the written law applicable to him to be influenced by the offer, promise or gift

17. Comparison of the Acts (6): Enforcement • Still to see whether the enforcement of the UK BA will match that of the FCPA. • Expect there will be some differences (SEC/DoJvs SFO)

18. The Only Source of Further Info… • Lissack & Horlick on Bribery • LexisNexis • ISBN: 9781405764575 • Available in all good bookshops from April 2011 (!) • “a comprehensive overview of the new legislation set in both a national and international context with a full explanation of the scope of the Act together with guidance on anti-corruption measures and sentencing” • “written by expert practitioners in white collar international crime (with magic circle and FCPA practitioner contributions), it offers a definitive voice amid fear and confusion toward the new bribery legal system. While both authoritative and accessible, it offers a clear emphasis on all practical issues with each chapter ending with a bullet-point list summarising key points to be considered”