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Bribe LLC: Examining the Strengths and Limitations of the Bribery Act 2010



Armando Castro evaluates the Bribery Act 2010 and discusses the practical implications of this when it comes to combatting corporate corruption. (This article won second place in our commercial article writing competition)



'No matter how sharp the law's teeth, bribery continues to be a major problem in commercial transactions' - Langley, 2020.[1]



In this essay, I will explore the complex topic of anti-corruption regulation in the UK by analysing the Bribery Act 2010 and its impact on companies. This legislation was an important step against corporate corruption in the UK; including offences that affect corporate bodies and partnerships, rather than just the individuals within these bodies (for example its directors, managers and secretaries). Firstly, I will explain the act and its provisions. Following that, I will analyse its strengths and explain why they are relevant. Lastly, I will discuss the act's main shortcomings and present potential solutions to improve anti-corruption efforts.



The Act


Coming into force on 1 July 2011, the BriberyAct 2010 replaced previous inadequate and inconsistent acts such as the Prevention of Corruption Act 1916. It covers four main categories of agents and principals: s/he who bribes (s.1); who is bribed (s.2), the bribing public officials (s.6) and commercial organisations or partnerships that failed to prevent bribery (s.7). Penalties include unlimited fines and up to ten years of imprisonment. In order not to be fined under s.7, companies should consider the six “Principles for the prevention of bribery,” published in 2011. These include risk assessment and due diligence procedures, a commitment of top-level management in preventing bribery, and clear and effective communication of bribery prevention policy procedures.


The most complex bribery cases are prosecuted and investigated by the SeriousFraud Office (SFO). During the investigations, the courts can approve an agreement between the company, partnership and the prosecutors,[2] called a Deferred Prosecution Agreement (DPA).



Strengths


'The view of our witnesses, with which we agree, is that the Act is an excellent piece of legislation which creates offences which are clear and all-embracing' - House of Lord Select Committee on the Bribery Act, 2010.[3]


The Act has several merits and I will discuss its three main strengths. First, its provision for the 'failure to prevent' offences(s.7) had a substantial impact on the governance practices and standards of commercial organisations in the UK. According to the act, a company can be fined and prosecuted even if it lacks awareness of the bribe (i.e. without mens rea). The burden of proof is on the company and the only way a company can defend itself in a corruption case is by showing it had adequate procedures and practices regarding anti-bribery. Therefore, even though the act does not overtly require organisations to adopt principles of prevention - as is the case in countries such as France (Sapin II) – s.7 was crucial in leading companies to create adequate anti-bribery procedures and in adapting their corporate culture to prevent bribery.


Second, the act has a vast jurisdictional reach. This means that offences happening within the UK - even by non-UK companies and nationals - are subject to its provisions. If the company or partnership carries even part of its business in the UK, the place of the incorporation is irrelevant. In addition, a commercial organisation can be found guilty under the act, even if the entity or an associated person that committed the bribery has no formal connection to the UK. This is crucial to commercial bodies since, regardless of where the potential bribery offence happens, it will be judged by the UK rather than the law of the country where it might have happened. Therefore, these provisions are critical to changing the British corporate culture and practices that used to normalise paying bribes outside the UK.


Third, penalties are proportionate to the bribery and act. The prosecution has no interest in giving punitive measures that are unreasonable or that could make the companies insolvent - thus affecting the livelihood of innocent employees. For instance, Standard Bank[4] in 2015 self-reported a suspicion of corruption in its subsidiary in Tanzania. Even though the bank had an anti-bribery system and had given its employees anti-corruption training, it admitted that these measures were ineffective (s.7). Due to Standard Bank’s self-reporting and cooperation, the SFO agreed to the first DPA under the new Act, to which the courts agreed. As a result, the company paid a fine, covered the costs of SFO and agreed to change its practices and procedures. This demonstrates that companies suspecting internal bribery have an incentive to cooperate and self-report since they can benefit from leniency and cooperation.



Shortcomings


'Bribery is still prevalent and pervasive however much legislators and judges try to stamp it out' - LJ Longmore, 2012.[5]


Despite its virtues, in the last 10 years, the 2010 Bribery Act has shown limitations in its reach and applicability. Here, I will discuss its three most relevant faults. First, the SFO needs more resources to meet the demand for investigations. Even single cases can consume 10% per cent of annual funding, such as in the case of Rolls Royce[6]. This limited funding has led to shortfalls when investigating larger cases. In these situations, the Treasury needs to approve extra funds. However, this decision can be influenced by politics and can result in conflicts of interest. This lack of funding also affects staffing and the timing of cases, creating uncertainty for companies under investigation. Moreover, as a result of financial limitations, the prosecution may find itself limiting cases to those with the highest probability of winning, rather than choosing cases by the importance of their corrupt actions.


Second, the inconsistent use and offering of DPAs. In the Rolls Royce case, the company was found to have paid bribes in several subsidiaries. Contrary to the previously discussed Standard Bank situation, Rolls Royce did not self-report its bribery act and was still offered a DPA[7]. Not too long before this, Skansen, a 30-person British company, reported bribery case[8] and collaborated with the investigations. Despite this, it did not get offered a DPA and was condemned in courts. These cases highlight the lacunae present in the offerings of DPA in bribery cases. They also reinforce the suspicion of different treatments by the authorities between SMEs and large companies.


Third, there has been a repeated failure to condemn or prosecute executives even after companies admitted wrongdoing in their DPA. This happened in the case of Guralp, who accepted its charges and signed a DPA, yet all staff were acquitted[9]. Similarly, when Airbus[10] signed a DPA in 2020, dozens of its executives left the company as a result of the investigation but none of them was prosecuted. Along with other examples, these cases show that often, prosecuting companies does not lead to punishing executives, even if investors and shareholders still have to pay the price for wrongdoings. There seems to be, therefore, a lack of equality before the law.



The Way Forward


The 2010 Bribery Act has generally been regarded as an effective legislative tool in fighting international bribery compared to the benchmark set by the OECD Anti-Bribery Convention. However, prosecutions of bribery are still low and the legislation can be improved to reward and incentivise honest companies.


Based on the limitations described above and building upon its successes of the act, I argue that the best way to protect companies and improve the anti-corruption struggle is to:


a) punish more key individuals in corrupt companies. A DPA should only be offered if the company provides strong evidence that can be used against the bribery perpetrators;


b) create a new funding mechanism to the FCA that will give it autonomy such as keeping and managing a percentage of the fines collected. This will ensure its complete legitimacy and protect it from political interests; and


c) clarify the incentives to companies that self-report and cooperate with the prosecution by creating incentives so companies that self-identify bribery can eradicate these practices.


Therefore, in order to succeed in the fight against corporate corruption and bribery, the act and its application have to be clear, more funding must be assigned to investigations, and finally, there should be more incentives for companies to collaborate and improve their corporate culture and governance practices.






Written by Armando Castro.




 


[1] Christopher Langley, Bribery in Commercial Litigation and Arbitration. in Richard Lissack and Fiona Horlick (eds), Lissack and Horlick on Bribery and Corruption (LexisNexis 2020) 18.3


[2] Serious Fraud Office, 'Guidance and Protocols' (October 2020) <https://www.sfo.gov.uk/publications/guidance-policy-and-protocols/sfo-operational- handbook/deferred-prosecution-agreements/> accessed 21 January 2021 [3] Report of Session 2017-2019 ( March,2019)


[4] Serious Fraud Office, 'SFO agrees first UK DPA with Standard Bank' (18 May 2016) <https://www.sfo.gov.uk/2015/11/30/sfo-agrees-first-uk-dpa-with-standard-bank/> accessed 18 January 2021


[5] Novoship (UK) Limited v Mikhaylyuk [2012] EWHC 3586 (Comm), 82

[6] Serious Fraud Office, 'Rolls Royce Plc' (22 Feb 2019) <https://www.sfo.gov.uk/cases/rolls-royce- plc/> accessed 28 January 2021

[7] https://www.sfo.gov.uk/2017/01/17/sfo-completes-497-25m-deferred-prosecution-agreement-rolls- royce-plc/

[8] 1 Regina v Skansen Interiors Limited, Southwark Crown Court, Case Number: T20170224, 21 February 2018

[9] www.sfo.gov.uk/2019/12/20/three-individuals-acquitted-as-sfo-confirms-dpa-with-guralp-systems-ltd/


[10] www.sfo.gov.uk/2020/01/31/sfo-enters-into-e991m-deferred-prosecution-agreement-with-airbus-as- part-of-a-e3-6bn-global-resolution/.

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