By Neil Baker — October 27, 2009
arlier this fall, the United Kingdom scored its first-ever conviction against a company for overseas bribery, 10 years after the country first pledged to crack down on such abuse. Now more cases—and legislation—are on the way, and Britain may finally be delivering on its promise to get tough on corruption.
That first conviction, against construction company Mabey & Johnson for bribery in Africa and elsewhere, was a watershed moment for two reasons. Not only was the company convicted (a first in British legal history), but also the conviction arose through a plea agreement with the Serious Fraud Office, Britain’s primary enforcement agency for corruption cases.
The SFO received authority from the government to broker such plea-bargains only this year. Officials there now see that power, comparable to what U.S. prosecutors have been able to do for years, as a major weapon in the SFO’s future efforts to combat corruption.
And now that they’ve successfully used the plea-bargain once, they aren’t hesitating to use it again. Just days after British courts approved the Mabey & Johnson deal in late September, news broke that the SFO is pursuing much bigger game: BAE Systems, the $24.1 billion British defense contractor.
BAE is a highly symbolic target for the SFO. In 2006, the agency dropped an investigation into charges that BAE had paid bribes to Saudi Arabian officials, amid pressure from the British government that the probe would compromise national security. That caused howls of outrage in anti-corruption circles, and a British court later ruled that the decision to drop the case was unlawful.
This time around, the SFO has been pressuring BAE Systems to plead guilty to corrupt activities involving contracts in Africa and Eastern Europe. A Sept. 30 deadline to agree to a deal came and went; neither side has commented on the terms of the proposed settlement, but published reports say the SFO wanted a fine of £500 million to £1 billion ($816 million to $1.6 billion). BAE reportedly wanted to settle, but balked at a fine that large.
Alderman
SFO Director Richard Alderman has since announced that he plans to prosecute. Under current English law—which will soon change—he needs formal consent to proceed from the attorney general, Britain’s senior legal adviser. It was the attorney general’s opinion that killed the last BAE investigation in 2006, and there is no guarantee that the current attorney general, Patricia Scotland, will go along with this prosecution either. Some suspect the SFO and BAE Systems could still cut a deal.
The legwork against BAE so far has already won plaudits from anti-corruption voices in Britain. Chandrashekhar Krishnan, executive director of Transparency International U.K., says the SFO has taken “robust action” that will “send an important wider message to [Corporate Britain] that bribery does not pay and has serious consequences.”
The Mabey & Johnson conviction was a “landmark case that will encourage other firms to cooperate.”
—Chandrashekhar Krishnan,
Executive Director,
Transparency International U.K.
Krishnan praises the Mabey & Johnson conviction as a landmark case that will give other companies incentive to cooperate with law enforcement, but he says it remains to be seen whether the penalties imposed in that case will be adequate deterrent for other British companies. Mabey & Johnson paid a total of £4.95 million ($8.1 million) in fines and other penalties.
New Legislation Coming
Meanwhile, Krishnan and others wants to see the government finally adopt proposed new laws to combat bribery and corruption—another area where Britain has lagged behind other nations.
After the SFO’s first investigation into BAE collapsed three years ago, the Organization for Economic Cooperation and Development conducted its own review of Britain’s commitment to anti-bribery law. Its conclusion: The failure to hold BAE Systems accountable “was an illustration of a more general problem” that British law on bribery was inadequate.
Every lawmaker and regulator in London knew this already, but the government still decided in 2007 to scrap plans for a major overhaul of bribery laws (some of which date back to 1889). The government finally produced a new Bribery Bill last spring, which has been under review all summer. The Brown Administration will have its chance to clarify the bill’s future on Nov. 18, when it announces its legislative timetable for the next session of Parliament.
BRIBERY LEGISLATION KEY POINTS
The following excerpt contains the summary of the Bribery Draft Legislation:
The purpose of the Bill is to reform the criminal law of bribery to provide for a new consolidated scheme of bribery offenses to cover bribery both in this country and abroad.
The Bill replaces the offenses at common law and under the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906, and the Prevention of Corruption Act 1916 (known collectively as the Prevention of Corruption Acts 1889 to 1916 and which would be repealed) with two general offenses covering the offer, promise and giving of an advantage or the request, agreeing to receive or acceptance of an advantage. The formulation of these two offenses abandons the agent/principal relationship in favor of a model based on an intention to induce improper conduct. The Bill also creates a discrete offense of bribery of a foreign public official and a new offence of negligent failure of commercial organizations to prevent bribery.
The other main provisions of the Bill are:
- extra-territorial jurisdiction to prosecute bribery committed abroad by persons ordinarily resident in the U.K. as well as U.K. nationals, and U.K. corporate bodies;
- replacing the existing requirement for the Attorney General’s consent to prosecute a bribery offense so that proceedings for the offenses in the Bill may only be instituted by, or with the consent of, the Director of the relevant prosecuting authority;
- a maximum penalty of 10 years imprisonment for all new offenses, save the corporate offense, which will carry an unlimited fine.
- provision for Secretary of State authorization of conduct that would constitute a bribery offense by the intelligence agencies;
- setting aside Parliamentary Privilege to make evidence from proceedings in Parliament admissible in the prosecution of a member of either of the Houses of Parliament for a bribery offense or in related proceedings.
Source
Government Information on the Bribery Bill (March 25, 2009).
As currently proposed, the Bribery Bill creates a new general offense of bribery, a specific offense of bribing foreign officials, and a corporate offense of failing to prevent bribery. The last two offenses would essentially make companies responsible for bribery committed on their behalf. The company has a defense if it can show that it had “adequate procedures” in place to prevent bribery, although the legislation doesn’t define what “adequate” means. Future guidance on that point is expected.
If all that sounds a lot like the U.S. Foreign Corrupt Practices Act, well, that’s the general idea. The legislation also includes extra-territorial reach, much like the FCPA does—so British authorities can prosecute any British company bribing officials anywhere, or any company at all doing business in the United Kingdom. “It is irrelevant where the offending conduct takes place,” says a briefing note from law firm WilmerHale.
According to PricewaterhouseCoopers, few companies are prepared for the demands the legislation would impose. In discussions among non-executive directors, heads of internal audit, and business executives, PwC says, most have not even considered the implications of the Bribery Bill.
“These findings are concerning,” the firm said in a recent bulletin. “Companies need to be taking action well before the bill is enacted if they are to be at least substantially compliant by the time its provisions come into force.”
That inaction might reflect skepticism over whether the much-delayed legislation will ever pass at all. But the government is under “considerable pressure to upgrade its legislation,” PwC said. This is coming not just from the OECD, but also from the cross-party Parliamentary committee that reviewed the legislation earlier this year. That committee described it as an “overdue step” and asked the government to enact the bill as soon as possible, given its “protracted and faltering history.”
Source: Compliance Week
