In the first of a new series of Legal Perspective columns designed to help the industry understand changes in water regulation, we look at the introduction of the Bribery Act 2010 in the UK.
Neil McInnes, senior associate and barrister at international law firm, Pinsent Masons LLP, looks at what this legislation could mean for third party companies overseas.
New legislation due to come in to force in April 2011 will dramatically change English law in the area of anti–corruption. Of primary importance to any business in the water industry, the Bribery Act 2010 creates a new corporate offence of failing to prevent bribery, which will make companies doing business in the UK liable for acts of bribery by those performing services on their behalf. This liability might arise even where the bribery involves third parties overseas, who may only be loosely connected to the UK business.
The Act also repeals various historic bribery laws, which have been widely criticised for both their technical difficulties to prosecute and their out-moded terminology. In their place, a new suite of offences is introduced, which gives considerable discretion to UK regulators tasked with enforcement.
Of note, the new main offences of bribery do not distinguish between private and public sector corruption, with the result that companies across the water industry, nationally and internationally, should reassess their corruption risks in all their business dealings. Specific industry risks will also be important to take in to account – critical in the utilities sector where companies regularly find themselves interacting with public bodies, or public officials, or those performing similar functions (both in the UK and overseas). Here heightened standards of due diligence may need to be considered as a result of the new Act to ensure adequate anti-corruption compliance.
The Act creates four new offences:
• An offence of paying a bribe ("active bribery") – This includes the offering of a financial (or any other) advantage to another party with the intention of inducing them to perform an activity improperly
• An offence of receiving a bribe ("passive bribery") – This includes where a person requests an advantage, intending that they or someone else will perform a function improperly as a consequence
• A separate offence of bribing a Foreign Public Official, with the intention of influencing that person in their official capacity in order to obtain some form of business advantage. Foreign public officials are very widely defined in the Act and include persons exercising functions for public agencies and enterprises - which could include a wide range of individuals with involvement in the water industry.
• A corporate offence of failure to prevent bribery, triggered if a person associated with an organisation commits an act of bribery. This 'associated person' could be anyone who performs services on behalf of the organisation (perhaps as an employee, or as an agent, or a overseas subsidiary) – and while companies and partnerships caught by this offence must carry on part of their business in the UK (or be formed or incorporated here), the associated persons need not, meaning any business with a presence in the UK should be considering its corruption risks on a worldwide basis.
The only defence for a corporate will be to show that it had 'adequate procedures' in place designed to prevent bribery. It means that water and wastewater businesses whose principal operations (or parent companies) are outside of the UK may nevertheless need to ensure their policies and procedures are compliant with the new Act, if they carry on part of their business in the UK. Individuals convicted of a bribery offence will face up to 10 years imprisonment, as well as unlimited fines. Corporates found liable will also face unlimited fines as well as possible additional sanctions such as debarment from tendering for public contracts. It is therefore no surprise that anti-corruption measures should now be a regular feature on any boardroom agenda.
The Act has thrown up a number of other talking points. Firstly, the main offences of active and passive bribery revolve around the concept of 'improper performance' of relevant functions or activities. These activities will include all manner of public and business functions where there are expectations of good faith or impartiality or where a position of trust arises. But whether someone performs a function improperly will be gauged objectively – based on what a reasonable person in the UK would expect. It will not be possible to rely on a defence that a particular course of conduct was perceived to be appropriate elsewhere, if it is deemed to be unacceptable in the UK.
Furthermore, the main offences focus on the conduct of the bribe payer or recipient. Actual payment or receipt of bribes does not need to be proven - an offer would be sufficient; nor is it necessary to show a function was actually performed improperly, if it had been intended or anticipated; and the drafting of the Act is such that a simple offer or receipt of a particular type of advantage can be caught, if that itself is improper, with no need for any further steps to be taken.
Considering Adequate Procedures
In light of the ambit of the new corporate offence, it will be essential for UK businesses (and others affected) to consider their procedures to prevent bribery. To assist companies to develop their compliance with the new Act, the UK Ministry of Justice has published a draft guidance document, which is framed around six core principles for companies to consider. In outline these principles are as follows:
• Risk assessment – e.g. knowing the corruption risks in your sector and market. For the international water industry this presents a wide range of circumstances to consider. This would include identifying any jurisdiction-specific risks in countries to which a company exports or where it tenders for projects or is a joint venture party.
• Top level commitment – e.g. establishing a culture of anti-corruption across your organisation
• Due diligence – e.g. knowing who your organisation deals with and how
• Clear, practical and accessible policies and procedures – e.g. policies on gifts, hospitality and political donations
• Effective implementation – e.g. to embed policies within your company's operations
• Monitoring and review – e.g. to audit and update your controls as necessary.
Final guidance is expected in early 2011. In the meantime, it is clear that the principles set challenging standards for all companies to consider. The touchstone of compliance will be for organisations to engage now in the process, as one size will not fit all come April.
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