THE BRIBERY ACT 2010Sanctions and Incentives

Roderick Macauley

REQUIREMENTS OF INTERNATIONAL

OBLIGATIONS

• International standards - UN, Council of Europe, OECD, EU & OAS

• Focus on UN & OECD• Bribery (OECD) and corruption (UN)• Scope and terminology

• The nature of a bribe • The nature of the ‘quid pro quo’

• Active and passive bribery; • Intermediaries• Third party beneficiaries• Definition of public official • Private sector & corporate liability

DEFINING BRIBERY • Agent/principal model

– 1906 Prevention of Corruption Act/2003 Corruption Bill

– Public sector

– Principal’s consent

• Improper performance – Bribery Act general offences - sections 3 to 5 Bribery Act

– Advantage

– induce a breach of expectation – Bribery Act UK centric test

• Influence – Active only– OECD Convention– Influence a person in the exercise of duties

Bribery Act overview

• General offences ss. 1 &2– Public & private

– Active (s.1) & passive (s.2) - autonomous

– Intermediaries & third parties

• Bribery of foreign public officials – Influence model

– Business only offence

– “Foreign public official”

– Defence - permitted or required

• Corporate liability– Innovation

– Failure to prevent

JURISDICTION, PENALTIES & CONSENT

• 21st century cases multi-jurisdictional

• Extraterritorial jurisdiction - section 12 – Nationality jurisdiction

– Section 7 corporate offence

• Individuals – 10 years’ imprisonment maximum

– Unlimited fines

• Corporate bodies, unincorporated bodies & partnerships – Fines

– Sentencing Guidelines

• Consent to prosecution– DPP & Director of the SFO

CORPORATE LIABILITY AND INCENTIVES THEORY

• Violation gains ≤ Sanctions + Incentives

• Stakeholder – the State

• Standard setting role – legal

• Criminal/administrative sanctions

• Deterrence/enforcement

• Legal incentives - mitigating

THE ADVANCE OF CORPORATE LIABILITY

• New development in many jurisdictions– Italy in 2001, Poland in 2003, Romania in 2006, Luxembourg and Spain in 2010, Czech

Republic - corporate criminal liability created on 1 January 2012.

• Emergence of new national laws– Germany - 2013 North Rhine Westphalia proposed a draft law on corporate criminal liability

– Russia - June 2014 a draft law on corporate criminal liability was put before the Russian Federation Council.

– UK – Bribery Act section 7 failure to prevent

– Ukraine – 2014 Corporate Criminal Liability Law

• Systems and controls– show there was no intent to commit an offence on part of a corporate

– provide a defence

– be a mitigating factor upon sentence

– impact on decisions to prosecute and on penalties

• Penalties and DPAs

FORMULATION OF SECTION 7 PART I

• Robust offence - strict corporate liability

• Predicate offences ss. 1 & 6 = active bribery– Jurisdictional criteria do not apply

– Commercial intent

– Individuals or legal persons

• Relevant commercial organisation– Section 7(5)

• Corporate bodies & partnerships

• Carries on a business or part of a business

– Jurisdiction • Section 12(5) combined with section 7(5)

• Outward supply side focus

FORMULATION OF SECTION 7 PART 2

• Associated person – Section 8 – performing services

– Employees presumption

– Agents & intermediaries

– Subsidiaries

• Mitigation incentive - full defence -adequate procedures – Shifts the burden

– Balance of probabilities

• Sanctions– Financial only

– Public procurement

BUSINESS COMMUNITY & CIVIL SOCIETY

• Pre-legislative engagement– Government Ministerial anti-corruption champion– Pre-legislative scrutiny

• Parliamentary process– Section 9 – Section 10

• Change of Government• Ministry of Justice Guidance

– September 2010 to July 2011

• 2011 to present day - awareness raising• Foreign governments• SMEs

MINISTRY OF JUSTICE GUIDANCE

• Definitive text

– Flexible and transferable

• Guidance not law

• Principle based – six principles

– Outcome focussed

– Familiar concepts

• Proportionality & adequacy

• Formulation

– Explanation of the relevant offences

– Principles with illustrative examples

– Factual scenarios

BA ENFORCEMENT & INCENTIVES

• Corporate self referrals – Adequate procedures

– Full disclosure and transparency

– Non-criminal outcome

– No guarantees

• Civil recovery – applies to proceeds of predicate offence where

s.7 adequate procedures defence applies

• Deferred Prosecution Agreements –February 24th

Deferred Prosecution Agreements 1

• Economic/financial crime

– Schedule 17 Crime & Courts Act

• Organisations only

– Individuals – imprisonment

• Transparency

– Judicial scrutiny – interests of justice and fair, reasonable and proportionate

– Public declaration

• Not an adversarial process

– Agreement

– No appeal

• No formal admission of guilt

– Company must accept the wrongdoing

Deferred Prosecution Agreements - 2

• Content/terms – No elements prescribed by the legislation– Likely to include: financial penalty; disgorgement of profits; order to pay

costs; compliance measures & external monitoring; cooperation on the prosecution of individuals; compensation to victims; replacement of senior management etc.

• Expiry– Company cannot be prosecuted for the facts upon which DPA was agreed

• Breaches and variation– Minor breaches – provided for in DPA– More material - court adjudication - invitation to remedy/vary– Variation - only prosecution can apply, only judge can vary

• Termination – Breach too material for variation, or – Parties are unable to agree a remedy, or – Court does not approve a proposed remedy– Monies paid under the DPA non-refundable– Prosecution can recommence proceedings

LEGISLATIVE MODEL

• International recognition

• Supports high global standards in commercial bribery– UK businesses – ethical guarantee

• Corporate failure to prevent– Leading legal incentives model

– Supply side support for demand side initiatives