UK Bribery Act Reaches Beyond UK

You may be guilty and not even know it
By Emma Roe, Daniel O’Gorman and Richard Weiner | April 27, 2012

The U.K. Bribery Act 2010, effective July 1, 2011, has significant reach beyond the U.K. and will affect many U.S. biofuels companies. A U.S. biofuels company that conducts business in the U.K. could be prosecuted under the act for failing to prevent bribery committed by any of its employees, agents or associated persons, notwithstanding the fact that the act constituting bribery is committed outside the U.K. and involves no U.K. people. A U.S. biofuels company can protect itself from prosecution by enacting and demonstrating “adequate procedures” to prevent bribery throughout the company.

To illustrate the act’s potentially wide reach, consider a U.S. biofuels company conducting business in Asia. It appoints an agent in an Asian country to assist establishing business there. To speed up telephone service connection, the agent makes a “facilitation payment” to a local official. The company also has a representative in the U.K., but does not have any connection with the Asia business. The U.S. company is liable under the act for failing to prevent bribery. It’s not relevant that neither the U.S. company nor the U.K. representative was aware of the Asia agent’s actions, or that the bribe has no connection with the U.K. The potential application of the act to the U.S. company is triggered simply because the U.S. company conducts business in the U.K. Even if the U.S. company has no U.K. representative, it would still be liable for an offense if it simply conducts business in the U.K., including dealing directly with U.K. customers.

U.K. regulators have indicated they will be actively looking to bring legal proceedings in the U.K. against non-U.K. companies and businesses. Speaking at an event for the U.S.-Russia Business Council not long before the bribery act became effective, the U.K. Serious Fraud Office director said, “[O]ur view is that if a foreign group has a subsidiary in the U.K. and in another country and that bribery occurs in that other country, then that bribery is within the remit of the SFO.”

Key to whether the act applies to a U.S. biofuels company is if it conducts any “part of a business” in the U.K. Therefore, if the bribery is committed outside the U.K. and if the U.S. company does business in the U.K. whether through a branch or office or by appointing a U.K. agent, the U.S. company’s activities will be covered by the U.K. Bribery Act; and if a U.S. parent company does business in the U.K. through a U.K. subsidiary, the U.S. parent might also be covered. Whether it applies to the U.S. parent company will depend on how the U.K. subsidiary is controlled and if it has complete operational independence from its U.S. parent company.

If the act applies to a U.S. company, then it will commit an offense if a person associated with the U.S. company performing services on its behalf bribes someone with the intention to obtain or retain business or an advantage in business and the U.S. company is unable to show it had adequate procedures in place designed to prevent bribery from being committed by persons performing services on its behalf.

Key points: A U.S. biofuels company will be liable for the actions of its “associated persons.” A person is “associated” with a company if it performs services on its behalf. An associated person will include employees and agents but also subsidiary companies, distributors, subcontractors and joint venture partners. The act that constitutes bribery needs no connection to the U.K. The act applies to bribery carried out anywhere in the world and neither the bribe giver or receiver needs to be a U.K. person or have any U.K. connection. Bribery is not just cash payments or making “facilitation payments,” but can include corporate hospitality, gifts or charitable donations. The U.K. Bribery Act catches bribes paid or offered to any person, not just foreign public officials, meaning it applies to bribery in both private and public sectors. While this article refers to U.S. companies being within the scope of the U.K. Bribery Act, it applies to any commercial U.S. entity conducting business in the U.K. This includes U.S. partnerships, trading businesses and professional organizations doing business in the U.K.

Sanctions: Offenses under the U.K. Bribery Act are criminal in nature and can lead to monetary penalties, imprisonment of a company’s directors and officers, disqualification of persons from acting as company officers, and prohibition of a company from bidding on government contracts in the U.K.

Authors: Emma Roe, Daniel O’Gorman; Richard Weiner
Attorneys, Cobbetts; Vice President, Fredrikson & Byron