As the foreword to the Ministry of Justice’s (“MoJ”) recently released guidance on the Bribery Act 2010 (the “Act”) reminds us, one of the Government’s aims in pushing forward with this legislation is to create “a level playing field” with regards to the eradication of bribery. The Government recognised that by taking a more stringent approach to certain issues, such as facilitation payments, than other regimes (e.g. the US’ Foreign Corrupt Practices Act, or “FCPA”), it ran the risk of placing UK companies at a competitive disadvantage when operating in foreign countries. To minimise those risks, it became important to ensure that the Act had as broad a jurisdictional scope as possible. In the run up to the publication of the MoJ’s guidance, however, there was some heavyweight lobbying in favour of restricting, or at least clarifying, the jurisdictional provisions. This Alert considers, therefore, to what degree do foreign companies need to pay heed to the Act.
The Act sets out four main offences: active bribery; passive bribery; bribing foreign officials; and the corporate offence of failing to prevent bribery (the “Corporate Offence”). For the first three offences, jurisdiction is limited to companies and/or individuals with a close connection to the UK, or for offences which take place in the UK. The Corporate Offence, however, has a much broader scope, and is intended, amongst other things, to try and ensure that foreign companies adhere to the same high anti-corruption standards as UK companies. The Corporate Offence creates liability for “relevant commercial organisations” (“RCOs”) for the offence of having failed to prevent its “associated persons” from committing an active bribery offence with the intent to obtain or retain business, or a business advantage, for the RCO. From a jurisdictional perspective, the important question that arises is who can be considered to be an RCO?
Who can be an RCO?
The Act specifies that an RCO can be a company, or partnership, which has been incorporated or formed in the UK. Entities formed elsewhere, however, can still be considered to be an RCO for the purposes of the Corporate Offence if they “carry on a business” in the UK. Although the Act goes on to confirm that “business” includes trades and professions, no further clarification of what it means to carry on a business is proffered. How this will be interpreted has, therefore, been the cause of much debate.
Common sense would suggest that in a situation where a company has premises in the UK, or actively sells in to, or out of, the UK, then clearly it is carrying on a business. But this analysis may be harder in cases which fall on the borderline.
For example, how should the following situations be assessed:
- an internet retailer, based in Austria, which targets the Austrian market but will sell anywhere on request, particularly within Europe, to avoid problems under European competition law, so sells some products into the UK;
- a Mexican company that does no business in the UK, but is listed on the UK Stock Exchange; or
- a US company, with purely domestic activities, with a UK-based subsidiary that operates completely
independently from its US parent?
In these scenarios, can it really be said that the foreign entities are carrying on a business in the UK?
What does the guidance say?
The MoJ’s guidance suggests that, whilst the Courts will be the ultimate arbiter of this issue, the Government’s intention is that a common sense test should be applied, taking into account the particular facts of each individual case. Using this approach, the guidance anticipates that if entities do not have a “demonstrable” business presence in the UK, then they won’t be caught by the Act. The guidance goes on to state that simply being listed on the UK’s Stock Exchange, or having a UK subsidiary, will not be enough, in and of itself, to trigger jurisdiction.
Following the guidance, therefore, the Mexican and US companies in the second and third examples listed above would not be considered to be carrying on business in the UK, so would not risk prosecution under the Act. For the Austrian company in the first example, however, the analysis is more difficult and will turn, very much, on the facts. Incidental sales are, undoubtedly, evidence of carrying on a business in the UK, but is that enough to constitute a demonstrable presence?
In any event, it must be remembered that the guidance, whilst persuasive, does not have any legal force. The Courts will apply the law, not simply the Government’s intentions and interpretations. That said, the latter considerations are likely to be relevant to any decision by the Serious Fraud Office or Director of Public Prosecutions as to whether prosecution should be pursued in any given case. One thing, however, is likely. If a serious instance of bribery has taken place, and there is strong public interest in favour of bringing criminal proceedings, the defence team will have to be very strong to dissuade a Court from reaching a guilty verdict purely on jurisdictional grounds.