This article was originally published on 19 July 2021, and updated on 22 July 2021.
The introduction of the Bribery Act 2010 (the "Act") on 1 July 2011, was an attempt to create a comprehensive set of bribery offences so that corporates and individuals, both in the UK and abroad, could be held accountable by anti-corruption legislation fit for the twenty first century.
The Act consolidated the patchwork of law previously in place in the UK and responded to calls by the international community for broad and effective bribery legislation in the UK, following the introduction of similar laws in the US and elsewhere.
The Act identifies four primary offences:
- bribing another person (section 1)
- soliciting or accepting a bribe (section 2)
- bribing a foreign public official (section 6)
- failure to prevent bribery by a corporate entity (section 7)
The impact of the Act
A global reach
From the outset, the Act was heralded as a benchmark for the prosecution of bribery. The Act has global significance because an offence can be committed by any business which is incorporated or trading in the UK, for acts of that company, or on its behalf, anywhere in the world. Before the introduction of the Act, proving the link between a UK business and corruption which occurred outside of the jurisdiction was a major challenge for prosecutors. However, a number of recent prosecutions involving multi-jurisdictional prosecutorial collaboration, such as in the Airbus case, show that this challenge can be overcome.
"Failure to prevent" offences
The creation of the section 7 offence, holding businesses to account, was novel in lowering the evidential bar for prosecution and placing the burden of proof on the corporate to show that adequate procedures were in place. It also made it more difficult for senior executives to claim that they were unaware of the wrongdoing and for companies to apportion blame to one bad actor. The "failure to prevent" offence has more recently been successfully recast in the Criminal Finances Act 2017 to combat tax evasion and the Law Commission is currently consulting on the introduction of a broader offence of failing to prevent economic crime. Under this formula the responsibility for prevention lies with the organisation and what began as a radical concept, is now readily relied upon as an effective and responsible mechanism to prompt businesses to play their part in the prevention of bribery.
Adequate procedures
In part, the success of "failure to prevent" type offences is due to the balancing effect of the statutory defence. Section 7(2) of the Act provides a defence if, at the time of the offence there were adequate procedures in place to prevent bribery. This defence is intended to incentivise companies to proactively put in place robust compliance procedures.
Section 9 of the Act provides that guidance must be published by the Ministry of Justice ("MoJ") to assist with understanding what may constitute "adequate procedures". The guidance is based on six key principles, which are designed to have general application for all businesses. The guidance states that it is "not intended to be prescriptive and is not a one-size fits-all document" as the application of the principles in practice will be relative to the circumstances and size of the company. The guidance advocates a "risk based approach" where "procedures are proportionate to the risks faced by an organisation". In this way the defence available under the Act recognises and accounts for the changeable meaning of what will be adequate in the circumstances. However, as the term "adequate procedures" has no statutory definition and the MoJ's published guidance has not been updated since 2011, many businesses have expressed frustration about the uncertainty around how "adequate procedures" should be interpreted for business in 2021.
Bribery risks in 2021
The way that a bribery offence may be committed has also changed over the last 10 years. Most recently, the COVID-19 pandemic has meant that businesses, and particularly sales agents reliant on international travel and face to face meetings, have faced increased financial pressure. Remote working has also risked the erosion of good compliance cultures and clear managerial oversight, the effects of which may not be seen fully for some time. There are concerns that these enhanced risks create an environment in which corrupt practices could thrive. For this reason, renewed, committed compliance action will be crucial to ensuring that the positives from the Act's legacy, a decade after its introduction, are maintained.
Although the Act could not have foreseen the business disruption caused by COVID-19, the pandemic is an example of how an adaptable, risk based approach to combating bribery is essential. However, amidst the initial disruption of the pandemic, companies, in particular smaller businesses ("SMEs"), are unlikely to have had anti-bribery compliance reviews as a top priority and a more prescriptive MoJ guidance would likely have been helpful. Perhaps the ten year anniversary of the Act offers an opportunity for the MoJ to take stock and update its guidance so that it remains constructive and relevant for businesses.
The Act in practice
Companies
The section 7 offence has only been used to prosecute two companies: Sweett Group in 2015 and Skansen Interiors Ltd in 2018. The first conviction proved that the Serious Fraud Office ("SFO") is willing to impose large fines for breaches of section 7, and demonstrated the scope of the Act as it was found that a subsidiary of the company operating in the UAE as a distinct legal entity was an "associated person" for the purpose of the Act.
In both prosecutions the companies were found to have failed to prevent bribery: Sweett Group entered a guilty plea while Skansen, dormant by the time of prosecution, contested the charge creating the first case in which adequate procedures were assessed. Skansen's argument that its procedures were adequate commensurate to the size of the business was not a view shared by the jury. This sent a clear warning to SMEs that the adequacy of their procedures and compliance with them were clearly high on the SFO's agenda.
A clear trend since their introduction in 2014, has been the SFO's preference for Deferred Prosecution Agreements ("DPAs"). The first DPA was agreed with Standard Bank in 2015, and a further eight DPAs relating to breaches of section 7 of the Act have since been entered into. The largest DPA to date was agreed with Airbus at the end of January 2020. The agreement cemented the use of DPAs as a powerful tool in bribery investigations, resulting in five counts of failing to prevent bribery by two Airbus divisions spanning five jurisdictions. The company was fined a total of £833m in the UK, and suffered a record global fine of USD 441m.
At the beginning of July 2021, the SFO agreed a DPA worth £103m with Amec Foster Wheeler Energy Limited following a four year investigation conducted by the UK, US and Brazilian authorities into the use of corrupt agents and suspected bribery across various continents.
One reason for the SFO's preference for DPAs may be that they appear to be successful at dealing with larger companies and encourage self-reporting and remedial action. The effect of a DPA is that a company will be required to demonstrate a degree of contrition and to take steps to prevent future misconduct. This trend by the SFO in its reliance on DPAs for tackling wrongdoing by companies demonstrates its perception that they are a powerful tool to incentivise future compliance. However, in taking this stance the SFO risks becoming primarily a deal maker rather than a prosecutor.
Individuals
While DPAs do not preclude the prosecution of an individual who participated in the wrongdoing, no individuals have yet been convicted following the agreement of a DPA. This has not however stopped the SFO in some instances naming those individuals when detailing the alleged corrupt conduct forming the basis for the DPA.
In other cases, it has been suggested that following a DPA being entered into there isn't the impetus to attempt to prosecute individuals. The implication of this could be that those actively involved in paying, accepting and arranging bribes have not faced any legal repercussions or that innocent individuals are implicated in the wrongdoing without ever being tried in court.
The Act has been successfully used to prosecute some individuals. In 2014 two former directors of a Biofuel company were prosecuted under sections 1 and 2 of the Act, but since then, the rise in the number of DPAs has coincided with a fall in the number of individuals being prosecuted by the SFO under the Act. To date only four convictions have been secured by the SFO against individuals under sections 1 and 2 of the Act. Meanwhile, section 6 (bribing a public official) has never been used.
Although the sanctions that individuals prosecuted for corruption offences can face include unpaid work, supervision orders, curfews and director disqualifications, the courts have shown a willingness to impose serious custodial sentences on individuals who contravene the Act. The SFO set the bar high in 2014 by securing its first convictions under the Act against three men, who together, were sentenced to a total of 28 years imprisonment. In 2019, former company director, Carole Anne Hodson received a custodial sentence of two years, a ban on being a company director for seven years, and an order to pay £4,495,541.46 plus costs for her role in a £12m bribery scheme which was found to amount to a breach of section 1 of the Act.
Enforcement and compliance
The number of prosecutions under the Act is low for all of the offences, and by all of the authorities able to prosecute under the Act. The danger of low prosecution figures is that motivation for compliance with anti-corruption measures may weaken and businesses may accept the risk of implementing only lax compliance practices, particularly when businesses are facing extra pressures brought on by the pandemic.
The low number of prosecutions also means a lack of case law which could help businesses and legal teams better understand how the courts will interpret terms such as "adequate procedures" and "relevant function", which are only explained vaguely in the legislation and guidelines. Without clarity around what will constitute an offence (or a defence under section 7) there is a risk of inadvertently poor compliance as well as overly cautious compliance teams implementing restrictive policies which hamper businesses.
What has the Act has achieved?
In the wake of the Act's passing, many organisations rewrote and rejuvenated their compliance programmes in line with advice on what would amount to "adequate procedures" to ensure they had robust measures in place to combat bribery and any allegations of wrongdoing.
The OECD, whose calls for the UK to adopt stronger anti-corruption laws led to the Act being passed, has praised the impact of the legislation in tackling economic crime. It must be concluded that the Act has had a positive impact on corporate culture: the widely drafted offences, the reversal of the burden of proof for businesses in the section 7 offence, and the availability of an "adequate procedures" defence, have caused businesses to take notice of the role organisations and their compliance policies can play in preventing bribery.
In some respects, use of the Act has fallen short of what was expected when it was introduced, and as such prosecutors have come under attack for a lack of prosecutions and an overreliance on DPAs. The length of time it takes for these complex investigations to reach a stage where action is taken has also been a barrier to the Act's effectiveness.
However, the Act's main success could be said not to be in prosecuting wrongdoing but in refocussing the responsibility for anti-corruption efforts on businesses. For this reason the Act continues to be held up as the gold standard for anti-corruption legislation and we may see the "failure to prevent" corporate criminal offences being replicated further. There is potential for this improved corporate attitude towards bribery risk to become further ingrained with time, although more support for corporates, in the form of updated guidance from the MoJ would be welcome to ensure the Act remains fit for the challenges faced in 2021 and beyond.