Anti-bribery law – a mistaken hurdle of international trade.
In recent years there has been a unified crackdown on bribery in an effort to combat corruption in international commerce. The most notable and recent incident involved the UK based pharmaceutical giant, GlaxoSmithKline. For over a year, GSK’s Chinese subsidiary was placed under investigation by the Chinese authorities. This culminated with the imposition of a £297m fine and a number of suspended jail sentences for GSK executives following a guilty plea by GSK.
When a company as large as GSK with its plethora of available resources is caught out for bribery in the perilous waters of international commerce, what hope does a smaller business with existing or prospective international trade have in avoiding criminal liability whilst maintaining that crucial competitive edge?
The corporate offence of failing to prevent bribery
To overcome this hurdle, it is necessary for businesses to understand the anti-corruption measures in place in the UK. Specifically, the effect of section 7 of the Bribery Act 2010, which is responsible for introducing the corporate offence of failing to prevent bribery.
Put simply, any ‘relevant commercial organisation’ is guilty of a section 7 offence if an ‘associated person’ bribes another in order to benefit the organisation.
A relevant commercial organisation is defined by section 7(5) as;
- any body/partnership that is either;
- incorporated/formed in the UK; or
- carries on a business or part of a business in the UK;
- a trade or profession is regarded as a business.
An associated person is defined by section 8 as;
- any person who performs services for or on behalf of the organisation, regardless of the capacity in which those services are performed.
The UK’s commitment to preventing corruption can be seen in the drafting of this provision. This is because the breadth of these definitions give the offence a wide scope of application. Not only does it apply to any UK business, but also any foreign business that carries on any business in the UK. Furthermore, the extent of liability includes an act of bribery by any person in any capacity acting for or on behalf of the business. As regards the penalty upon conviction of a section 7 offence, section 11 of the Act specifies that an unlimited fine may be given.
This corporate offence presents a danger to many businesses, particularly those that conduct their business internationally. Business culture varies greatly around the world. In many cultures, the offering of gifts is expected in the context of business. In other cultures, bribery may even be commonplace. Not knowing which countries it is acceptable to offer a gift and what is regarded as an acceptable gift can create the impression of bribery and increases the risk of liability. This risk further increases the more employees, agents or subsidiaries a business has.
A poisonous characteristic of bribery is that it creates a culture of expectation. The first bribe will create this expectation and the cycle of bribery will perpetuate. A prime example of this expectation culture can be found when attempting passage at the Suez Canal. The officials who control the canal expect something known in Egypt, amongst other countries as “Baksheesh”. In this context, it is a bribe that will facilitate one’s smooth and expedient passage of the canal. If one were not to pay baksheesh, there is no telling of how long or inconvenient one’s passage of the canal would be. The principle that arises is that if the payment of baksheesh were to stop entirely, the disparity of service would subside.
For the purposes of liability in the UK, this offence may be circumvented. Section 7(2) provides that where a relevant commercial organisation had in place adequate procedures designed to prevent persons associated with the organisation from undertaking such conduct, they will have a valid defence to plead.
This means that businesses may avoid liability by utilising anti-bribery procedures. Such procedures could include market risk assessment and risk management, periodical anti-corruption training for employees, due diligence amongst others. A business should also be conscious of its liability for bribery committed by contractors and subcontractors for which it should equally enforce preventative procedures. Rather than introducing a separate set of protocols specific to preventing bribery, protocols may be integrated with existing business procedures. Producing an internal anti-bribery policy is an effective way of consolidating a businesses’ preventative procedures. It is then important to regularly review that policy and to comply with it. If a business fails to comply with its own anti-bribery policy, it will have difficulty in successfully relying on the section 7(2) defence.
So what effect does this have on businesses in the international market? The common misconception is that the legislation imposes a competitive disadvantage for businesses that fall under its ambit. Yes, businesses must exercise particular caution so as to avoid wrongdoing and abide by additional bribery protocols and this may slow down business. Nonetheless, bribery is not the solution to facilitate quicker growth and expansion for businesses. Bribery distorts the economy. The inconvenience and burden on businesses trading internationally to comply with anti-bribery protocols is a necessary collateral in the elimination of bribery. The long-term objective of this provision, by widespread prevention of bribery, is to restore and preserve healthy competition in the international market to develop a stronger economy. It is not the enemy.
© 2014 Chambers of Lawrence Power, 4 King’s Bench Walk, Temple, London, EC4Y 7DL. Tel: 020 7822 8822. www.4kbw.net