UK's Bribery Act toughens grip on foreign firms

| Updated on: Jul 02, 2011

Britain's long-awaited bribery Act finally came into force at the start of July, imposing tough requirements on businesses as well as a fair amount of confusion for foreign firms.

The Bribery Act 2010, introduced by the former Labour government and passed by Parliament last April, replaces Britain's existing fragmented anti-bribery regulations with a comprehensive framework. It makes it a criminal offence for a person to receive or give a bribe and can send the guilty up to ten years in prison.

It also creates a new offence for companies that fail to ensure they have adequate measures in place to prevent a bribe being paid on their behalf, whether by their employees, agents, subsidiaries or suppliers. Firms face unlimited fines if found in breach of the Act. The legislation is considered the most draconian anti-corruption legislation now out there, surpassing the Foreign Corrupt Practices Act of the US which, for example, allows companies to make “facilitation payments”. Such payments are strictly forbidden under the British Act.

Impact on Indian firms

The UK law will affect Indian companies in a number of ways. There will be indirect impacts, for example, because the Act requires British firms to work with suppliers that have adequate anti-corruption procedures in place, Indian suppliers that do not have such measures risk losing out on contracts. “If they do not have adequate procedures in place they will become unattractive to do business with,” says Mr Saionton Basu, co-head of the India Group at Penningtons Solicitors in London. (The requirement only applies to the first company in the supply chain not those further on.).

What is less clear, however, is the impact it will have on Indian firms with minimal presence in the UK, firms that are perhaps listed in London, but without major business activities.

Presence matters

A company that does not have a demonstrable presence in the UK might not fall under the Act's requirements, according to guidance on Section 7 of the Bribery Act listing the responsibilities of companies published at the end of March. That message, however, strongly contrasts with a number of comments by the head of Britain's Serious Fraud Office, Mr Richard Alderman, who has repeatedly pledged that foreign firms without a registered office or subsidiary in the UK still fall within its remit and would be pursued with equal vigour.

“The SFO position is not the same as the Ministry of Justice,” says Mr Graham Hand, co-ordinator of the UK Anti-Corruption Forum, who believes ultimately it will be the SFO position that triumphs. “My view is that it will be very hard to escape this law if you are listed on the London Stock Exchange, though they are clearly going to weigh what is in the public interest and whether it is a case worth pursuing.”

Accountability measures

With this level of confusion, it is unsurprising that firms are being cautious “ensuring adequate procedures are in place”, something Mr Hand says is what the government is after. “From the start, this Act was designed to change behaviour rather than to catch bad behaviour. It is not about accumulating a vast number of cases.”

Either way, it imposes tough new requirements at the heart of which are two fundamental principles, says Mr Basu: proportionality and checks and balances. Hospitality, for example, “won't be off the cards completely” but simply has to be done in proportion to what is reasonable given the nature of the business being done, with proper accountability measures in place to ensure whatever is done is done with the knowledge and consent of those at the top. The difference between a company taking a client out for that charity dinner, versus a trip to Barbados.

Published on November 23, 2017

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you