Contributed By Brown Rudnick LLP
The UK is a signatory to the Organisation for Economic Co-operation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Convention). The OECD Convention focuses upon the ‘supply side’ of bribery transactions and it establishes binding standards to criminalise bribery of foreign public officials in international business transactions. The OECD Working Group on Bribery monitors implementation and enforcement of the Convention.
Other European conventions to which the UK is a signatory include the Council of Europe's Criminal Law Convention on Corruption, which aims to co-ordinate the criminalisation of corrupt practices, and the European Union Convention against Corruption involving Officials, which focuses upon EU officials or national officials of EU Member States.
The UK is also a signatory of the United Nations Convention against Corruption, the only legally binding universal anti-corruption instrument.
In July 2011, UK criminal law regarding bribery and corruption offences was substantially overhauled through the implementation of the Bribery Act 2010 (the Bribery Act), which is the main legislation in the UK. This sets out all the bribery and corruption offences in the UK, although offences committed prior to July 2011 continue to be prosecuted under the old law.
Prior to the Bribery Act, the UK’s law regarding corruption was seen as fragmented, complex and insufficiently clear (see The Law Commission Consultation Paper No 185, 2007). A significant criticism of the UK’s enforcement was that there had been very few corporate convictions under the old legislation. Of those companies investigated, the aborted prosecution of BAE Systems regarding alleged corruption affecting the Al-Yamamah fighter jet contract with Saudi Arabia was frequently cited as an example of the UK’s inadequate approach to pursuing companies for bribery offences.
The current UK legal framework is, in many ways, cast more broadly than the notoriously far-reaching US Foreign Corrupt Practices Act 1977 (FCPA), as the Bribery Act covers bribery in a private and public setting, and prohibits facilitation payments. The Bribery Act is often described as the leading standard by which companies measure their legal risk regarding corruption and in relation to which they therefore devise their corporate policies and procedures.
There have been other relevant legal reforms since the Bribery Act became law (principally the introduction of Deferred Prosecution Agreements through the Serious Crime and Courts Act 2013) and a series of aggressive enforcement actions against corporates. There have been five Deferred Prosecution Agreements (DPA) to date. The Rolls Royce DPA, approved in January 2017, represents the largest financial penalty secured by the SFO to date, totalling GBP497,252,645.
The most significant feature of the current framework is the corporate offence of failure to prevent bribery (Section 7 of the Bribery Act), which requires no knowledge of offending behaviour by the corporate for it to be held liable. This represented a substantial break from tradition in English law, which had only imposed criminal liability upon corporates where it could be shown that the organisation’s directors or senior management knew of the criminal conduct at the relevant time (commonly referred to as "the identification principle").
Typically, investigations into bribery will interact with the UK money laundering regime, which is governed by the Proceeds of Crime Act 2002 (POCA). In practice, the Bribery Act and POCA are closely related, as any benefit flowing from a bribe is likely to constitute the proceeds of crime or “criminal property” under POCA. Consequently, any company or individual dealing with the proceeds of bribery may have potential criminal exposure under POCA. Those engaged in the regulated sector – including financial services firms, accountants and lawyers – have particularly onerous obligations, and direct liability, under POCA as they must report known or suspected money laundering by third parties; failure to do so is itself a criminal offence. It is important to note that individuals in the regulated sector may be convicted under POCA even where they did not subjectively suspect money laundering but where, objectively, they had reasonable grounds for doing so.
Similarly, bribery cases also often involve subsidiary issues regarding fraud (see the Fraud Act 2006), common law conspiracy to defraud and/or false accounting (Theft Act 1968).
The key guidance is listed below.
Whilst the Bribery Act has not been amended, it has been under Parliamentary review recently. In March 2019, the House of Lords Select Committee published the Bribery Act 2010: post-legislative scrutiny, which considered whether the Act was fulfilling its intended purpose. The report concluded that the Bribery Act is an "excellent" piece of legislation, with offences that are clear and all-embracing. It noted that the availability of the corporate failure to prevent offence (section 7 Bribery Act) is particularly effective at encouraging company management to conduct business in an ethical manner.
The Bribery Act sets out four main offences:
Bribery and requesting or receiving a bribe
It is an offence under section 1 of the Bribery Act for a person to offer, promise or give a bribe. It is equally an offence under section 2 of the Bribery Act to ask for, agree to receive or receive a bribe. A bribe is a financial or other advantage to another person and it must be intended that the bribe should induce or reward improper conduct, or that the acceptance of the bribe in itself would be improper conduct. The improper conduct must relate to the exercise of a public function or be carried out in a business or employment context. The conduct must also be in breach of an expectation to act in good faith, impartially or in breach of an expectation arising out of the person’s position of trust (see sections 3, 4 and 5 of the Bribery Act).
It is important to note that:
Definition of a bribe
A bribe is “a financial or other advantage" which is not defined in the Bribery Act but, according to the Joint Prosecution Guidance and the explanatory notes to the Act, the term is a matter of fact for the jury to determine, based on its ordinary meaning.
Although some jurisdictions (eg, the USA) tolerate genuine facilitation payments, they remain unlawful in the UK. Facilitation payments are not differentiated from bribes and making such payments can be an offence under sections 1 or 6 of the Bribery Act. Where that offending involves a relevant commercial organisation (RCO), it will be exposed to liability under section 7. However, it is important to note that prosecutors retain an element of discretion. In deciding whether to prosecute in relation to a facilitation payment, prosecutors will consider the Full Code Test set out in the Code for Crown Prosecutors, the Joint Prosecution Guidance and (where relevant) the joint Guidance On Corporate Prosecutions.
The Full Code Test requires that prosecutors consider (i) whether there is sufficient evidence to provide a realistic prospect of conviction and, if so, (ii) whether a prosecution is required in the public interest. The prosecution should proceed only if both stages of the Full Code Test are met. The Joint Prosecution Guidance sets out specific public interest considerations in relation to facilitation payments and factors tending in favour of and against prosecution. Factors tending in favour of prosecution include (p.8):
Factors tending against prosecution include (p.8):
The MOJ Guidance recognises (at paragraph 48) that there may be circumstances in which a person has no realistic alternative but to make payments and suggests the common-law defence of duress is available where payments are made to prevent “loss of life, limb or liberty.” Whilst those are narrow circumstances, companies operating in relevant industries and/or locations should ensure that their anti-bribery policies and training programmes include guidance on duress.
Failure to prevent bribery
Section 7 of the Bribery Act introduced strict corporate criminal liability for any “relevant commercial organisation” (an RCO, defined broadly in section 7(5) of the Bribery Act, considered further below) where bribery is committed by an “associated person” (AP) of that business. The only defence is to demonstrate that the business had "adequate procedures" in place to prevent bribery by its employees and other associated persons.
To convict under section 7, the prosecution must prove that:
The section 7 offence only relates to the failure to prevent acts of bribery under sections 1 and 6; it does not apply to the demand side of bribery, ie, the request or receipt of a bribe under section 2.
The RCO can be liable under section 7 even where the AP was not prosecuted or convicted for the underlying offence. However, there must be sufficient evidence to prove that an offence under section 1 or 6 of the Bribery Act was committed.
All UK companies as well as foreign companies that carry on business or part of a business in the UK are caught within the scope of section 7 through the definition of a “relevant commercial organisation.” Courts in the UK will have jurisdiction over an RCO, regardless of where in the world the underlying bribery was committed.
A person is associated with the RCO if they perform services for or on behalf of the RCO, in whatever capacity. The definition of an associated person (as per section 8 of the Bribery Act) is very broad and may include an employee, agent or subsidiary but whether the person “performs services for or on behalf of” the RCO will be a matter of fact in each case, depending upon the circumstances. An employee of an RCO will be presumed to be an associated person unless the contrary is shown. The MOJ Guidance (at paragraphs 42 and 43) emphasises the importance of evidence as to what the associated person intended when committing the bribery: “Even if it can properly be said that an agent, a subsidiary, or another person acting for a member of a joint venture was performing services for the organisation, an offence will be committed only if that agent, subsidiary or person intended to obtain or retain business or an advantage in the conduct of business for the organisation. The fact that an organisation benefits indirectly from a bribe is very unlikely, in itself, to amount to proof of the specific intention required by the offence. Without proof of the required intention, liability will not accrue through simple corporate ownership or investment or through the payment of dividends or provision of loans by a subsidiary to its parent. So, for example, a bribe on behalf of a subsidiary by one of its employees or agents will not automatically involve liability on the part of its parent company, or any other subsidiaries of the parent company, if it cannot be shown the employee or agent intended to obtain or retain business or a business advantage for the parent company or other subsidiaries. This is so even though the parent company or subsidiaries may benefit indirectly from the bribe. By the same token, liability for a parent company could arise where a subsidiary is the "person" which pays a bribe which it intends will result in the parent company obtaining or retaining business or vice versa."
Bribery of foreign public officials
It is an offence to bribe a foreign public official (which is defined broadly in section 6) with the intent to influence that person in their official capacity, but only where the bribe is intended to obtain or retain business, or a business advantage. If the written law applicable to the foreign public official allows or requires them to be influenced by a financial or other advantage, no offence will be committed. This offence can be committed where the bribe is offered through a third party. It is important to note that the section 6 offence does not require intention by the briber that the foreign public official should perform their role improperly; if the evidence shows that the briber intended to influence the official to obtain or retain a business advantage then he or she will be guilty of the offence.
Hospitality and promotional expenditures
The MOJ Guidance recognises that bona fide, reasonable and proportionate hospitality and promotional expenditure is an important part of doing business. However, any such expenditure can constitute a bribe if (i) it is intended to induce or encourage improper performance by the recipient, or (ii) if, in the case of foreign public officials, it is intended to influence the recipient in their official role to secure business or a business advantage. The Joint Prosecution Guidance notes that prosecutors need to consider the full circumstances of each case; where hospitality is lavish and beyond what may be reasonable in those circumstances, or there were attempts to conceal it, there will be a greater inference that it was intended as a bribe. As David Green, the former director of the SFO, emphasised shortly after the Bribery Act entered law: “The sort of bribery we would be investigating would not be tickets to Wimbledon or bottles of champagne.”
Bribery between private parties in a commercial setting
Sections 1, 2 and 7 of the Bribery Act (see above) apply to bribery, whether it occurs in the public sector, or between private parties in a commercial setting. Section 16 of the Bribery Act specifically provides that the Act "applies to individuals in the public service of the Crown as it applies to other individuals."
As noted above, the definition of bribery in the substantive offences includes "financial or other advantage." Similarly, the definition of the bribe recipient's intended "improper performance" could well catch 'influence-peddling'. It would, however, be a matter of fact to be determined by a court as to whether any exchange of influence amounted to some kind of "other advantage."
The Bribery Act contains no specific accounting or bookkeeping offences. However, the Companies Act 2006, the primary source of company law in England and Wales, does require companies to keep adequate books and records. Specifically, failure to keep adequate accounting records constitutes an offence under sections 386 and 387 of the Companies Act 2006.
In addition, the way bribes are accounted for will often constitute a false accounting offence under Section 17(1) of the Theft Act 1968, ie, the falsification of accounting records with the intent to gain for oneself, or to cause loss to another. The offence includes providing materially misleading or false documents, or omitting relevant documents when accounts information is requested.
Regulated firms in the financial sector may be sanctioned by the Financial Conduct Authority (FCA) for failing to maintain effective systems and controls in relation to bookkeeping, bribery and corruption. For example, insurance brokers Aon Ltd and Willis Ltd were fined GBP5.25 million (in 2009) and GBP6.895 million (in 2011) respectively for failings in their systems and controls that allowed bribery to occur. More recently, insurance brokers JLT Specialty Limited and Besso Limited were fined GBP1.876 million (in 2013) and GBP315,000 (in 2014) respectively for failing to maintain effective systems and controls to guard against the risks of bribery and corruption.
There is no specific offence relating to the misappropriation of public funds by a public official although glaring conflicts of interest are likely to be caught by the offence of misconduct in public office, discussed below.
The embezzlement of public funds by a public official is likely to be charged as fraud. See below.
Public officials who misappropriate or misuse funds are liable to be prosecuted under a number of criminal offences, including offences under the Fraud Act 2006. They may also be charged with the offence of misconduct in public office, which is a complex and archaic offence that has recently been subject to scrutiny by the Law Commission. The offence of misconduct in public office may be loosely defined as a public officer, acting as such, who wilfully neglects to perform his or her duty and/or wilfully misconducts him- or herself to such a degree as to amount to an abuse of the public's trust in the office-holder without reasonable excuse or justification.
Depending on the factual matrix of the offence, the public officer may find themselves charged with fraud (if they have benefited in some way from their alleged criminality), or with misconduct in public office if there has been some kind of wider interference with the public interest. If a public official is charged with a fraud offence, their status as a public official will be considered by a court as an aggravating factor warranting a higher sentence than they might have received as a private citizen.
As noted above, the definition of "other advantage" used in the substantive Bribery Act offences is likely to cover situations in which a person offers something other than money in return for improper performance.
The use of intermediaries is an important, and often pivotal, issue in many corruption cases. Each of the Bribery Act offences could arise through the use of an intermediary. The section 1, 2 and 6 offences explicitly cover the use of a third party for bribery, requesting or receiving a bribe or bribery of a foreign public official. Whilst each case will turn upon its own facts, intermediaries are likely to be "associated persons" for the purposes of section 7, thereby creating corporate liability for companies.
There are no limitation periods for the prosecution of indictable offences. However, only offences occurring on or after 1 July 2011 will be prosecuted under the Bribery Act. Offences committed before that date are covered by the common law and statutory offences, including the (now repealed) Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916. Furthermore, conduct that constitutes bribery may also be covered by other common-law offences such as misconduct in public office or conspiracy to defraud. Other statutory offences include conspiracy (to corrupt) under the Criminal Law Act 1977 or those set out in the Honours (Prevention of Abuses) Act 1925 or the Criminal Justice and Courts Act 2015, section 26 of which relates to the corrupt or other improper exercise of police powers or privileges. Cases such as the Rolls-Royce Deferred Prosecution Agreement demonstrate that conduct of a historic nature can and will be pursued; the Statement of Facts in that case covered criminal conduct spanning the period between 1989 and 2013.
The Bribery Act has extensive extra-territorial jurisdiction. An offence can be committed in certain circumstances even where the alleged offending occurs wholly outside the UK.
In relation to sections 1, 2 and 6, each offence is committed even where an act or omission constituting part of the offence occurs in the UK (see section 12). If the person committing the act or omission has a “close connection” with the UK, it is irrelevant that his or her conduct occurred entirely outside the UK. Under section 12(4), a close connection with the UK includes where the person is a British national, British citizen, ordinarily resident in the UK, or a body incorporated under UK law.
The corporate offence (section 7) of failure to prevent bribery in the course of business applies to any RCO (wherever incorporated) that carries on any part of its business in the UK. An RCO could be prosecuted for failure to prevent bribery even where the bribery takes place wholly outside the UK and the benefit or advantage to the company is intended to accrue outside the UK.
The Bribery Act does not, however, define what constitutes “part of a business” although the MOJ Guidance provides some assistance in this regard, noting (at paragraph 36) that organisations without a “demonstrable business presence” in the UK are not caught. The MOJ Guidance notes, for example, that being listed on the LSE would not in and of itself mean a company was carrying on a business or part of a business in the UK for the purposes of section 7. The MOJ Guidance further states (at paragraph 36) that “having a UK subsidiary will not, in itself, mean that a parent company is carrying on a business in the UK, since a subsidiary may act independently of its parent or other group companies”. Where there is a dispute as to whether a business presence in the UK satisfies the test, the final arbiter will be the courts; it should be noted that the SFO may not take a conservative approach to this issue if it is otherwise confident about the strength of its evidence in any particular case.
The following are examples of section 7 cases:
As is apparent, each of those cases centred upon conduct overseas, often through an overseas office or subsidiary of the UK company.
Individuals and corporates can commit the offences of active bribery, passive bribery and bribery of a foreign public official under sections 1, 2 and 6. Because these offences require mens rea, the liability of a corporate for the offences must be established through the "identification principle", which establishes that only the acts and state of mind of those who represent the “directing mind and will of the corporation” can be imputed to the corporation itself (Lennard v Asiatic Petroleum  AC 705). The case of Tesco Supermarkets Ltd v Nattrass  AC 153 defined the directing mind and will of a company as extending to the "board of directors, the managing director and perhaps other superior officers of the company who carry out functions of management and speak and act as the company." Under the Bribery Act, where the directing mind and will of the company has the necessary criminal intent, the corporate will be directly liable for the offences under sections 1, 2 and 6.
Where an offence under sections 1, 2 or 6 of the Bribery Act is committed by a body corporate and it can be proved that the offence was committed with the consent or connivance of a senior officer or a person purporting to act in that capacity, the senior officer or person is also guilty of the offence as an individual under section 14 of the Bribery Act. However, where the offending was outside the UK, they will only be liable if they have a “close connection” to the UK under section 12 of the Bribery Act.
By contrast, only an RCO can be liable for the offence of failure to prevent bribery by an associated person under section 7. The RCO will incur liability for an offence or offences by the associated person unless it can prove it had adequate procedures in place to prevent bribery, even where it was not aware of the offence. See 2.1 Defences for further information about this defence.
The situation is more complex where a company has been subject to a merger or an acquisition. There is no specific doctrine of "successor liability" in England and Wales. Consequently, prosecutors and the courts would have to ensure that any successor company shared the relevant mens rea of the purchased or acquired company.
Individuals and companies can be held liable for the same offence or the same underlying misconduct. A company and an individual could both be prosecuted for the same offences under sections 1, 2 or 6, provided the necessary mens rea was present.
The SFO has, however, recently suffered a number of high-profile set-backs on this front, most notably in relation to Tesco which entered into a DPA in April 2017 and received a fine of GBP129 million. By January 2019, the SFO's prosecution of three former Tesco executives, based upon the same facts underpinning the Tesco DPA, also failed. The judge stated that the prosecution case was "so weak it should not be left for the jury's consideration." Similarly, in July 2019, three former Sarclad Limited (referred to until recently as ‘XYZ Ltd’) employees were acquitted of bribery charges, irrespective of the company’s acceptance of a DPA in 2016. There have also been high-profile acquittals of senior executives in relation to the Deutsche Bank EURIBOR scandal and the Barclays Qatari deal. In the latter case, the SFO failed to reinstate bribery charges brought against Barclays, having previously been dismissed by the Crown Court.
In light of the above, some legal commentators have suggested that it is now foreseeable that the law will develop to make DPAs available to individuals. If DPAs do become available to prosecutors regarding individual suspects, it is likely that the authorities will achieve a higher rate of "success" in resolving cases, albeit without proceeding to a full, contested and expensive, trial.
However, DPAs remain an attractive option for organisations and the decision to enter into one will always be based on economic factors. For an organisation, a DPA avoids a time-consuming, costly and damaging prosecution and trial. In essence, a DPA allows an organisation to take a one-off financial hit, remove uncertainty around its future and avoid adverse impact to its share price. It is well documented that share prices often increase on the announcement of a DPA, with both Rolls Royce and Tesco being prime examples.
The sole statutory defence to corporate liability for failure to prevent bribery is the adequate procedures defence, found in section 7(2) of the Bribery Act. For this defence to succeed, the court must be satisfied that the company had adequate procedures in place to prevent bribery. The procedures must be proportionate to that organisation's bribery risks and to the nature, scale and complexity of the organisation’s activities. The MOJ Guidance recognises that no anti-corruption measures can prevent all instances of bribery and specifies the six principles (as below) that should inform the procedures implemented by a relevant commercial organisation:
It is critical that the procedures in place are effective in practice. In this context, it is notable that Standard Bank chose to enter a DPA despite having a number of committees, policies and procedures in place designed to address bribery and corruption. In approving the terms of the DPA, Sir Brian Leveson, sitting as judge of the Crown Court, noted (at paragraphs 20-21) that the applicable policy was unclear and was not reinforced effectively through communication and training.
In March 2018, Skansen Interiors Limited was the first corporate to be convicted under section 7 of the Bribery Act on the basis that it had only inadequate systems and controls to prevent bribery. As there were no assets available when Skansen was sentenced, the only penalty available to the Court was an immediate discharge. Whether a relevant commercial organisation has adequate procedures in place will be a question of fact in each case.
It is a defence under section 13 of the Bribery Act for a person to prove that his or her conduct was necessary for the proper exercise of any function of an intelligence service or of the Armed Forces, when engaged in active service.
As mentioned above, the common law defence of duress is available where payments are made to prevent “loss of life, limb or liberty”.
There are no further exceptions to the statutory defences outlined in 2.1 Defences.
There are no de minimis exceptions to the offences in the Bribery Act. However, when considering whether prosecution is in the public interest, a prosecutor may decide against enforcement where the bribe was of a low value. As noted above in relation to facilitation payments, the Joint Prosecution Guidance includes amongst the factors tending against prosecution “a single small payment likely to result in only a nominal penalty" (at p.8).
There are no sector or industry exemptions.
See the defence of adequate procedures in 2.1 Defences and the outline of the self-reporting regime and DPAs in 3.1 Penalties on Conviction.
The maximum penalty for an individual convicted on indictment under the Bribery Act is ten years’ imprisonment and/or an unlimited fine.
A corporate convicted of an offence under the Bribery Act faces an unlimited fine. Conviction is likely to result in a compensation order for any loss resulting from the offence and/or the confiscation of any criminal proceeds. An order to reimburse the cost of the investigation and prosecution of the offence is also likely.
When considering what penalty to impose, a court must follow any sentencing guidelines issued by the Sentencing Council, or its predecessor, the Sentencing Guidelines Council. The Sentencing Council has, for example, issued guidelines in relation to three of the offences created by the Bribery Act and a sentencing court will be bound to apply them. Where there is no sentencing guideline in existence, then courts must follow any guidance provided by the Court of Appeal (Criminal Division) and consider the factors outlined in Part 12 of the Criminal Justice Act 2003.
Even where there are no criminal proceedings, it is open to a prosecutor to apply for a civil recovery order under Part 5 of POCA in order to recover property obtained through unlawful conduct. In practice, however, prosecutors will be aware of the serious criticism voiced by Lord Justice Thomas in the case of R v Innospec Limited  EW Misc 7 (EWCC). In that judgment, Thomas LJ referred to civil recovery orders in the following terms: “Those who commit such serious crimes as corruption of senior foreign government officials must not be viewed or treated in any different way to other criminals. It will therefore rarely be appropriate for criminal conduct by a company to be dealt with by means of a Civil Recovery Order; the criminal courts can take account of co-operation and the provision of evidence against others by reducing the fine otherwise payable. It is of the greatest public interest that the serious criminality of any persons, including companies, who engage in the corruption of foreign governments is made patent for all to see by the imposition of criminal and not civil sanctions. It would be inconsistent with basic principles of justice for the criminality of corporations to be glossed over by a civil as opposed to a criminal sanction. There may, of course, be a place for a civil order, for example, as a means of compensation in addition to a fine.”
The DPA Code of Conduct suggests that the appropriateness of a Civil Recovery Order should be considered where neither limb of the evidential stage can be met by the conclusion of DPA negotiations and it is not considered appropriate to continue the criminal investigation.
Previous Corporate Penalties
In December 2015, Sweett Group plc pleaded guilty to a charge of failing to prevent an act of bribery intended to secure and retain a contract under section 7 of the Bribery Act. Upon conviction, the company was ordered to pay a total of GBP2.34 million, which was made up of a fine of GBP1.4 million, a confiscation order of GBP851,152.23 and costs of GBP95,031.97 awarded to the SFO.
Recent examples of companies entering DPAs with the SFO include the case of Serco Geografix Ltd. In July 2019, the SFO entered into a DPA with Serco in relation to fraud and false accounting offences which concerned misleading the Ministry of Justice about the Serco parent company’s profits. Serco paid a financial penalty of GBP19.2 million and the SFO’s costs of GBP3.7 million. This was in addition to the GBP12.8 million paid by Serco to the MoJ as part of a civil settlement in 2013.
In April 2017, Tesco Stores Limited entered into a DPA with the SFO in relation to creating a false account of its financial position. Tesco paid a total of GBP128,992,500 and the SFO’s costs of GBP3,069,951.
In January 2017, Rolls Royce plc paid a total of GBP497.25 million plus interest and the SFO’s costs of GBP13 million (as well as large sums in settlement with enforcement authorities in the US and Brazil) in relation to offences including conspiracy to corrupt, false accounting and failure to prevent bribery. In that case, the conduct covered by the DPA spanned three decades, involved multiple parts of the business and took place across seven jurisdictions.
In July 2016, the SFO entered a DPA with Sarclad Ltd, a UK technology company based in Rotherham, regarding the failure to prevent a bribery offence. Sarclad paid a total of GBP6,553,085, comprised of disgorgement of gross profits of GBP6,201,085 and a GBP352,000 financial penalty.
As noted above, the first DPA in the UK regarding bribery was that agreed between the SFO and Standard Bank plc (now known as ICBC Standard Bank) in November 2015. Standard Bank paid financial orders of USD25.2 million and was required to pay the government of Tanzania a further USD7 million in compensation. The bank also agreed to pay the SFO’s costs of GBP330,000 in relation to the investigation and subsequent resolution of the DPA.
Other consequences of conviction may include disqualification of an individual to act as a company director, EU procurement bans and exclusion from projects funded by the World Bank or its partner development banks and cross-debarment. A conviction under sections 1, 2 or 6 of the Bribery Act will lead to the mandatory exclusion of an economic operator (defined in section 2 of the Public Contracts Regulations 2015) from participation in public tenders, under the Public Contracts Regulations 2015. The section 7 offence of failure to prevent bribery will not trigger mandatory exclusion, but may give rise to grounds in support of a discretionary exclusion under the Public Contracts Regulations 2015. Clearly, for any company with a significant portion of revenues derived from public contracts, such debarments could prove fatal to the business.
The Sentencing Council's Fraud, Bribery and Money Laundering Offences Guideline, which came into effect on 1 October 2014, specifies the range of sentences appropriate for each offence under the Bribery Act. For each offence, the Council has specified categories with sentencing ranges reflecting varying degrees of seriousness and a starting point for each category. Once the starting point is determined, the court will take into account aggravating and mitigating factors set out in the guidance. Credit for a guilty plea is taken into consideration only after the appropriate sentence has been identified. In order to identify the appropriate category, the court must consider the culpability of the offender and the harm caused by the offending.
For corporate offenders, the harm is represented by a financial sum. For corporate offences under the Bribery Act, the guidelines state that the relevant figure will generally be the gross profit arising from the contract obtained (or otherwise affected) by the bribery. The resultant harm figure is then multiplied by a percentage according to whether there is low, medium or high culpability. The starting point for high culpability is a multiplier of 300%, with a range between 250% and 400%. Aggravating and mitigating factors are considered, which may change the appropriate range. Once the court has arrived at an appropriate figure, the guidance notes it should "step back" and consider the overall effect of its orders. The guidance states: “The combination of orders made, compensation, confiscation and fine ought to achieve the removal of all gain, appropriate additional punishment, and deterrence.”
In the Standard Bank DPA (December 2015), the financial penalty was calculated in consultation with US authorities. In a media interview at the time, the SFO’s then joint head of bribery and corruption, Ben Morgan, stated that it was “the new norm” for the financial penalty to be calculated having regard to whether it would have parity with a fine in the USA. He suggested that the courts expect to see parity with corporate punishment in the USA and that this was necessary to prevent forum shopping. He went so far as to suggest that even where a case has no connection to the USA, the SFO should consider whether a penalty would have been appropriate in the USA, given its enforcement history.
A defendant who intends to plead guilty may seek an advance indication of sentence, commonly known as a "Goodyear indication" (R v Goodyear (Karl)  EWCA 888). The Attorney General's Guidelines on the Acceptance of Pleas and the Prosecutor's Role in the Sentencing Exercise, published 30 November 2012, provides guidance regarding such an indication. The basis of the plea should be agreed before an indication is sought. The CPS's Instructions for Prosecuting Advocates states that the judge should not be invited to give an indication on what would be, or what would appear to be, a "plea bargain". In giving an indication, the judge is confined to the maximum sentence if a guilty plea were entered at the time the indication is sought. Once an indication is given, it is binding on the judge who has given it and any other judge who may become responsible for the case.
Section 7 of the Bribery Act 2010 places an explicit duty to prevent bribery on corporations incorporated or carrying on business within the United Kingdom. The Act creates a specific defence for corporations who can demonstrate that they had in place "adequate procedures" to prevent bribery. In 2011, the UK Government published The Bribery Act 2010: Guidance, which sets out six principles to be adopted by "commercial organisations wishing to prevent bribery [from] being committed on their behalf":
Regarding disclosure, individuals and corporates operating in the "regulated sector" (which may be loosely defined as financial institutions, professionals and those dealing with high-value transactions) also have concurrent duties to report and prevent money laundering under POCA. The duties under this Act require those in the regulated sector to report activities and transactions they reasonably consider to be suspicious. Failure to do so may result in that individual or corporation being prosecuted in their own right under the "failure to disclose" offence.
In August 2019, the SFO published its long-awaited Corporate Co-operation Guidance aimed at providing organisations and their legal advisers with transparency about what to expect if they self-report bribery to the SFO. See 6.2 Likely Future Changes to the Applicable Legislation or the Enforcement Body below for further information about this Guidance.
Whistle-blowing protection is afforded to UK workers under the Employment Rights Act 1996 (ERA), as amended by the Public Interest Disclosure Act 1998 (PIDA) and the Enterprise and Regulatory Reform Act 2013 (ERRA). It was introduced to protect employees from being unfairly dismissed, or otherwise subjected to detriment, where they had disclosed information about an alleged wrongdoing in certain defined circumstances.
For a whistle-blower to qualify for protection, numerous requirements need to be met. The key requirements are that there must be a disclosure of information that is a "qualifying disclosure", which means that the worker must reasonably believe the disclosure is made in the public interest and that it tends to show that one or more of six relevant failures has occurred (including, for example, a criminal offence and a breach of any legal obligation), is occurring or is likely to occur. The disclosure must also be "protected". The issue of whether a disclosure is protected depends on the nature of the person to whom the disclosure is made and, depending on to whom it is made, other specified conditions.
The ERRA strengthened the whistle-blowing protections under the ERA in 2013 by introducing personal liability for co-workers, or agents of an employer, where they subject a whistle-blower to detriment in the course of their employment because they have made a protected disclosure. Employers also have vicarious liability where other workers or agents subject a whistle-blower to detriment, unless the employer has taken all reasonable steps to prevent that behaviour.
In 2015, the FCA and the Prudential Regulation Authority introduced rules requiring banks and insurers to introduce whistle-blowing procedures internally.
In light of its impending departure from the EU, the UK Government confirmed that it does not propose to adopt the EU Whistleblower Protection Directive, which was adopted by the European Council in October 2019.
However, the UK has confirmed that it has committed to reviewing its own whistle-blowing framework "once the recent [EU] reforms have built the necessary evidence of their impact. As part of this we will look at the protections offered in other countries." It is presumed that those other countries will include EU Member States.
There are no financial incentives for whistle-blowers to report bribery or corruption in the UK, although the Competition and Markets Authority now offers incentives of up to GBP100,000 for information that leads to the successful investigation and prosecution of cartels.
The House of Lords previously debated the inclusion of a clause in the Criminal Finances Bill, now the Criminal Finances Act 2017, that would have incentivised whistle-blowing and strengthened protections for whistle-blowers, but it was ultimately not included (HC Deb 28 March 2017 Vol 782 cols 535-541). The proposed clause would have allowed whistle-blowers to be awarded financial compensation of between 10% and 30% of the total financial penalty collected as a result of any enforcement action resulting from the whistle-blowing. The FCA also confirmed in a policy statement published in May 2017 (Whistle-blowing in UK Branches of Foreign Banks: Response to Consultation Paper 16/25) that it has no plan to offer incentives to whistle-blowers.
Where a person admits to offending and agrees formally to co-operate with a criminal investigation and any subsequent prosecution, they may be eligible to enter a "SOCPA agreement" with the prosecutor under the Serious Organised Crime and Police Act 2005 (SOCPA). In exceptional cases, a person might receive immunity from prosecution in exchange for their co-operation. In practice, however, it is more common to see co-operation lead to a reduction in sentence, separately and in addition to the usual discount a defendant receives upon entering a guilty plea. The relevant provision in SOCPA (Section 73) does not allow the prosecutor to guarantee a reduction but states: “In determining what sentence to pass on the defendant the court may take into account the extent and nature of the assistance given or offered.”
In R v Blackburn  EWCA Crim 2290, the Court of Appeal held that the discount for a co-operating witness should normally be between one third and two thirds of the sentence that would otherwise have been passed, but that in a most exceptional case it could exceed three quarters of the sentence. However, the Court also emphasised that every sentencing decision would be fact-specific.
In R v Dougall  EWCA Crim 1048 the Court stated that where the appropriate sentence for a defendant would be 12 months’ imprisonment or less and taking into account the level of criminality, features of mitigation, a guilty plea and (at paragraph 36) “full co-operation with the authorities investigating a major crime involving fraud or corruption, with all the consequent burdens of complying with his part of the SOCPA agreement” ‒ a suspended sentence should normally follow. The Court emphasised that it was not suggesting a suspended sentence would always be appropriate and reiterated that sentencing was fact-specific in each case.
The relevant provisions regarding whistle-blowing are located in the Employment Rights Act 1996 as amended by the Public Interest Disclosure Act 1998, the Enterprise and Regulatory Reform Act 2013, the FCA Handbook and its related Guidance, and the Serious Organised Crime and Police Act 2005.
See 5.2 Enforcement Body.
In England, Wales and Northern Ireland, the SFO is the lead prosecution body for offences under the Bribery Act. The SFO was established under the Criminal Justice Act 1987 to investigate and prosecute offences involving serious and complex fraud. In deciding whether to pursue a particular case, the Director of the SFO considers whether the criminal conduct undermines UK commercial or financial interests, the scale of the actual or potential financial loss and whether there is a significant public interest issue. In Scotland, the primary prosecutor is the Lord Advocate. The CPS also pursues cases brought by individual police forces around the UK.
The other major enforcement bodies are the National Crime Agency (NCA), a criminal investigative agency, and the FCA. The NCA’s economic crime division contains a specific international corruption unit, which has a particular focus on money laundering offences arising from corruption overseas and recovering the proceeds of crime. The NCA investigates cases for subsequent prosecution by the CPS. By contrast, the FCA does not typically prosecute offences under the Bribery Act but it has a wide remit for regulating the financial services industry, which includes the imposition of rules and requirements for systems and controls to prevent financial crime, including bribery and corruption. The interplay between the FCA and SFO is often critical to the outcome of a financial services investigation, particularly in relation to any agreement as to the scope of each respective agency's investigation.
In 2018, the National Economic Crime Centre (NECC) was launched, following a governmental review of economic crime in the UK. The NECC is an overarching body, the function of which is to co-ordinate the national response to fraud and corruption in the UK. It brings together law enforcement and justice agencies, government departments, regulatory bodies and the private sector. It has both a law-enforcement and crime-prevention role.
In particular, the NECC has the power to direct the SFO to carry out investigations into corruption, among other matters. This has raised questions about the independence of the SFO as a separate standalone authority from the NCA (the SFO is overseen by the Attorney General, while the NCA reports to the Home Office). Notwithstanding this, the Director of SFO has outlined the importance of cross-collaboration between the SFO and NECC, in order to "fight… corruption in a shrinking world" .
In July 2019, the UK government published its Economic Crime Plan for 2019 - 2022. The Plan sets out a number of strategic objectives, including an intention to strengthen UK law-enforcement agencies' capability to prosecute bribery and corruption.
Under section 2 of the Criminal Justice Act 1987 (CJA 1987), the SFO has extensive and intrusive powers to compel the production of information. Put simply, the SFO need only issue a formal letter of demand specifying the categories of information, including documents, that it requires from the recipient. In practice, investigating authorities, including the SFO, often start from the premise of issuing a broadly defined demand for documents. Any person receiving a notice issued under section 2 should consider carefully the scope of the disclosure required and engage promptly with the SFO to negotiate the scope of the demand and the timeframe for response (wherever possible).
Wide-ranging demands present significant practical difficulties for companies, which may hold data for thousands of affected contracts or employees and store the data in paper and/or digital format in various locations, including overseas. The legal issues that this presents include the clash with data privacy laws; various jurisdictions require specific informed consent before personally identifiable information is processed for specific purposes, such as a criminal investigation. Similarly, the company should be alive to its potential legal risk in other jurisdictions where its disclosure of documents to the SFO would run contrary to any banking secrecy statutes, blocking statutes, or state secrecy laws. Wherever possible before disclosing material to the SFO, the recipient of the section 2 notice should take appropriate legal advice, including obtaining input from local counsel.
The extra-territorial effect of section 2 powers is considered further at 5.5 Jurisdictional Reach of the Body/Bodies.
Although the UK courts determine individual sentences, prosecuting bodies can affect the sentence that an individual receives. In particular, a prosecuting agency is responsible (alongside the defence) for bringing to the attention of the sentencing court the mitigating and aggravating factors present in the case that may impact the court’s assessment on sentence. Furthermore, plea agreements are available to individuals in certain circumstances. These agreements afford individuals a degree of foresight and certainty in the sentencing process. When considering a plea agreement, prosecutors must adhere to specific guidance in the Attorney General’s Guidelines on Plea Discussions in Cases of Serious or Complex Fraud (published November 2012) and the Criminal Procedure Rules. The general principles of the Guidelines are that prosecutors must, when conducting plea discussions, act openly, fairly and in the interests of justice. Put briefly, those principles require the prosecutor to ensure:
As outlined above, the SFO’s section 2 powers have limited extra-jurisdictional effect where the "sufficient connection test" is met.
It had previously been thought that section 2 notices were only effective within the UK jurisdiction and could not be used to compel a recipient to produce documents located overseas. However, the extra-territorial reach of section 2 powers was considered in 2018 by the High Court in KBR v Serious Fraud Office  EWHC 2368 (Admin). In that case, the SFO had initiated an investigation into suspected bribery at KBR Ltd, a UK subsidiary of KBR Inc, a company registered in the USA. The SFO issued KBR Ltd with a section 2 notice in respect of a number of categories of material. It became concerned about the company’s co-operation and issued section 2 notices for disclosure of the material, and served one of those notices upon an officer of KBR Inc who was visiting the UK.
KBR Inc issued judicial review proceedings, arguing that the section 2 notice was unlawful because section 2 did not have extra-territorial effect. The High Court disagreed. Finding for the SFO, the court held that section 2 notices did have extra-territorial effect where a "sufficient connection" existed between the company and the jurisdiction. The court was concerned that SFO investigations should not be "frustrated or stymied" on the basis that a company held documents on a computer server outside the jurisdiction. Since KBR Ltd was the UK operating arm of KBR Inc, the court held in favour of the SFO. In April 2019, the Supreme Court granted KBR permission to challenge that decision, and that appeal has yet to be heard.
The SFO may also seek mutual legal assistance from overseas authorities via the Crime (International Co-operation) Act 2003. Under that statute, the SFO may utilise the assistance of overseas authorities to serve various documents (eg, summons, Section 2 notices), obtain evidence (including witness statements on oath, documentary and banking evidence) and execute search and seizures.
Significantly, the UK passed the Crime (Overseas Production Orders) Act 2019 which gives law enforcement agencies such as the SFO and prosecutors the power to obtain electronic data directly from an overseas communications service-provider. The UK government has stated that those extensive powers will be subject to robust judicial oversight, and that statutory protections for legally privileged or journalistic material will be adhered to. The UK is also currently negotiating a data access agreement with the US. Given broader uncertainties regarding Brexit and the new UK government, this remains an area for practitioners to watch closely.
In June 2019, FH Bertling Ltd, a UK shipping and freight-forwarding company (now in liquidation), was sentenced after admitting to operating a bribery scheme in order to secure contracts in Angola. The company admitted to paying circa USD350,000 in bribes in order to secure freight-forwarding contracts valued at USD20 million during the period January 2010 to May 2013. The company was fined GBP850,000 for conspiracy to give or accept corrupt payments contrary to section 1 of the Prevention of Corruption Act 1906 and section 1 of the Criminal Law Act 1977. The criminal investigation into corruption at FH Bertling began in September 2014, with the first charges announced in July 2016. In total, 13 individuals were charged as part of the SFO’s investigation, with nine convicted of one or more charges and four individuals acquitted.
For further information about recent developments in the field of anti-corruption, see 4.3 Protection Afforded to Whistle-blowers (whistle-blowers) and 6.2 Likely Future Changes to the Applicable Legislation or the Enforcement Body (corruption-prevention measures).
Following the prosecution of Skansen Interiors (see 2.1 Defences) in 2018, the company’s former managing director and another individual (the recipient of Skansen’s bribes) received custodial sentences of 20 months and 12 months respectively. Both individuals had pleaded guilty to bribery and their sentences reflect a discount compared to the sentence they would have otherwise received. Ancillary orders were also utilised in this case, with one individual being disqualified from as acting as a company director for seven years. Skansen itself, however, was given an absolute discharge after the court ruled it had no assets for a financial penalty to be imposed.
In June 2019, the former managing director and owner of UK company ALCA Fasteners Limited was sentenced to two years' imprisonment for paying GBP300,000 in bribes to a purchasing manager employed by one of ALCA’s customers in order to secure contracts valued at GBP12 million. In addition to the custodial sentence, a seven-year Company Director Disqualification Order was imposed and the individual was required to pay a Confiscation Order in the amount GBP4,494,541 and prosecution costs to the SFO in the amount of GBP478,351.
In February 2019, David Lufkin, a former executive of oil and gas company Petrofac Limited, pleaded guilty to eleven counts of bribery contrary to sections 1 and 2 of the Bribery Act. The offences relate to the making of corrupt payments to influence the award of contracts to Petrofac worth in excess of USD730 million in Iraq and in excess of USD3.5 billion in Saudi Arabia. As at the date of publication, Mr Lufkin awaits sentencing.
To date, there has been only one successful prosecution of a corporate for bribery offences (Skansen Interiors). The approach the courts will adopt when calculating fines for corporates convicted for bribery is as yet unchartered territory and remains an area for practitioners to watch.
See 1.1.4 Recent Key Amendments to National Legislation as regards post-legislative scrutiny by the House of Lords Select Committee on the Bribery Act 2010.
Recent developments and statements by authorities (as summarised below) are likely to result in a change in the way corruption and bribery is prosecuted in England and Wales.
In September 2019, a year after starting her role as Director of the SFO, Lisa Osofsky delivered a speech that, amongst other things, emphasised her intention to seek greater co-operation from the SFO's international counterparts, stating that the SFO cannot do its job without obtaining evidence, such as documents, bank records and witness accounts, and taking steps to trace and recover ill-gotten assets, in multiple jurisdictions. While Ms Osofsky noted that the SFO is reaping the benefits of close international co-operation, she admitted that there is still some way to go.
Similarly, the Director General of the National Economic Crime Centre has stated that better co-ordination is needed between its domestic affiliated agencies, in addition to international co-operation, in order to tackle the "absolutely startling" levels of fraud.
The SFO and the NECC both emphasise the importance of the private sector cooperating with the authorities to prevent and report crime.
In August 2019, the SFO published its long awaited "Corporate Co-operation Guidance" (the Guidance), aimed at providing organisations and their legal advisers with transparency about what to expect if they self-report bribery to the SFO.
The SFO states that co-operation means going "above and beyond what the law requires" in order to assist the law-enforcement authorities.
The Guidance sets out a non-exhaustive list of good practices, including:
The Guidance also reiterates the DPA Code, stating that co-operation means disclosing witness accounts, making witnesses available for interview and providing a report of any internal investigation. While Ms Osofsky has previously stated that waiving privilege will be a "strong indicator of co-operation and an important factor […] for DPA negotiations", the Guidance does not expressly require waiver of privilege.
Organisations are also expected to provide a schedule of documents over which they claim privilege and the basis for that claim. The SFO notes that, where an organisation claims privilege over documents, it will be expected to provide certification by independent counsel (appointed by the organisation). This is the most controversial part of the Guidance as it will inevitably increase the time and cost burdens for any organisation involved in an SFO investigation. As the SFO has already expressed its apparent appetite to challenge claims of privilege where it considers that to be "necessary or appropriate", further litigation on this point can be expected.
Apart from the SFO, the relatively new National Economic Crime Centre’s stated intention is to provide a multi-agency, multi-disciplinary approach to economic crime, by bringing representatives of the main prosecuting agencies into one team.
In July 2019, the UK government published its Economic Crime Plan for 2019 - 2022. Continuing a theme from recent years, the Plan emphasises the need for the public and private sectors to work together to help the UK counter all forms of economic crime.
The Plan describes an intention to strengthen UK law-enforcement agencies' capability to prosecute bribery and corruption. Increased funding is proposed for the International Corruption Unit at the NCA and CPS, to enable them to recover and return assets stolen from developing countries by corrupt individuals and pursue UK companies and nationals who engage in bribery and corruption in developing countries.
Other developments include the increased use of Unexplained Wealth Orders (UWO), a tool implemented in the Criminal Finances Act 2017. Where granted, the UWO compels the respondent to explain the nature of their interest in the property, and to explain how they obtained it but only if there are reasonable grounds for suspecting that the known sources of that person's lawful income would have been insufficient for the purposes of enabling the respondent to obtain the property. A failure to respond effectively to a UWO creates the presumption that the property was obtained unlawfully and is therefore eligible for civil recovery under POCA. Such orders may only be made against politically exposed persons (PEP), or where there are reasonable grounds for suspecting that the person is or has been involved in serious crime. As of July 2019, the NCA had obtained four UWOs, the most recent against an individual in Northern Ireland with suspected links to paramilitary and organised crime groups. Similarly, the authorities are also starting to exercise their reinforced powers to freeze and forfeit money held in bank accounts that either resulted from unlawful activity or is intended for use in unlawful activity. Again, these powers arise from the Criminal Finances Act 2017 amendments to POCA.