We are happy to announce a new feature to the Subject to Inquiry blog.  Our colleagues in London have just launched the Bribery Library.  The blog focuses in on the UK Bribery Act and discusses its implications on businesses. There are already several insightful posts on the site and you can access them here or by clicking on the "Bribery Library" icon on the upper right corner of this page.  Welcome!

Implementation of the UK Bribery Act has been pushed back at least one month from its previous effective date of April 2011, as UK businesses maintain pressure on government officials to clarify its provisions and soften its impact on their overseas activities.  The announcement, made by Justice Secretary Ken Clarke earlier this week, comes just two weeks after UK officials decided to assess the Bribery Act as part of a government Growth Review designed to improve conditions for private sector growth.  According to press reports, the delay is attributable to the Bribery Act’s inclusion in that review—a measure taken by UK officials to address strong concerns from businesses over the impact of the new law—and failure to publish guidance on how the law will be implemented. 

Clarke promised that the Bribery Act would not be implemented until at least three months after publication of that guidance, which is mandated by the Bribery Act and was expected to be in place by January 2011.  In a statement made earlier this week, a Ministry of Justice official explained that, “We are working on the guidance to make it practical and comprehensive for business.  We will come forward with further details in due course.  The most important thing is to get it right.”  No date has been set for publication.    

At the same time as the implementation delay was announced, the recent announcement of budget estimates for the UK Serious Fraud Office (SFO) cast serious doubt upon whether UK law enforcement will have the resources to give the law teeth.  The SFO will be the principle enforcer of the Bribery Act, but in response to a question in the House of Lords, Minister of Justice Lord McNally stated that the SFO can expect to receive just an additional £2 million ($3.24 million) per year to investigate and prosecute the new offense of failure by a commercial organization to prevent bribery.  It is reported that this could translate to less than two investigations or prosecutions a year.  The SFO is already facing extensive budget cuts, from £34 million ($55 million) in 2011 to £29 million ($47 million) in 2014.  

On January 13, 2011, UK government officials confirmed that the soon-to-be-implemented UK Bribery Act is set to be assessed as part of a government Growth Review designed to improve conditions for private sector growth, including easing regulatory burdens.  Press reports indicate that the Growth Review, being undertaken jointly by HM Treasury and the Department for Business, will consider business concerns about the possible impact of the new law and whether there are steps that can be taken to lessen that impact.

The Bribery Act has been both hailed and pilloried within and outside the UK, with a number of companies expressing concern over the potential for inadvertent violations or penalization of what until now has been considered run-of-the-mill corporate hospitality.

Last week’s report regarding the Growth Review comes on the heels of comments from former UK Attorney General Lord Goldsmith, who expressed that corporate hospitality policies could be an easy early target for UK law enforcement once the Bribery Act comes into force in April 2011, but that the new corporate strict liability offense of failing to prevent bribery cannot be underestimated and “is the thing that companies need to be most worried about.”    

In his comments, reported on January 5, 2011, Lord Goldsmith advised companies looking to address compliance with the new law to look to the experience of U.S. companies and law enforcement under the U.S. Foreign Corrupt Practices Act (FCPA).  “It is not just a case of having a written policy that says don’t bribe,” advised Goldsmith.  “The American experience demonstrates you need to have a procedure for instructing people about that, for monitoring it; you have to have ways of dealing with problems when you come to them.  You do have to have policies on things like entertainment and facilitation payments—what is acceptable and what isn’t.”

While there is no current indication whether or when the Growth Review will issue recommendations regarding the Bribery Act, the UK Ministry of Justice has confirmed that it will issue its final guidance to assist companies in addressing Bribery Act compliance by the end of this month. 

UK regulators are reviewing the interplay of EU procurement directives and the recently-enacted Bribery Act 2010 in an effort to reduce the risk of debarment from public contracts following certain corporate violations of the new law.  Under EU procurement rules, companies convicted of an offense concerning professional misconduct, which would include bribery, are banned from bidding on large public contracts.  For some companies, this type of debarment could be hugely damaging if not fatal.

UK Ministry of Justice officials are considering amendments to the regulations implementing the EU directives to reflect the fact that corporations can violate the Bribery Act’s new corporate strict liability offense due to a failure to implement adequate procedures to prevent bribery, without having intended to commit or facilitate the underlying bribery. 

The Ministry of Justice has committed to clarifying when debarment may be triggered prior to the April 2011 effective date of the Bribery Act.  

On July 20, 2010, the UK Ministry of Justice announced that the recently enacted Bribery Act will take effect in April 2011.  The announcement had been anticipated by UK companies and companies doing business in the UK, all of which must comply with the new Act.  The Act received the Royal Assent on April 8, 2010, just before Parliament was dissolved prior to the May 6 General Elections.

The Bribery Act stands to revolutionize the UK’s approach to anticorruption enforcement and has the attention of lawyers, law enforcement and corporate executives throughout the world.  The new legislation replaces a patchwork of existing anticorruption laws and was introduced following years of criticism of lax enforcement and more than a decade of failed efforts to pass similar legislation.  The Bribery Act is modelled closely on the U.S. Foreign Corrupt Practices Act (FCPA), but reaches beyond the FCPA in a number of notable respects. 

In announcing the April 2011 effective date of the new law, the Ministry of Justice also announced that in September 2010 it would “launch a short consultation exercise on the guidance about procedures which commercial organisations can put in place to prevent bribery on their behalf.”  The guidance will then be published “early in the New Year to allow businesses an adequate familiarisation period before the Act commences.”  This guidance is a critical next step because proof of an adequate system to prevent bribery will be a defense to the Bribery Act’s corporate strict liability offense.

The guidance is ultimately expected to set out broad guidelines that will illustrate “good practices examples, rather than detailed and prescriptive standards.”  It is also expected that courts will take into account the size and needs of a business when assessing whether its policies and procedures are adequate to satisfy the “adequate system to prevent bribery” defense during the course of a prosecution.  Bearing in mind that it may take up to several months to implement such measures from scratch or to bring existing systems up to speed, companies subject to the Bribery Act are well-advised to act now to ensure adequate protections are in place by the time the Act takes effect.  The Bribery Act’s departures from the FCPA warrant revisiting and revising even robust anticorruption compliance programs to ensure compliance with UK law. 

Voters in the UK produced an unlikely result by failing to deliver a clear majority to any one party in the May 6, 2010 general elections.  The resulting “hung Parliament” —the first since 1974—has resulted in the creation of a coalition government between the Conservative Party and the Liberal Democrats, with the Conservative Party’s David Cameron serving as the UK’s new Prime Minister.  This change of power from the Labour party has any number of political implications in the UK and beyond, including the opportunity for a new government to determine key aspects of when and how the new UK Bribery Act 2010 will be implemented.  

The Act received Royal Assent on April 8, 2010, but two critical steps must be completed before the Act can take effect.  First, the Act’s commencement date must be determined by a new Ministry of Justice, which will be appointed by the new government.  Second, the Ministry of Justice must provide guidance as to what constitutes adequate anticorruption procedures, pursuant to the mandate of Section 9 of the Act.  The government committed to providing this guidance before the new offenses under the Act take effect to give commercial organizations adequate time to address any potential shortcomings in their internal compliance functions. 

At the February 2, 2010 third reading of the Bill before the House of Lords, Lord Tunnicliffe indicated that the Ministry of Justice had already begun working closely with business groups and non-governmental organizations to develop a set of principles to serve as the basis of the guidance document.  However, the guidance consultation and development process was stayed during the election.  If Labour had won a majority, it was anticipated that the Act would take effect in October 2010, following a July 2010 release of the guidance required by Section 9.  The Conservative/coalition victory may result in commencement being delayed until 2011 as the new Ministry of Justice prepares the guidance required by Section 9.  This could include a new round of consultations with businesses and other relevant entities.  

While awaiting news regarding the commencement of the Act, UK businesses and U.S. businesses operating in the UK have the opportunity to begin assessing their compliance programs and identifying the changes necessary to ensure compliance with the Act and the ability to take full advantage of its “adequate procedures” defense. 

More information about the Act, including its new offenses and how it compares to the U.S.’s Foreign Corrupt Practices Act, can be found in McGuireWoods’ white paper Understanding the UK Bribery Act.