As can be seen from a recent post by my colleague, Adam Greaves, the general worth of the Guidance, which was published by the Ministry of Justice on 30 March 2011, has been called into question. However, with regard to certain specific issues, the Guidance does provide some ‘useful’ commentary on the wording used in the Bribery Act and the way in which it is to be interpreted by the Serious Fraud Office (the “SFO”).
One such issue is the potential liability of companies involved in joint ventures; whether operating through separate legal entities or through contractual arrangements.
In the case of a joint venture operating through a separate legal entity, the Guidance states that a bribe paid by that separate legal entity may lead to liability for a company that is involved in the joint venture if: the joint venture is performing services for that company; and, the bribe is paid with the intention of benefiting that company. However, the mere existence of such a separate legal entity will not, in itself, mean that it is “associated”, for the purposes of the offence, with any of the companies which are involved in the joint venture.
Where a joint venture is conducted through a contractual arrangement, the Guidance identifies the determining factor as being that of control. Specifically, the level of control that a company has over the relevant contractual arrangement will be considered by the SFO in deciding whether a person, who paid a bribe in the conduct of the joint venture business, was “performing services for or on behalf of” that company. Consequently, an employee or agent of a company who has paid a bribe in order to benefit his employer will not be automatically regarded by the SFO as a person “associated”, for the purposes of the offence, with all of the other companies that are involved in the joint venture.
Whether a joint venture operates through a separate legal entity or through a contractual arrangement, to bring a prosecution the SFO will have to show the required intent on the part of the person who paid the bribe. Therefore, even if it can properly be said that an agent, a subsidiary, or another person acting for a company that is involved in a joint venture was also performing services for all of the other companies involved in that same joint venture, an offence will only be committed if that agent, subsidiary or person intended to “obtain or retain business or an advantage in the conduct of business” for those companies. Therefore, the fact that companies involved in a joint venture benefit indirectly from a bribe will not, in itself, amount to proof of the specific intention required by the offence.
In specifically addressing the potential liability of companies that are involved in joint ventures in the way that it has, and identifying the actions such companies should take to enable them to rely on the “adequate procedures” defence, the Guidance appears to have severely restricted the basis upon which the SFO can seek to bring a prosecution against a company which has ‘wilfully shut its eyes’ to the corrupt activities of its joint venture partner. Is this a further example of the corporate offence being watered down under the guise of providing clarity?