«Bruce W. Bean & Emma H. MacGuidwin' INTRODUCTION On December 17, 1997 the United Kingdom, a founding member of the Organization for Economic ...»
UNSCREWING THE INSCRUTABLE: THE UK
BRIBERY ACT 2010
Bruce W. Bean & Emma H. MacGuidwin'
On December 17, 1997 the United Kingdom, a founding member of
the Organization for Economic Cooperation and Development ("OECD"),
signed the OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions (the "OECD Convention"
or "Convention").' This Convention obligates signatory states to criminalize bribery of foreign public officials by those seeking to obtain or retain business. The UK Bribery Act 2010 (the "Bribery Act" or the "Act"),2 enacted after more than a decade of debate, delay, and desultory deliberation, is the culmination of the United Kingdom's extraordinarily extended effort to update its antiquated corruption legislation and thus comply with its obligations under the OECD Convention.
The Bribery Act is a wholesale revision of all United Kingdom domestic bribery and corruption statutes, some dating from the nineteenth century. The Act applies to both domestic and foreign bribery. In this article we review the operative provisions of the Bribery Act and then focus on a shocking new crime: the failure of a commercial enterprise to prevent a bribe. This crime, which requires no criminal intent and no knowledge of the offending bribe, will ensnare many non-UK businesses involved in cross border transactions. This is so because the Bribery Act contains an expansive concept of what may be deemed a bribe under the Act and because the jurisdictional reach of the Act is unparalleled. The Act also provides that the offending bribe need not be committed by an employee of the company. Any "associated person" may trigger the strict liability crime * Professor Bruce W. Bean teaches Business Enterprises and conducts the Global Law Colloquium at Michigan State University College of Law. He also coaches the Jessup International Moot Court Competition Team and is Faculty Advisor to the Michigan State University International Law Review. Earlier, Professor Bean had practiced corporate law for 30 years in New York, Los Angeles and Moscow. He is a graduate of Columbia Law School and clerked for Judge Leonard P. Moore on the U.S. Second Circuit Court of Appeals.
Emma H. MacGuidwin is a 2008 summa cum laude graduate of Michigan State University College of Law, where she served as Senior Articles Editor of the Law Review.
She is a former law clerk to the Honorable Russell G. Vineyard, United States Magistrate Judge for the Northern District of Georgia.
1. OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Dec. 17, 1997, available at http://www.oecd.org/ dataoecd/4/18/38028044.pdf [hereinafter OECD Convention].
2. Bribery Act, 2010, c.23, (U.K.) [hereinafter Bribery Act]
of "failing to prevent bribery." The sole defense companies have to this crime is the nigh impossible task defense of demonstrating that the company had "adequate procedures" in place to prevent such bribery.
Moreover, since the Act characterizes small facilitation payments, currently made all over the world in the ordinary course of traveling or conducting business, as "bribes", business as now conducted may have already triggered the Bribery Act's strict liability crime of failing to prevent bribery. Furthermore, this will be the case even for a non-UK business if it is found to be "carry[ing] on a business, or part of a business, in any part of the United Kingdom[.]" 3 The surprising hypocrisy of Parliament criminalizing facilitation payments and, in certain instances, hospitality expenditures, while acknowledging that these are daily occurrences by both UK and non-UK companies, seems inexplicable. It is certainly indefensible.
Part I outlines the United Kingdom's leisurely pace of bringing its laws into compliance with the OECD Convention - a process that began on December 17, 1997 and was completed more than thirteen years later on July 1, 2011, when the Bribery Act finally became effective. Part II analyzes three offenses created by the Bribery Act - bribing another person, requesting or agreeing to receive a bribe,' and bribery of a foreign public official. Part III explores what in our view is the most egregious aspect of the Bribery Act, the strict liability corporate crime of failing to prevent bribery,' a crime that requires no mens rea and triggers unlimited fines. Parts I to III of this article draw on language from our previous article, Expansive Reach - Useless Guidance: An Introduction to the UK BriberyAct 2010.8 Part IV probes the expansive scope of what is deemed a "bribe" under the Bribery Act. Once a bribe is alleged, a non-UK business doing only a part of its business in the United Kingdom will be guilty of failing to prevent a bribe even when such bribe was paid by a non-employee or other person over whom the now automatically guilty company has no operational control. In such a case, the sole defense available to the presumptively guilty company is to satisfy the burden of proving that, despite the occurrence of the alleged bribe that it failed to prevent, that company had in place adequate procedures designed to prevent that very bribe! We intend to show that the Bribery Act's operative provisions, particularly the strict liability provisions and the treatment of facilitation
and hospitality payments, are unprecedented in their jurisdictional reach and cannot realistically be enforced. We conclude by commenting on concerns relating to the Bribery Act's violations of due process and the European Convention on Human Rights. The Bribery Act cannot hope to effect, in a legitimate way, Parliament's goal of ending bribery in the United Kingdom and elsewhere.
I. WITH ALL DELIBERATE DELAY: THE SORDID SAGA OF THE ULTIMATE
BIRTH OF THE UK BRIBERY ACTThis part outlines the genesis and development of global anti-bribery legislation, beginning with the history of the United States Foreign Corrupt Practices Act, the predecessor of all modem anti-bribery efforts. We then explore the background of the OECD Convention and the role it played in the development and enactment of the Bribery Act. We also trace the long and tortuous history of the United Kingdom's efforts to comply with the OECD Convention by finally enacting the Bribery Act after more than a decade of debate and delay by Parliament.
A. The US Foreign CorruptPracticesAct
The United States began the global campaign to eliminate bribery and corruption in international business transactions in 1977 with the enactment of the Foreign Corrupt Practices Act ("FCPA").9 The FCPA, a curious artifact of the Watergate Scandal,o has two operative provisions. The first is that businesses keep accurate books and records of their financial transactions. This provision is enforced by the Securities and Exchange Commission." For this article, the more important FCPA provision is the
9. Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat. 1494, as amended by Title V of the Omnibus Trade & Competitiveness Act of 1988, Pub. L. No. 100secs. 5001-03, 102 Stat. 1415, 1415-25 (codified as amended at 15. U.S.C. §§ 78m(b)(2), 78m(b)(3), 78dd-1, 78dd-2, 78ff(1994)).
10. The Watergate investigation revealed corporate "slush funds" as the source of contributions to the committee to reelect President Nixon, as well as to make "questionable payments" overseas. This led to an investigation by the Securities and Exchange Commission, which ultimately led to enactment of the Foreign Corrupt Practices Act. A description of the genesis of the FCPA is found in an article by Stanley Sporkin, Head of Enforcement at the Securities and Exchange Commission at the time the FCPA was being drafted in the mid-1970's. See, Stanley Sporkin, The Worldwide Banning of Schmiergeld: A Look at the Foreign Corrupt PracticesAct on its Twentieth Birthday, 18 Nw. J. INT'L L. & Bus. 269, 271 (1998).
11. U.S. DEP'T OF JUSTICE, Foreign Corrupt Practices Act: An Overview, http://www.justice.gov/criminal/fraud/fcpal (last visited Mar. 4, 2013). CRIMINAL DIVISION
OF THE U.S. DEP'T. OF JUSTICE & THE ENFORCEMENT DIVISION OF THE U.S. SEC, FCPA: ARESOURCE GUIDE TO TIE U.S. FOREIGN CORRUPT PRACTICES ACT 4 - 5 (Nov. 14, 2012), available at http://www.justice.gov/criminal/fraud/fcpa/guide.pdf (hereinafter RESOURCE
IND. INT'L & CoMP. L. REv. [Vol. 23:1
prohibition against bribing foreign government officials to obtain or retain business. 12 This portion of the FCPA is enforced by the Department of Justice. 13 It is important to note that the FCPA was amended in 1988 to make explicit that the FCPA does not prohibit "grease" or "facilitation" payments. Such payments are excluded from the definition of bribe when they are not "corrupt," that is, when such payment is not intended to obtain or retain business but simply to secure a "routine governmental action," such as approvals, licenses, permits, and the like, that are not subject to a foreign government official's discretion. 14 The 1988 amendments also included a direction from Congress to the Executive Branch to end the competitive disadvantage US companies believed that they faced when no other nation criminalized bribes to foreign officials by urging other nations to similarly outlaw overseas bribery.' 5 This latter requirement ultimately resulted in negotiation and approval of the OECD Convention.
B. The OECD and OtherAnti-Bribery Conventions
In 1997, twenty years after the FCPA went into effect, OECD member nations completed preparation of the OECD Convention. The OECD Convention obligates parties to enact domestic legislation criminalizing bribery of foreign government officials.16 Subsequent to negotiation of the Convention, five other anti-bribery conventions have FCPA). The Bribery Act does not contain a requirement that a company
GUIDE TO THEmaintain accurate books and records. Such a provision is contained in Part 15 of the UK Companies Act 2006, Section 386.
12. RESOURCE GUIDE TO THE FCPA, supra note 11, at 4 - 5.
13. Id.at 5.
14. 15 U.S.C. § 78dd-1(b)-3(b) (1998); S. REP. No. 100-85, at 53 (1987); H.R. REP. No.
100- 4 0, pt. 2, at 77 (1987).
A "routine governmental action" is only ordinarily and commonly performed by a foreign official in obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country; processing governmental papers; providing police protection, mail pick-up and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country; or providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration. The term does not include any decision by a foreign official whether or on what terms to award new business to or to continue business with a particular firm. 15 U.S.C. § 78dd-l(f)(3).
15. See, e.g., James R. Hines, Jr., Forbidden Payment: Foreign bribery and American Business after 1977 (Nat'1 Bureau of Econ. Research, Working Paper No. 5266, 1995).
16. OECD Convention, supra note 1, at art. 1 § 1. "Each Party shall take such measures as may be necessary to establish that it is a criminal offence under its law for any person intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business."
UNSCREWING THE INSCRUTABLE 672013]
been negotiated, four of which are now in effect. The five are as follows:
The broadest in scope of these international expressions of disapproval of bribery and corruption is the United Nations Convention Against Corruption, which binds 140 states and has twenty additional nations currently dealing with ratification.23 C. The Adequacy ofPrior UK CorruptionLegislation The United Kingdom is an original member of the OECD and was an initial signatory of the OECD Convention in December 1997. As noted, the Convention requires parties to enact domestic legislation to make it a crime to pay bribes overseas in pursuit of business. After signing the OECD Convention, the British government took the position that its existing domestic anti-bribery legislation satisfied this requirement. This existing
17. U.N. Convention Against Corruption, GA Res. 58/4 (Oct. 31, 2003), availableat http://www.unodc.org/unodc/en/treaties/CAC/.
18. Council of Europe, Civil Law Convention on Corruption, Nov. 4, 1999, E.T.S. no.
174, availableat http://conventions.coe.int/Treaty/en/Treaties/Html/l74.htm.
19. Council of Europe, Criminal Law Convention on Corruption, Jan. 27, 1999, E.T.S.
no. 173, availableat http://conventions.coe.int/Treaty/en/Treaties/Html/173.htm
20. Council of Europe, Additional Protocol to the Criminal Law Convention on Corruption, May 15, 2003, E.T.S. No. 173, available at http://conventions.coe.int/Treaty/en/ Treaties/Html/191.htm.
21. Organization of American States, Inter-American Convention against Corruption, Mar. 29, 1996, 35 I.L.M. 724, available at http://www.oas.org/juridico/english/treaties/bhtml.
22. African Union Convention on Preventing and Combating Corruption, July 11, 2003, 43 I.L.M. 5, availableat http://www.africa-union.org/rootlauldocuments/treaties/treaties.htm.
23 See United Nations Convention Against Corruption: UNCAC Signature and Ratification Status as of 09 November 2012, UNITED NATIONS OFFICE ON DRUGS AND CRIME, http://www.unodc.org/unodc/en/treaties/CAC/signatories.html (last visited Mar. 4, 2013).
IND. INT'L & COMP. L. REV. [Vol. 23:1