Rightly or wrongly, the oil and gas sector is viewed as being vulnerable to bribery and corruption. The UK Bribery Act 2010 sets down the foundations to encourage prosecutions of corruption in business, especially British businesses with overseas operations. At the same time prosecutors across the UK are promoting schemes which offer alternatives to prosecution where a business demonstrates a willingness to cooperate and address the causes of corruption. In the first of two articles on this subject, Paul Marshall considers how the Bribery Act increases the risk of prosecution for corruption.
The Bribery Act 2010 – increasing the risk of prosecution
The UK Bribery Act 2010 – which came into force in July 2011 – introduced a new regime for the prosecution of bribery. As matters stand, in August 2013 we are yet to see the first corporate prosecution under the Act in the UK. However the Bribery Act contains provisions which greatly increase the risk of prosecution in the oil and gas sector.
Bribery is now a private affair
Bribery is traditionally understood to be an offence which relates to public officials, and that remains the case. However the Bribery Act signals very clearly that bribery is not limited to conduct involving public officials – bribery can also take place in the context of “any activity connected with a business”.
Against that background business leaders have, rightly, been taking steps to protect against individuals within the business taking part in bribery since the new Act came into force. New, or at least improved, anti-bribery policies have been drafted and training has been rolled out to business leaders and employees
Guilt by association
A more fundamental change for business introduced by the Bribery Act is in the introduction of the “corporate offence” which provides that a commercial organisation will be guilty of an offence where someone outside the organisation but acting on its behalf – an “associated person”, bribes with the intention of gaining an advantage for the organisation. There is a defence open to the organisation, which is to show that it had in place “adequate procedures” designed to prevent bribery by associated persons. In other words, a business needs to do due diligence on, and monitor the activities of, agents and others acting on its behalf.
Overseas conduct – was it acceptable in the UK?
But there is a sting in the tail for businesses operating overseas. Businesses with a “close connection to the UK”, including companies incorporated in the UK, can be prosecuted for overseas conduct if the same conduct would amount to bribery in the UK.
Businesses can’t rely on assurances from local agents that actions are part of the custom and practice of the overseas territory. To be confident that no wrongdoing has occurred, an organisation must be satisfied that the action of its agent is in accordance with the “written law” of the overseas territory.
Self policing – and policing third parties
We are yet to see the first corporate prosecution under the Bribery Act but the Act has already had a substantial impact on corporate governance. The Act says to UK businesses: if someone bribes on your behalf, you are also guilty unless you have in place adequate procedures designed to prevent bribery.
This has caused business leaders to take a long, hard look at how their own organisations operate at local and international level. It has caused business leaders to take steps not only to self-regulate, but to examine the activities of third parties who perform services for the business.
Business leaders taking these steps may uncover bribery or corruption either within their own organisation or in the operations of third parties they work with. What should a business do in these circumstances? The authorities in the UK – whether Crown Office in Scotland, or the Serious Fraud Office in England and Wales, want you to come forward and speak to them.
In the second part of this series Paul Marshall discusses the key differences of approach taken by these two authorities when businesses come forward. For more information please contact Paul Marshall, an Associate in Brodies’ Public Law and Regulatory team, on 0131 656 0062 or paul.marshall@brodies.com