English law on bribery is about to undergo a major overhaul. After years of protracted consultation, the UK government finally published the draft Bribery Bill on 25 March 2009.

The Bill is largely based on recommendations made by the Law Commission in November 2008. Its principal aims are:

• to modernise and simplify existing legislation to allow for more effective prosecution of bribery and related offences
• to encourage businesses to put in place proper and effective business ethics policies

As currently drafted, the Bill will have a direct impact on the way that businesses, particularly those with overseas operations, carry out their business activities.

This article considers the Bill's key provisions, the implications for businesses and the practical steps that businesses should be taking now to ensure that they do not fall foul of the legislation once it comes into force.

Key Provisions

The Bill's key provisions are:

• establishing two general bribery offences, one concerned with giving bribes and the other concerned with taking them
• creating a separate offence of bribery of a foreign public official
• introducing a special corporate offence of "negligent failure to prevent bribery" by persons working on behalf of a business
• increasing the maximum penalty for bribery from seven to ten years' imprisonment, with an unlimited fine

General Bribery Offences

The two general bribery offences would replace all current offences and are concerned with the giving and receiving of bribes.

In terms of giving bribes, a person commits an offence if he offers or gives an advantage to another person to reward or induce improper behaviour. In addition, if a person offers or gives an advantage to another person knowing that acceptance in itself will cause that person to behave improperly, the person giving the advantage has committed an offence. An offence is committed irrespective of whether the advantage is given directly or indirectly.

In terms of receiving bribes, there are several cases in which a person commits an offence. Firstly, where the recipient intends improper performance to follow as a consequence of the request for, agreement to or receipt of the advantage. Secondly, where the request, agreement to receive or receipt of the advantage itself constitutes improper performance of the relevant function or activity. Thirdly, where an advantage is requested, agreed or accepted as a reward for performing the relevant function or activity improperly.

These general offences are confined to activities of a business, professional or public nature and are applicable to both individuals and bodies corporate.

Bribing a Foreign Public Official (FPO)

Bribing an FPO involves offering, promising or giving an advantage to an FPO, or to another person at the FPO's request, in order to obtain or retain a business advantage. A defence is available to individual and corporate bodies if the advantage to the FPO is legitimately due - i.e. if the law applicable to the FPO permits or requires the FPO to accept such an advantage.

Bribery committed overseas

In addition to acts committed within England, Wales and Northern Ireland, the general offences of bribery and bribery of an FPO will apply to acts committed outside the jurisdiction if

• the acts in question would have amounted to an offence within the jurisdiction
• the person accused was at that time a national of the UK, an individual ordinarily resident in the UK, a national of a UK overseas territory or a body incorporated in the UK

Failure of a Commercial Organisation to Prevent Bribery

This offence occurs where a company negligently fails to prevent bribery being committed in connection with its business. It is immaterial where the act of bribery takes place. A company (C) may face prosecution where:

• someone (A) acting on C's behalf bribes another person
• the bribe was in connection with C's business
• the person with responsibility for preventing bribery being committed negligently failed to do so. If no-one is specifically tasked with preventing bribery, then the responsibility falls to any senior officer in C (defined as a "director, manager, secretary or other similar officer of the body corporate").

Companies at risk of committing this offence include corporate bodies and partnerships incorporated in England, Wales and Northern Ireland or any other entities incorporated elsewhere, which carry on business within the jurisdiction.

The capacity in which A performs services for or on behalf of C does not matter. A includes the company's employees, agents and, most importantly, subsidiaries. This offence is aimed at companies which fail to make continuing and systematic efforts to ensure that active bribery is not committed. A company may have a defence if it can show that adequate procedures had been put in place designed to prevent bribery.

What is adequate is not defined but presumably will depend on facts such as the size of, and resources available, to the company in question. That being said, this defence is not available if the negligence which led to the failure to prevent bribery being committed is attributable in whole or part to a senior officer.

Director's Liability for Bribery Offences

If bribery is established on the part of the company, a senior officer may be held individually liable if he conspired or consented to the commission of the bribery offence.

Facilitation payments

The issue of "facilitation payments" was considered by the Law Commission but the decision was taken not to specifically exclude them. It was decided that they are best handled through sensible use of the discretion not to prosecute.

How Does This Work In Practice?

This is best reviewed by way of an example:

AB Developments Ltd (AB), a UK company engaged in the oil and gas sector, is trying to secure a lucrative LNG concession in Nigeria. AB has a very strong business ethics policy and its senior compliance officer is in charge of ensuring compliance with the policy throughout the company.

During the tender process, one of AB's directors is asked by a Nigerian government official to make a payment to his sister in exchange for the official awarding the concession to AB. While in Nigeria, the director takes the opportunity to pass on the payment to the official's sister via AB's expense account. A week later, AB is awarded the concession.

In connection with this, AB requires planning approval for the construction of an LNG liquefaction facility in Nigeria. An on-the-ground facilitator (a UK citizen living in Nigeria) is aware of this fact and, for a small fee, arranges for AB's planning application to be moved to the top of the planning application list. When the financial director of AB is advised of this, he sends the facilitator a £1,000 payment.

Which parties fall foul of the Bill and which acts are deemed to be bribery offences?

Assuming that Nigerian law does not permit a third party to accept payments on behalf of a government official, the payment to the sister falls squarely within the bribery of an FPO offence. AB's director will be personally liable if he is a UK national or resident in the UK given that the act was committed overseas.

Is the payment to the on-the-ground facilitator a bribe or not?

As mentioned above, facilitation payments are not specifically dealt with under the Bill and therefore will be decided on a case by case basis. If the facilitator has acted improperly by, for example, making a payment to the civil servant in charge of planning, this will bring the act of paying the facilitator within the scope of the general bribery offence. If that is the case, under the Bill, the finance director and the on-the-ground facilitator could potentially be prosecuted as the act of the finance director of paying the bribe is committed in the UK and the facilitator is a UK citizen.

What about the company?

It will only be liable if the compliance officer can be shown to have negligently failed to prevent the acts in question. If that can be shown, does its business ethics policy provide a defence to the acts of bribery committed? This will depend on the circumstances. Assuming that the senior compliance officer is not also a director (and therefore falls within the definition of senior officer), the defence is available and the issue is whether AB had in place adequate procedures designed to prevent such acts. What is adequate is not defined but is likely to depend on the size of the company and the resources available. In this scenario, the fact that directors of AB were involved in the acts of bribery suggests that the procedures were inadequate.

Practical Steps

Although still in draft form, these impending changes to the law highlight the need for UK companies to develop and implement sound business ethics practices. In practice, this means that companies will need to:

• implement comprehensive business ethics policies within their global structure: this would include detailed policies on industry-specific issues such as solicitation, kick-backs, extortion, political and charitable contributions, gifts and hospitality and extra payments
• implement management systems and procedures and perform risk assessments of bribery within their global structure: this ought to include thorough training and regular internal and external review
• ensure that their overseas branches, subsidiaries, intermediaries and agents are fully conversant with its business ethics policies and are adhering to them.   It is not enough to merely circulate copies of their policies: rather, the parent company must take concrete steps to ensure that anti-bribery policies are complied with, particularly if these branches or subsidiaries are located in countries where bribery is commonplace
• ensure that all their financial transactions are properly and fairly recorded in books of account available for inspection by boards of directors and/or external auditors

The Way Forward

In the coming months, the Bill will undergo pre-legislative scrutiny by a committee to be nominated by Parliamentary authorities. Given the political pressure on the government to tackle this issue, it is generally anticipated that these reforms will be enacted sooner rather than later.

The authors of this article were Ronnie King, Drazen Petkovich, Lianne Sneddon and Michelle Egbosimba from Ashurst.