Countdown to the UK Bribery Act

After recession, UK appears to be in a reforming mode, geared towards restoring the economic equilibrium. However, some processes, in the pipeline for a long time, are aimed at creating a new model of economic development and governance with the objective of making the Union Jack fly high once more. The hotly-debated new Bribery law is poised to come into force, as this goes in for print.

Dishonesty, corruption and bribery, inherent in human behaviour, are not a phenomenon specific to developing nations or banana republics. In India, corruption has assumed alarming proportions, and despite corporate shake-ups, such as the Satyam case, and the more recent CWG and 2G scams, there are no corrective measures, and India’s image as a leading global player is in jeopardy. The existing laws, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002 and Rules thereunder, none of which are prehistoric, have not worked. In my view, nor will the proposed Lokpal Bill. 

The existing law in the UK is based on common law principles and a codified law dealing with bribery of public officials, dating back to the 19th century. Other than replacing the obsolete legislation, which is ineffective in countering innovative forms of modern bribery, the Act aims at targeting and actively eradicating bribery in international business. 

The Act identifies three primary offences attributable to individuals, being the Sections 1, 2 and 6 offences – addressing both hard and soft forms of bribery i.e. the offence of bribing, the offence of being bribed, and that of bribing a foreign public official – thereby consolidating common law offences and administrative corruption on a statutory footing. There is also a new offence, being that of failure to prevent bribery. But this can be neutralised if the accused Corporation has its anti-bribery mechanisms in place, and is able to establish in-house compliance norms which can repel suspicion..

The two new elements the Act brings on board are that of extra-territorial jurisdiction, the other is making corporate organisations liable for offences without having to establish mens rea of an individual officer, essential under common law for culpability. The Indian Supreme Court in the Standard Chartered Bank case [2005 4SCC 530] has already addressed this issue. 

The Act also aims at making the highest heads roll, without exception. Senior officers and Board members are accountable for implied consensus, or negligence in prevention of offences. While the sentence for imprisonment can be up to ten years (highest anywhere), there is no limit to the quantum of fine. The US laws are mild in comparison.

A review of the UK law, criticised as draconian, is worthwhile for several reasons; for one, to consider whether certain features can be adopted and emulated, and to understand the implications for Indians doing business in the UK. In its overarching reach, the Act applies to organisations doing business in the UK – a wide definition which requires an act of bribery being performed by a “connected person”, who can be prosecuted for offences committed anywhere in the world, irrespective of mens rea or nexus, but determinable by the circumstances in which the offence has occurred. 

The term “connected person” is capable of widest possible connotation, as the Act is silent on its interpretation and application, but has provided certain exceptions as illustrations e.g. a subsidiary if its association is limited only to remitting dividend, but on the other hand also seeks to exclude a foreign company listed on the any of the UK stock exchanges on that ground alone, which has given rise to a great deal of controversy. 

On the other hand, if, say an Indian company has a UK subsidiary, as well as a connected person in Bolivia, who bribes a local official for facilitation, this could be interpreted as a an offence under the UK Act. 

In other words, any intermediary can be prosecuted for section 7 offences anywhere in the world. In practice, the enforceability of such investigation and prosecution will establish how effective this will be and put rest to speculation.. 

A robust law such as this is bound to give rise to humours and rumours, for example, the delay in the Act’s gestation and introduction is attributed to dilution of certain stringent provisions particularly on corporate hospitality being relaxed under the Guidance Note. With the Wimbledon season at its peak, twitters on traditional corporate hospitality norms are doing the rounds, ,particularly with the Olympics round the corner. 

Jokes apart, Indians engaging in business in UK have to be mindful of unjustifiable hospitality, particularly if inconsistent with industry practice, and how it could be perceived by the media, public and the courts.

Kumkum Sen is a partner at Bharucha & Partners Delhi Office and can be reached at kumkum.sen@bharucha.in