Joint Committee on the new bribery law recommends important changes

The Joint Committee on the Draft Bribery Bill have published their first report on the proposed legislation, following 10 weeks of review, which included consideration of 61 written submissions and oral evidence from 37 witnesses.

The existing draft Bill would, if enacted:

• Repeal the existing bribery laws and replace them with "general offences" of bribing and being bribed - whether in the public or private sectors and whether directly or indirectly (clauses 1 and 2). An act (or advantage) will be treated as a bribe if a "reasonable person" would expect it to be carried out in "good faith" or "impartially", or that the person performing the act was in a position of trust in that regard, and there was "improper performance" of the act - i.e. a breach of that expectation or trust.
• Create a specific offence of bribing a foreign public official - broadly, providing any advantage to an official to influence them to win or retain business, except where the advantage was "legitimately due" (clause 4).
• Create a new offence for businesses that negligently fail to prevent bribery by those acting on their behalf (subject to a defence of showing that "adequate procedures" were in place to prevent bribery) (clauses 5 and 6).

(Our previous Law-Now analysing the Bill in more detail can be found here)

Subject to certain recommendations and proposed amendments, the Joint Committee have urged the Government to introduce the Bill "as soon as possible". However, the Committee's comments are likely to be seen as a mixed blessing by those most likely to be affected by the legislation. In particular, some of the Committee's proposed changes to the new corporate offence will be seen as most unwelcome by business and a step towards a more draconian corporate criminal liability regime.

Key conclusions of the Joint Committee

The general offences

• The Committee endorsed the "improper performance" test for bribery (to replace the current requirement to show actions were performed "corruptly"), as representing "a careful balance between simplicity, certainty and effectiveness". However, it felt that before introducing the Bill the Government "must" address concerns raised by business that conduct that ought to be treated as a civil wrong may be criminalised by the scope of the new offences. This is needed to provide certainty to those expected to comply with the law and to minimise prosecutorial discretion.
• While acknowledging that the new offence of "being bribed" (which does not require proof of knowledge or intention on the part of the recipient of the bribe), was a departure from the normal principle that subjective fault should be proved, the Committee considered this was an important element in the new law to change corporate culture and encourage those in positions of trust to think twice before accepting any advantage or personal gain.

Bribing a foreign public official

• This offence allows for an exception where the advantage given to the official was "legitimately due" - i.e. "if the law applicable to [the official] permits or requires [him] to accept it". The Committee accepted the wide criticism of the reference to "law" as being unhelpfully vague and apt to create unwanted loopholes, while also accepting the need for an "appropriately narrow gateway" to protect legitimate advantages being given. It recommended replacing the reference to "law" with "written law" - meaning statutes, regulations and case law - in keeping with the OECD Convention itself and in order to provide greater certainty.
• Despite calls from business and others (including from the Director of Public Prosecutions) for a defence to be introduced where a person "reasonably believed" that the official was required or permitted to accept the advantage under his local law, the Committee supported the Government's position to reject such a defence. They cited the Secretary of State for Justice and his view that "prosecutorial discretion and the good sense of jurors could be trusted to ensure that genuine mistakes were not punished by conviction".

Corporate offence - negligently failing to prevent bribery

• Much criticism has been levelled at the new corporate offence, including: (i) the introduction of the negligence concept into criminal law; (ii) its focus on the fault of an individual (i.e. the negligence of the "responsible person") rather than the company's collective failure to put in place adequate procedures; (iii) the risk of creating a variable standard where a more qualified "responsible person" may be judged more harshly than a less qualified one; (iv) whether "gross negligence" or "recklessness" was a better threshold test; (v) why the adequate procedures defence was not available where the "responsible person" was a "senior officer" of the organisation; and (vi) what exactly was meant by a "responsible person" in the first place. These complaints have not fallen on deaf ears, but the Committee's conclusions and recommendations are likely to cause significant concern to business. The Committee has recommended removing the need to prove the responsible person's negligence at all - leaving the organisation strictly liable, subject to the adequate procedures defence (the "Defence").
• The Committee considered two options for the burden of proof regarding the Defence - (i) that the prosecution must prove the inadequacy of the organisation's procedures beyond a reasonable doubt; or (ii) that the organisation must prove the adequacy of its procedures on the balance of probabilities. The Committee has favoured the latter approach and considered that a "commercial organisation is well placed to demonstrate the adequacy of its procedures".
• On the other hand, the Committee joined with business and most other commentators in concluding that the Defence requires amplification through guidance. They noted that this must be interpreted flexibly and proportionately with regard to "the size and resources of the company, alongside the ethical risks associated with the industry, geographical area and the type of transaction concerned". It must also depend on what the organisation is doing in practice rather than in theory.
• The Committee also recommended removal of the provision that the Defence will not apply where a "senior officer" is the responsible person and has been negligent. The role of senior officers in any failing would then fall to be determined as part of the Defence.

Guidance

• Status: Guidance was needed on certain aspects of the Bill to promote certainty, to be available before the legislation comes into force. The Committee has favoured an approach similar to that adopted regarding the Money Laundering Regulations, whereby the Government should have power to approve guidance prepared by appropriate industry or professional bodies.
• Content: Industry-led guidance should allow professional bodies and Government to identify areas where clarification was needed. In addition to the meaning of "adequate procedures" under the Defence, further clarification could cover the application of the Bill to subsidiaries, joint ventures, commercial agents and to the practice of "offsetting" (i.e. companies providing industrial, commercial or other economic benefits as part of winning a state-funded contract).
• However, the Committee did not support the establishment of a formal advisory or opinion service as operated in the U.S. whereby requests can be raised in advance with the Department of Justice as to whether a proposed action would be lawful under the Foreign Corrupt Practices Act - and where the advice received is semi-binding. It was felt that in practice this would be difficult to establish and would risk undermining the independence of prosecutors, who would ultimately need to take the final decision about whether to bring charges.

Facilitation payments and corporate hospitality

• Facilitation payments (i.e. paying a small sum of money to a public official to ensure that they perform their duty) are currently illegal, albeit unlikely to be prosecuted. The Bill would also criminalise such payments as being "improper" or not "legitimately due". In other OECD member states there are specific defences for such payments. Concerns have been expressed that the new legislation therefore risked putting British businesses at a competitive disadvantage. The Committee considered that facilitation payments should remain illegal under the draft Bill as a specific defence would risk legitimising corruption. Rather, prosecution should be left to the discretion of the authorities, although prosecution policy, which should be based on proportionality, needs to be made clear, but not so prescriptive that a defence may develop by the back door.
• The Committee accepted that corporate hospitality is a legitimate part of doing business, within appropriate limits. While the general offences impose an appropriate limit on this activity under the "improper" performance test, the test is different for the offence of bribing foreign public officials. This requires only an advantage to be given in order to "influence"; there is no mention of impropriety. Therefore, the matter is left to prosecutorial discretion. While businesses and industry bodies sought either a specific defence for "reasonable and bona fide" expenses (as per the US position) or the insertion of an impropriety requirement into the test, the Committee felt that prosecutorial discretion was an adequate safeguard. However, they asked the court to reassure business "that it does not risk facing prosecution for providing proportionate levels of hospitality as part of competing fairly in the international arena".

How far does the Bill reach?

• Individuals: The existing law would catch any individual of any nationality if any relevant act relating to the offence occurred in the UK. Otherwise, the current law only extends to British citizens. The draft Bill extends this wider to encompass anyone "ordinarily resident" anywhere in the UK. The Committee supported this change.
• Corporates: The new corporate offence covers any company (or partnership) incorporated (or formed) in England, Wales or Northern Ireland or that "carries on business, or part of a business" in any of those countries. The Committee considered that this expansive term "must" be clarified before the Bill was introduced. Clarification was also needed as to whether the person performing services on behalf of the organisation and who commits the bribe must have a connection to England, Wales or Northern Ireland.

Penalties - unlimited fine, confiscation and debarment

• The Bill introduces an unlimited fine for the corporate offence, but does not explain how the courts will approach the level of fine to impose. The Committee felt that Government "must" clarify how the level of fines will be assessed.
• The Committee also recommended that steps be taken to ensure that the civil powers of confiscation and recovery available under the Proceeds of Crime Act 2002 operate in a way that is proportionate and reasonable.
• Under the Public Contracts Regulations 2006 a company will be automatically and perpetually debarred from competing for public contracts where it is convicted of a corruption offence. The Committee considered this was overly rigid - absent some discretion as to whether to debar, there would be no incentive for businesses to carry out proper internal investigations and cooperate with the authorities where wrongdoing was discovered. This was also noted in the recent guidance issued by the SFO on its approach to dealing with overseas corruption - see here. The Government must ensure that the UK reaches a position where debarment is discretionary, particularly if self-reporting is to work effectively in practice.

Conclusions
The Law Commission has described the existing bribery laws as "riddled with uncertainty and in need of rationalisation". The Secretary of State for Justice has said that he is determined to secure the new Bill's enactment before the next general election. This may mean the recommendations expressed by the Committee, based on the wide and learned comments received, will be taken on board to improve the Bill's prospects of swift and straightforward passage through Parliament.

The desire expressed by the drafters and endorsed by the Committee is to introduce legislation that will bring about a culture change in the way that even the lowest levels of bribery and corruption are treated and tolerated. Based on the responses received by the Committee, there appears to be broad consensus that the existing laws require urgent change to create a clear and workable system. There is already evidence of a move down by the relevant authorities towards a new approach to the policing of corruption - through much more targeted and aggressive investigation and prosecution coupled with a greater flexibility and willingness to negotiate civil settlements with those who can show they are improving their procedures and self-report discoveries of wrongdoing.

The Committee has broadly endorsed the aims and content of the draft Bill. Some of their suggested changes - notably the removal of the negligence requirement in the corporate offence - may appear alarming to those likely to be affected by the legislation. However, the Committee have helpfully identified a need for greater clarity and certainty as to how the proposed changes would apply in practice. At the same time, the draft Bill leaves much to the discretion of prosecutors and judges; the Committee agreed that further clarification should not be at the expense of prosecutorial independence and discretion, exercised reasonably and proportionately.

In reaching that conclusion, the Committee has recommended that further clarity and safeguards would best be achieved through broad (but not overly prescriptive) guidelines generated by relevant industry bodies in consultation with Government. This may not provide the sort of certainty that business was hoping for, but it at least creates an opportunity, if accepted by Government, for business to influence the finer details. Time will tell whether the Government will take on board the Committee's suggestions.

Law:
The Draft Bribery Bill is available here
The Joint Committee's report can be found here