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Don't Be Lulled by the U.K. Bribery Act's Uneventful First Year

Bruce Carton | July 17, 2012

July 1 marked the first-year anniversary of the U.K. Bribery Act. Let's just say it hasn't exactly been a very event-filled year for the law.

Enacted by Parliament on April 8, 2010, the Act finally took effect last year after pressure from large British business initially led to high-profile delays in its implementation.

After one full year, what have U.K. enforcers done under the Bribery Act to date, what is in the pipeline, and what is the state of compliance and preparedness among companies worldwide that are subject to it? In short, Britain has not yet brought a single significant case under the Bribery Act, leading some companies to doubt the U.K.'s resolve in this area. There are strong indications, however, that a flurry of future activity may be building behind the scenes at U.K. regulators.

To recap, the Bribery Act caught the full attention of businesses and lawyers worldwide when it was enacted in 2010. The Bribery Act criminalized commercial bribery and bribery of domestic and foreign government officials, including receipt of a bribe, and went well beyond the U.S. Foreign Corrupt Practices Act to create a new strict liability for corporate entities that failed to prevent corruption. The strict liability extended to any corporation with a U.K. presence. Also of great significance to corporate compliance programs, the Bribery Act provided that there was just one defense available to corporations for failing to prevent bribery: a demonstration that the company maintained “adequate procedures” to prevent bribery. 

As businesses braced for the Bribery Act to take effect before the end of autumn 2010, as originally projected, the U.K.'s Ministry of Justice announced in July 2010 that the Bribery Act would be delayed until April 2011. The effective date was later pushed out even further as U.K. officials reportedly “bowed to pressure” from panicked businesses and agreed to make changes before making it effective. One year later, with the exception of one very unremarkable case, the Bribery Act has resulted in no visible enforcement, leaving businesses to wonder whether the furor that accompanied its passage was nothing but hype.

The lone case brought to date under the Bribery Act came in August 2011 against Munir Patel, a court clerk in east London. The case was filed not by the U.K.'s Serious Fraud Office—the lead enforcement agency for the Bribery Act—but instead by the U.K. Crown Prosecution Service, and alleged that Patel agreed not to put details of a traffic summons on a court database in exchange for £500 ($778). Yawn.

Although the relative silence from Britain seems to have caused some companies to view future enforcement of the statute with skepticism, there is ample evidence that year one under the Bribery Act may have been the calm before the storm.

Several recent surveys indicate that the lack of any visible activity by the SFO on Bribery Act cases may be leading to a level of complacency among the same businesses that were on red alert just one year ago.  In a June 2012 poll conducted by Deloitte of over 1,200 business professionals from various industries, less than one in ten (9.3 percent) said that they were concerned about a U.K. action being brought against their organization, with 57 percent saying they're not worried and 33 percent saying that they “didn't know.” Moreover, just 24 percent of those polled said their company had changed its anti-corruption programs to comply with the Bribery Act.

Similarly, a recent survey conducted by Ernst & Young found that just 26 percent of executives believe that “U.K. enforcers are willing to prosecute cases of bribery and corruption and are effective in securing convictions.”  E&Y's Jonathan Middup explained that the “delay in seeing prosecutions under the Act has led some businesses to begin quietly questioning the SFO's appetite for enforcement. After the hiatus of the Act being debated, passed, and finally becoming enforceable, a year without a corporate prosecution has left some feeling like it's a phony war.” E&Y also found that the lack of action in Britain has also led some businesses “to re-examine the level of investment in their anti-bribery and corruption compliance measures.”

Cases in the Pipeline

Many people familiar with the developments in Britain, however, believe that it is a major mistake for businesses to let their guard down. Vivian Robinson, a partner at McGuireWoods London and the former general counsel at the SFO, recently stated that he would be very surprised if the SFO was not presently investigating numerous cases under the Bribery Act. Robinson predicted that a number of these would “come to the surface in the next few months.” Robinson's view is consistent with publicly available information on the SFO's activity. For example, the Organisation for Economic Co-operation and Development Working Group on Bribery report showed that as of January 31, 2012, there were 11 active bribery cases, with 18 more under consideration in the United Kingdom. Many lawyers have expressed the belief that at least a handful of these cases are being pursued under the Bribery Act.

Comments by the former and current heads of the SFO further support the idea that significant cases are in the pipeline. Former SFO Director Richard Alderman stated unequivocally last November that there was Bribery Act activity by the SFO underway, confidentially, with corporations. He emphasized that the SFO's approach under the Bribery Act was not to go after easy corruption cases, however, but rather just the opposite:

“I know what the low hanging fruit are and I'm sure that in a week or so we could find half a dozen cases or more,” he said. “But that is not our approach. We are looking for the more difficult cases and I'm under no illusions about this. A number of the cases that we need to deal with are going to be amongst the most challenging that the U.K. criminal justice system will have seen. I have to say that this seems to me to be a reason for doing them and not a reason for not doing them.”

David Green, who replaced Alderman as director of the SFO in May 2012, has already offered similar comments.  Green reiterated that he is quite eager to bring the first big Bribery Act case, and is specifically looking for “significant strategic” cases which threaten confidence in British business. He also stated his intention to bring Bribery Act cases that will help define the defense of “adequate procedures.”

As the world waits for the first big U.K. Bribery Act case to be brought, lawyers and compliance professionals warn that it remains critical for companies to put “adequate procedures” in place. In a June Webcast, Julian Glass of FTI Consulting stated that he believes that after one year, most larger companies have by now implemented the “early stages” of adequate procedures under the Bribery Act, which include six principals published by the U.K. Ministry of Justice to assist companies on how to implement adequate procedures. The six principles are:  proportionate procedures; top -level commitment; risk assessment; due diligence; communication, including training; and monitoring and review.  Glass said companies should now begin to implement the next phase of Bribery Act training, monitoring, and due diligence. Such efforts, he said, should include an assessment of the effectiveness of a company's existing framework; gap analysis; appropriate responses to whistleblowing or red flags; refresher training and enhanced training for specific roles; a review of the business case for the use of third parties; tiered due diligence depending on risk; and more.

The Bribery Act's first year has passed quietly. Although the relative silence from Britain seems to have caused some companies to view future enforcement of the statute with skepticism, there is ample evidence that year one under the Bribery Act may have been the calm before the storm. U.K. enforcers have expressed a clear intention to bring significant Bribery Act cases as soon as possible, and companies should continue to refine and bolster their “adequate procedures” to prevent bribery.