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Why the U.K. Has Failed to Bring Significant Bribery Act Cases

Bruce Carton | July 9, 2013

Two years have now passed since the U.K. Bribery Act took effect on July 1, 2011.

Although entire forests were probably sacrificed to provide sufficient paper for the countless law firm memos that followed to warn the business community of the new compliance risks, enforcement actions under the Bribery Act have been nearly nonexistent to date. Britain has yet to bring a single significant case under the Bribery Act, fueling doubt as to the United Kingdom's resolve in battling corporate bribery and corruption. Many U.K. lawyers and other experts, however, still insist that Bribery Act cases are coming, albeit more slowly than anticipated, and that the legislation is having an impact nonetheless.

The Bribery Act criminalized commercial bribery and bribery of domestic and foreign government officials, including receipt of a bribe, and went beyond the U.S. Foreign Corrupt Practices Act to create a new strict liability for companies that fail to prevent corruption. The strict liability extends to any corporation with a U.K. presence. The Bribery Act also provided that there was just one defense available to companies that experience bribery cases: a demonstration that the company maintained “adequate procedures” to attempt to prevent bribery.

Although the legislation was enacted by Parliament on April 8, 2010, it did not take effect until July 2011 due, in part, to significant lobbying efforts by British businesses that feared it would harm their ability to compete. In the two years that have followed, many businesses around the world with a U.K. presence have worked to update their anti-corruption policies and procedures to comply with the Bribery Act. They have also kept a wary eye on the designated enforcer of the Bribery Act, Britain's Serious Fraud Office, for any indications of the extent to which the SFO intends to enforce the Bribery law. To date, however, SFO enforcement has been invisible.

As the Bribery Act enters its third year, the question remains: Where are the enforcement cases? The answer still appears to be that they are coming, but they have been delayed by various factors.

So far just two cases have been brought under it, and neither case was brought by the SFO or is of any real significance to the business community. In August 2011, the U.K. Crown Prosecution Service brought the first Bribery Act case against Munir Patel, a court clerk in East London who allegedly agreed not to put details of a traffic summons on a court database in exchange for £500 ($778). And in December 2012, a local authority, the Oldham Council, prosecuted a would-be taxi driver for offering a Licensing Officer a £200 to £300 bribe ($300 to $450) if he would change the result of a failed driving test to a pass.

Thus, as the Bribery Act enters its third year, the question remains: Where are the enforcement cases? The answer still appears to be that they are coming, but they have been delayed by various factors. These include:

  • The complex nature of Bribery Act cases. One explanation for the absence of any cases from the SFO continues to be that Bribery Act cases are complex and time-consuming. Julian Glass, a managing director with FTI Consulting in London, says that while cases under the Bribery Act are undoubtedly coming, the underlying investigations take approximately 18 to 24 months to complete. Thus, Glass says, even a Bribery Act investigation that was opened on the first day that the law became effective would only now be emerging as a potential prosecution.
  • The impact of U.K. austerity measures on SFO enforcement. Since 2008, the SFO has seen its budget fall from £53 million ($79 million) to a current level of £30 million ($45 million). A logical result of such a decline would be for the SFO to be more selective about the cases it elects to investigate and ultimately pursue. Although SFO Director David Green has vowed that the SFO will “never refuse to conduct an investigation on the ground that we cannot afford it,” the SFO's lean budget cannot be ignored when assessing the reasons for its lack of activity enforcing the Bribery Act
  • Lobbying efforts attacking and seeking to “water down” the Bribery Act. Since its enactment in 2010, the Bribery Act has faced consistent opposition from U.K. businesses. This opposition initially succeeded in delaying the Bribery Act's effective date until July 2011. More recently, opponents of the Bribery Act succeeded in getting it included in a broad government “red tape challenge” that is intended to trim thousands of regulations in the United Kingdom that may hinder business. In May 2013, the Financial Times reported that the British government would review the Bribery Act and potentially ease some restrictions to avoid unnecessary compliance costs for small and medium-sized businesses. In particular, the review will reportedly focus on the Bribery Act's prohibition against “facilitation payments” to local government officials to allow or to speed up a service. Such payments are not prohibited under the FCPA, and opponents argue that British businesses and others subject to the Bribery Act are therefore placed at a disadvantage.

Dominic Grieve, attorney general and a Member of Parliament, responded in June 2013, however, that “there is no question, as far as I am concerned, of the Bribery Act being watered down.” He added that to the extent that interpretations of the Act have “given rise to difficulties, including unnecessary ones for businesses in understanding what it requires of them, an educational process may be required.” As for the prospect of an enforcement action concerning facilitation payments, Kevin Davis, the SFO's chief investigating officer, stated that “the SFO exists to combat serious fraud. We are not generally interested in prosecuting facilitation payments unless it forms part of serious misconduct."

Bribery Act Pipeline

In late June 2013, the SFO's Davis offered some details on the number of Bribery Act cases now being considered by the SFO. He confirmed that the SFO is now actively investigating two cases under the law, with another six cases in the “pre-investigation” stage that could turn into additional formal investigations. Davis acknowledged the questions that have arisen due to the lack of any Bribery Act prosecutions by the SFO, but urged patience and noted that it took five years for any cases to be brought under the Foreign Corrupt Practices Act following its enactment in 1977.

Several factors may help drive the SFO to finally bring its first Bribery Act case sooner rather than later. First, as pointed out by Barry Vitou, a partner with law firm Pinsent Masons in London, the SFO's Green was appointed director in April 2012 and is now well into the second year of his four-year term. Vitou says that Green has to show that the SFO has something going on in the Bribery Act area in the near future. It cannot be the case, Vitou says, that Green will go through his entire term with nothing happening in this high-profile area.

Vivian Robinson, former general counsel to the Serious Fraud Office who is now a partner at law firm McGuireWoods in London, agrees with Vitou, and adds that it is important for the SFO to bring its first Bribery Act in the near future for two other reasons: to show that the Bribery Act is not the “paper tiger” that some are now starting to portray it as, and also to show that the SFO is “the right organization as currently constituted to deal with these kind of cases.”

Finally, it now appears that U.S.-style deferred prosecution agreements will be approved by Parliament and available for the SFO to use in 2014. Under a DPA, a company will typically be able to settle a Bribery Act prosecution and avoid criminal charges by admitting wrongdoing, paying a penalty, and agreeing to retain an independent monitor. DPAs allow companies to avoid the stigma and reputational damage associated with a criminal charge and also avoid the associated risk of being debarred and therefore ineligible to compete for government contracts. Robinson believes that the SFO may be waiting for DPAs to become available in early 2014 before bringing its first significant Bribery Act case.