10 years of U.K. Bribery Act: Compliance enough to define law’s success?

Designed to streamline the myriad (and archaic) anti-bribery and corruption legislation and common law that historically governed corporate corruption cases, the Bribery Act took effect July 1, 2011. Its aim was to put the United Kingdom on par with other leading countries and end the idea that the U.K.’s enforcement agencies were soft on corporate crime.

At the time, the Act was hailed as the “gold standard” for anti-bribery legislation: Its introduction of a “failure to prevent” offense under Section 7 meant companies—and management—could not avoid accepting responsibility for conduct they ought to have known about. And because the law’s principles were couched in terms of what “adequate,” “reasonable,” and “proportionate” risk and control measures and management actions companies should take as part of their defense, the hope was organizations of all shapes and sizes should be able to take steps to comply.

“In our experience it is still the U.S. Foreign Corrupt Practices Act, with the might of the Department of Justice and the Securities and Exchange Commission behind it, that instills fear into corporates, and that is perhaps where the issue lies.”

Zoe Newman, Managing Director, Kroll

However, while the legislation is generally lauded, its track record in the courts isn’t. The first conviction under the Act in 2011 was the case of a magistrates clerk who accepted £500 not to record a parking offense: hardly a major bust.

Fast forward to March 2020, and the Serious Fraud Office (SFO), the U.K.’s anti-bribery investigation agency, revealed in response to a Freedom of Information Request that it had taken just five cases to court under the Bribery Act since it came into force.

In the past decade, only two companies were convicted of “failure to prevent” bribery offenses, while just six deferred prosecution agreements (DPAs) have been approved in cases involving Section 7 offenses.

Some experts believe the lack of corporate convictions makes the legislation appear toothless.

“In our experience it is still the U.S. Foreign Corrupt Practices Act (FCPA), with the might of the Department of Justice and the Securities and Exchange Commission behind it, that instills fear into corporates, and that is perhaps where the issue lies,” says Zoe Newman, managing director, Business Intelligence and Investigations at risk consultancy Kroll. “The U.K. Bribery Act is regarded as the gold standard as a piece of legislation, but it is headline-grabbing enforcement that garners attention.”

One of the SFO’s main “success” stories was the £497.25 million financial penalty it agreed to with engine maker Rolls-Royce in 2017 as part of a DPA. The corrupt activity the company put its hands up to as part of the deal to avoid a criminal conviction spanned three decades, seven jurisdictions, and three businesses. In his DPA judgment, Sir Brian Leveson, president of the Queen’s Bench Division, stated the investigation revealed the most serious breaches of the criminal law in the areas of bribery and corruption, some of which implicated senior management. Despite that, the SFO announced there would be no prosecutions of any individuals under the legislation.

Lawyer David Walbank of Red Lion Chambers says while the United Kingdom is a better place for corporates to operate thanks to the Bribery Act, the legislation provides plenty of fuel for cynics. For example, the ability to self-report enables executives “who have a vested interest in steering any ensuing investigation away from themselves and their chums to point the finger instead at individuals perched one rung down the managerial ladder,” he says.

Meanwhile, the fact “cash-strapped investigators and prosecutors,” including the SFO, are forced to subcontract their investigations to City law firms has led to concerns there could be a conflict of interest with firms “acting as gatekeepers to records which would ordinarily fall within the definition of ‘prosecution material,’” Walbank adds.

“The primary aim of the legislation was never to have a high enforcement rate but rather a high degree of compliance. To that end, it has been a success.”

Alun Milford, Partner, Kingsley Napley

John Binns, partner in the Financial Crime team at law firm BCL Solicitors, says the Bribery Act might also have produced some results that are “not entirely virtuous.” The legislation could force some companies to make corrupt activity more sophisticated so as to hide it, while the duty to conduct internal inquiries might not always prompt companies to self-report bribery to the SFO.

“There are, inevitably, no official statistics to help us with these questions,” Binns says.

Others argue the legislation’s success should be judged by the way it has impacted corporate compliance, rather than by its conviction rate.

“The primary aim of the legislation was never to have a high enforcement rate but rather a high degree of compliance,” says Alun Milford, partner at law firm Kingsley Napley. “To that end, it has been a success.”

“Arguably, the biggest success of the Act is it has transformed the way businesses approach compliance and has influenced commercial practices for the better,” says Francesca Titus, white-collar crime partner at law firm McGuireWoods.

“Organizations have had to consider if they have ‘adequate procedures’ in place to prevent bribery by their employees or agents,” she adds. “This has led to a fundamental shift in behaviors, requiring positive action to ensure companies act with integrity.”