Corruption Overseas

Included in the Anti-terrorism, Crime and Security Act 2001 was new UK legislation on bribery and corruption. This came into force on 14 February 2002 to deter UK companies and nationals from committing acts of bribery overseas. UK companies and nationals can now be prosecuted in the UK for an act of bribery committed wholly overseas.

An overview of the changes to UK law

New UK legislation came into force on 14 February 2002 to deter UK companies and nationals from committing acts of bribery overseas. UK companies and nationals can now be prosecuted in the UK for an act of bribery committed wholly overseas.

The UK has an excellent reputation for openness and honesty. The UK government wants to build on that by stamping out those acts of bribery which may be committed by a minority of UK companies and nationals.

Bribery is bad for business. A culture of corruption is a disincentive to trade and investment and payment of bribes is unacceptable behaviour for UK companies or nationals. By upholding the law and promoting transparency in business activities British companies enhance their own reputations and staff morale. The legislative changes give UK companies and nationals a stronger defence against attempts to extort bribes from them.

Bribery can be defined broadly as the receiving or offering of an undue reward by or to any holder of public office or a private employee designed to influence them in the exercise of their duty, and to incline them to act contrary to the known rules of honesty and integrity. (This is not a legal definition).

These changes to the UK law on corruption are made by Part 12 of the Anti-terrorism, Crime and Security Act 2001. The changes cover two areas. The first makes explicit that relevant UK law applies to the bribing of foreign public officials or office holders including MPs, Ministers, judges and 'agents', whether public or private, ('Agent' is used here in the sense given by the Prevention of Corruption Act 1906: essentially an 'agent' is any person who is employed by or performs functions for another).

But the major change means a UK national or a company or other entity incorporated under UK law can be prosecuted in the UK for bribery even if no part of the offence took place in the UK. Previously, some part of the corrupt transaction needed to take place within the UK (e.g. the agreement, the transaction, or the arrangements) for UK law to apply.

This means that from 14 February 2002, UK-registered companies and nationals will be breaking UK law if they bribe someone overseas.

Crown Servants and British Embassy employees who in the course of their duties become aware of, or receive information relating to, acts of bribery committed by UK nationals or legal persons are obliged to report the matter, so that the appropriate UK authorities can decide whether to pursue an investigation.

Frequently Asked Questions

THE ANTI-TERRORISM, CRIME AND SECURITY ACT 2001 BRIBERY AND CORRUPTION

The Act makes two main changes to the law:

It puts beyond doubt that the existing offences of corruption apply to the bribery of foreign public officials, including foreign MPs, judges, ministers and foreign 'agents' (as defined by the Prevention of Corruption Act 1906).

It gives our courts jurisdiction over crimes of corruption committed overseas by UK nationals and by bodies incorporated under UK law.

1. What was the law prior to 14 February 2002?

The UK already had jurisdiction over acts committed by any company, foreign or UK, and any person who committed bribery wholly or partly in our territory. It also had jurisdiction over a UK parent company that conspired with a foreign subsidiary to commit acts of bribery abroad.

2. And so what are the changes with effect from 14 February 2002?

The Act makes two main changes to the law:

It puts beyond doubt that the existing offences of corruption apply to the bribery of foreign public officials, including foreign MPs, judges, ministers and foreign 'agents' (as defined by the Prevention of Corruption Act 1906). It gives our courts jurisdiction over crimes of corruption committed wholly overseas by UK nationals and by bodies incorporated under UK law.

3. Does it apply to overseas subsidiaries?

No, it does not. Like most countries throughout the world, we do not think it appropriate to take jurisdiction over a foreign company for actions which take place entirely in a foreign country. To do so, could well be regarded as interference in the internal affairs of another country. The position of overseas subsidiaries is an international problem, which needs to be tackled on an international basis. The OECD is examining this issue.

4. Why deal with this issue now?

We do not know of any country which does not criminalise the bribery of public officials within its own borders. The economic damage bribery can wreak on a society is well understood. Increasingly justice systems throughout the world are willing and able to take action against acts of bribery. Regional groups, such as GRECO (the Council of Europe anti-corruption body) are helping their members develop effective anti-corruption systems and the UN recently began negotiations on a global anti-corruption convention. The OECD Convention on the Bribery of Public Officials is part of the international effort to stamp out corruption in world trade. Most major exporting countries have laws in place against international corruption so there is a level playing field internationally.

5. Why doesn't the UK law exclude facilitation payments?

We do not think it desirable for UK law to apply differently overseas to the way it applies in the UK. That admits a double standard: we do not tolerate 'facilitation payments' to UK officials and clearly we should outlaw such payments in all equivalent countries. The realities of life in different countries vary, but we see no formal way of distinguishing one country from another.

Blanket exemptions are always liable to misuse, and we do not think it appropriate to make an exemption for 'facilitation payments'. However, we do not envisage any circumstances in which the making of a small 'facilitation' payment, extorted by a foreign official in countries where this is normal practice, would of itself give rise to a prosecution in the UK. The making of such payments may well, however, be illegal under the law of the country concerned.

6. Why are unincorporated bodies not covered?

Unincorporated bodies may have no legal personality. They may also not be subject to any registration requirement, which makes it difficult if not impossible to determine which of them can be identified as UK bodies and which, therefore, we might be justified in prosecuting for acts abroad.

7. What if one private individual bribes another in a foreign country?

In 1906, the UK may have been the first country to legislate on private to private bribery. Our courts will already hear cases in which elements of the offence of private to private bribery involving UK nationals or companies have occurred abroad. This applies both to the public and private sectors. In one case an agent of a foreign company was prosecuted under the 1906 Act for private to private bribery on the basis of a single phone call which was made from the UK. The same could apply to the agent of a UK company. The only new part of the law is to allow prosecutions where all the acts take place overseas.

8. What are the criteria for prosecutions?

When considering any potential prosecution, a two-stage test is applied: is there sufficient evidence to provide a realistic prospect of conviction and, if so, is it in the public interest to proceed to prosecution? In addressing the first stage, a fundamental question will be: what is the nature of the payment; is it corrupt?

At the second stage, the circumstances in which the payment was made will be one of the factors to be taken into account.

9. What is the maximum Penalty for this offence?

An unlimited fine and/or 7 years in prison.

Further guidance on corruption overseas, including downloadable word documents on the main provisions of the law of corruption since 1889 and a 2 page brochure on the UK Bribery and Corruption law, can be found on UK Trade & Investment's public website at: http://www.trade.uktradeinvest.gov.uk.

OECD GUDIELINES FOR MULTINATIONAL ENTERPRISES: FACT SHEET

The UK Government is an adherent to the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multi National Enterprsises (MNEs). We expect all UK investors to operate in accordance with the Guidelines. The following briefly explains what they Guidelines are, how they relate to your business, and where to obtain further information.

What are they?

They are a framework of "principles of good conduct" for international companies in their business activities, designed to help MNEs act in harmony with the policies of the countries in which they operate. They aim to help MNEs to develop/review their own corporate codes of conduct or socially responsible policies.

Although not legally binding, they represent the firm expectations of business behaviour by all OECD governments and observers, including the UK. They are the only comprehensive code of conduct for MNEs that has been collectively endorsed by Governments.

Why are they relevant to UK companies investing overseas?

They set out Governmental expectations of MNE behaviour worldwide covering a wide number of areas including the environment, labour standards, human rights, competition, corruption, disclosure, consumer relations, technology transfer and taxation.

They are not a substitute for local law. They reflect what are increasingly seen as universal standards of behaviour and values which should be observed over and above minimum standards which may be enshrined in local law. Conforming with local laws, therefore, may not be sufficient to ensure conformity with the Guidelines.

The Guidelines set out procedures for concerns to be raised with Governments, through National Contact Points, relating to individual MNE behaviour that is not in accordance with the Guidelines. On receipt of a complaint, the NCP will consider whether such issues are substantiated and can initiate dialogue with the MNE concerned, and others as appropriate, to try to reach a resolution.

The UK NCP is based at the DTI. Further information on the OECD Guidelines can be obtained from the UK NCP at uk.ncp@dti.gsi.gov.uk, or from the NCP website www.dti.gov.uk/ewt/ukncp.htm