Whether the act proves effective in that respect remains to be seen, but what is beyond doubt is the clear need for businesses to now address corruption in their compliance systems. The act includes a specific corporate offence of failing to prevent corruption – with one possible defence that you had adequate procedures in place. There is no guidance yet as to what constitutes adequate procedures, although the secretary of state is required by the act to provide relevant guidance to commercial organisations on this new offence. That guidance is still to be published and its content will be keenly awaited.
On indictment, the corporate offence will carry an unlimited fine. Recently courts have become increasingly willing to impose fines at a much higher level than has previously been the case. Recently chemicals firm Innospec was fined the sterling equivalent of $12.7m after it admitted bribing government officials in Indonesia. The court indicated that it wanted to impose a far heavier penalty, but had been prevented from doing so because of a deal struck by the SFO. For this reason, similar SFO deals in the future are highly unlikely.
A conviction under the act will almost certainly trigger the debarment provisions contained in the Public Contract Regulations and Utilities Regulations of 2006. These would operate so as to indefinitely prevent a convicted company from being awarded any future contract by a public body. For many companies that could be fatal. Even if a prosecution ultimately proved unsuccessful, the reputational damage to a company charged with corruption could in any event be severe.
In addition to the corporate offence, the act also provides new offences for individuals – of bribing another person or being bribed by another person – both of which carry a 10-year maximum penalty. The elements needed to prove these offences are however not straightforward.
This also all comes in at a time of great uncertainty as to how the enforcement agencies will be structured going forward. The SFO has had a significant budget reduction this year, and there is already debate as to whether a new national fraud agency, perhaps modelled on the US Department of Justice, will be created after the election. If that happens the SFO, and possibly the current enforcement arm of the FSA, may cease to operate in their present form.
The act, though, is welcome and long overdue. While questions may remain as to how it will be enforced, and by whom, businesses should be in no doubt as to the increased scrutiny now on them. Because of efforts internationally, most obviously by the Americans, what might have previously have been thought of as the “grey zone” is much smaller and commercial issues are more frequently either black or white. The consequences for a company being caught on the wrong side of that divide are increasingly grave, and all companies must therefore have adequate procedures in place to prevent bribery.
Jeremy Summers is a Partner in the Business Crime & Regulation department at the London office of Russell Jones & Walker. firstname.lastname@example.org