UK Bribery Act turns Ten - Looking back at the past decade and at the future of ABC Enforcement
01 July 2021
01 July 2021
The Act came into force on 1 July 2011 amidst much fanfare and expectation, and against a backdrop of strong public and political appetite to overhaul the UK's existing legislation by establishing a framework in which corporates could be held to account following various high profile corruption scandals.
In the absence of a birthday party, we mark the milestone by considering the key impacts that the Bribery Act 2010 has had over the years and, as importantly, where it might be headed in the next 10 years. For more detail on the Act itself, please see our Quickguide, here.
The Act modernised the UK's bribery laws introducing new separate offences for active and passive bribery. The application of the Act to private bribery in addition to bribery of public officials extended its scope beyond the US Foreign Corrupt Practices Act 1972, which had long been the standard bearer for ABC legislation globally.
However, it is in a commercial context that the Act has had the most profound impact with the new section 7 offence bringing about a fundamental change to the legal test for establishing corporate liability for bribery and corruption. Section 7 of the Act removed the need for prosecutors to prove that conduct carried out was by those representing the 'directing mind and will' of the corporate, instead introducing a strict liability model (with no proof of intent or knowledge necessary) based on a corporate's "failure to prevent" bribery occurring within its business. At the time, the new model received significant push-back but the "failure to prevent" approach has gained traction and become a feature of the legal landscape both in the UK, and the flagship approach for legislation overseas.
The Act is not retrospective in its effect meaning that it does not apply to conduct prior to its introduction in July 2011. This has led, inevitably, to a slow start from an enforcement perspective while law enforcement worked to detect and investigate conduct which occurred after its entry into force. Despite some high profile cases in the second half of the decade, the overall level of enforcement action against corporates based on section 7 has remained low, leading to criticism from many observers. Indeed, a number of constituent elements of the offence (notably, the adequate procedures defence and the interpretation of associated persons) have yet to be tested or receive any meaningful judicial consideration.
The introduction of the deferred prosecution agreement (DPA) regime in 2014 provided an alternative method of enforcement to criminal prosecution. In the past seven years, DPAs have become the preferred enforcement tool of the Serious Fraud Office (SFO). Of the nine DPAs agreed, seven include offences under the Act, racking up over £600 million of fines. The DPA regime has undoubtedly provided the SFO with a number of successes and positive publicity. Juxtaposed to the headline grabbing fines, however, is a weak track record of successfully prosecuting corporates – to date there has only been one conviction secured by the SFO under section 7. Moreover, the SFO's reliance on DPAs and the viability of the regime has been called into question after a series of cases where the office has failed to secure convictions against individuals connected with a company which acknowledged wrongdoing by entering into a DPA (see our briefing here and please join our forthcoming webinar).
The only defence to the section 7 offence is for the corporate to demonstrate that at the time of the relevant conduct it had "adequate procedures in place designed to prevent [bribery]"1. Following its implementation, this specific provision precipitated a major compliance effort across businesses of all sizes and in all sectors and regions who subsequently invested heavily in devising, implementing and maintaining ABC systems and controls.
As a result, the Act has directly brought about a seismic shift in corporate culture and behaviours across businesses in the UK and overseas including:
An emerging theme, however, is whether the relatively low level of enforcement activity may have started to weaken corporate appetite for continued investment in ABC as boards and senior management balance the escalating costs of compliance against the risk of enforcement. The absence of a strong deterrent in the form of corporate prosecutions and convictions could lead some companies to reassess their attitude to ABC risk and move away from a zero-tolerance approach.
Perhaps the single, greatest impact of the Act over the course of the decade is the influence it has had on ABC efforts globally. This was recognised by the 2019 Report of the House of Lords select committee review of the Act which concluded that it "is an excellent piece of legislation" and "an example to other countries, especially developing countries, of what is needed to deter bribery". The Act has become the benchmark for ABC legislation and there has been a global proliferation of laws analogous to the Act since its implementation including in France, Brazil and Spain. More specifically, the "failure to prevent" bribery model for corporates has been adopted in the Kenyan, CChilean, Indian, Italian, Malaysian, and Swiss ABC regimes. If passed, Australia's Combatting Corporate Crime Bill and proposed DPA regime will increase the liability risks for corporates in another major jurisdiction.
Despite concerns from commercial staff, who argued that (i) UK companies could not do business without paying bribes; and (ii) key counterparties would never agree to eliminating kickbacks and other forms of bribery, robust ABC contractual clauses and detailed due diligence checks have become routine compliance requirements which are now widely accepted by counterparties of UK companies (wherever those counterparties are located).
From an enforcement perspective, the extra-territorial nature of the Act means law enforcement agencies are operating increasingly on a cross-border basis. It is no coincidence that in the decade since its implementation, the SFO has forged closer working relationships with enforcement agencies in multiple jurisdictions across the world.
Looking to the future, it seems certain that ABC will remain a priority item in both the UK and globally as demonstrated by the Government's 'UK anti-corruption strategy' (2017 – 2022), the establishment of the European Financial and Economic Crime, and recent commitments from the Biden administration and G7 to tackle corruption.
The "failure to prevent" model pioneered in the Act has since been extended to the facilitation of tax evasion in the Criminal Finances Act 2017. Moreover, the current UK Law Commission Review into Criminal Corporate Liability is exploring the possibility of extending the "failure to prevent" model to all economic crime (including money laundering false accounting, tax evasion and fraud). A key learning from experiences over the past decade will be the need to ensure that key concepts (such as "carrying on business") are better understood to provide businesses with a degree of certainty so that they can tailor compliance programmes accordingly.
The nature of bribery itself has changed over the last decade and looks to continue to do so as criminals develop new methods. Far beyond 'cash in brown envelopes', bribery now encompasses a variety of other forms of conduct (including in recent years, for example, hiring practices). The pandemic will present its own unique challenges from an ABC perspective, particularly reliance on technology, remote working and the lack of oversight of front office staff. The tenth anniversary of the Act is an opportune time to update risk assessments, enhance policies and procedures to reflect emerging risks, and refresh staff awareness and training.
Authors: Ruby Hamid, Partner, Ross Denton, Consultant, Neil Donovan, Senior Associate, and Ellen Blakeney, Trainee Solicitor