Tag Archives: corporate liability

The UK’s Failure-to-Prevent-Bribery Offense Has Succeeded in Preventing Bribery

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The UK Bribery Act 2010 has been widely heralded as “the gold standard” of anti-bribery laws, an “exemplary” statute that is “a lodestar for other countries.” That the UK is now seen as a “world leader” in the fight against foreign bribery, after years of being seen as a laggard, is due in no small part to UK Bribery Act’s most innovative aspect: the failure to prevent bribery offense under section 7. This section makes commercial organizations doing business in the UK criminally liable if they fail to prevent a person associated with their organization from bribing another for the purpose of obtaining or retaining an advantage for the organization. “Associated” persons are defined broadly as including anyone who performs services on behalf of the organization, including employees, contractors and agents. But companies can avoid liability for failure to prevent bribery if they can show that they had adopted “adequate procedures” to prevent such wrongdoing. This feature of the Act has received growing international endorsement. Numerous jurisdictions have adopted similar provisions (e.g. Australia, Kenya, Bermuda, Ireland, South Africa) or are considering doing so (New Zealand, Canada, Hong Kong). Moreover, within the UK itself, this failure to prevent framework has been expanded to contexts such as tax evasion and fraud offenses, and is also being considered for tackling human rights harms, mistreatment of vulnerable persons and computer misuse offenses.

Yet despite such widespread praise, section 7, and the UK Bribery Act more generally, have their detractors. The main criticisms tend to fall into two categories. First, some have argued that section 7 has not been as effective in changing corporate behavior as might have reasonably been expected. Second, some have argued that section 7’s “adequate procedures” defense is too vague. Both of these criticisms are overstated. Continue reading →

Mixed Messages from the UK’s First Contested Prosecution for Failure to Prevent Bribery

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In February 2018, the UK secured its first ever contested conviction of a company for “failure to prevent bribery.” Under Section 7 of the UK Bribery Act (UKBA), a company or commercial organization faces liability for failing to prevent bribery if a person “associated with” the entity bribes another person while intending to obtain or retain business or “an advantage in the conduct of business” for that entity. Following an internal investigation, Skansen Interior Limited (SIL)—a 30-person furniture refurbishment contractor operating in southern England—discovered that an employee at its firm had agreed to pay nearly £40,000 in bribes to help the company win contracts worth £6 million. Company management fired two complicit employees and self-reported the matter to the National Crime Agency and the City of London police. The Crown Prosecution Service ultimately charged SIL with failing to prevent bribery under Section 7. Protesting its innocence, SIL argued that the company had “adequate procedures” in place at the time of the conduct to prevent bribery; SIL, in other words, sought to avail itself of the widely-discussed “compliance defense” in Section 7(2) of the UKBA, which allows a company to avoid liability for failing to prevent bribery if the company can show that it “had in place adequate procedures designed to prevent persons associated with [the company] from undertaking” the conduct in question.

The case proceeded to a jury trial. The verdict? Guilty. The sentence? None. In fact, SIL had been out of business since 2014, so the judge had no choice but to hand down an absolute discharge—wiping away the conviction.

The hollow nature of the government’s victory has led some commentators to call the prosecution “arguably unprincipled” or even a “mockery of the UK criminal process.” Indeed, the bribing employee and the bribed individual had already separately pleaded guilty to individual charges under UKBA Sections 1 and 2, respectively, and the remaining shell of a corporation had no assets or operations. Other commentators pointed out that precisely because the company was dormant it would have been unable to enter into a deferred prosecution agreement (DPA), lacking assets to pay financial penalties or compliance programs to improve. Putting aside arguments about the wisdom or fairness of pursuing a prosecution in these circumstances, the SIL case sheds light on Section 7(2)’s “adequate procedures” defense. While the UK government has secured a few DPAs for conduct under Section 7—beginning with Standard Bank Plc in 2015—SIL is the first case in which the Section 7(2) “adequate procedures” defense was tested in front of a jury.

While the government argued that it prosecuted the case primarily to send a message about the importance of anti-bribery compliance programs, the UK government’s actions in the SIL case ultimately sends mixed messages to companies and may have counterproductive effects. Continue reading →