The far reaching effect of the Bribery Act


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The SFO’s investigation into GSK’s commercial practices acts as a timely reminder of the potentially far reaching effect of the Bribery Act 2010 (BA), especially when UK companies have business operations in foreign jurisdictions.

Section 7 of the BA states that an organisation (C) is guilty of an offence if a person (A) associated with C bribes another person intending to obtain or retain business for C or obtains or retains an advantage in the conduct of business for C. Therefore, issues may arise when a subsidiary, in performing services for its parent company, commits an offence of bribery that will lead to the latter being prosecuted in the UK. This is the far reaching corporate offence which imposes strict liability on the company.

Difficulties may not present themselves where the company operates in the UK, or indeed in a jurisdiction that is close to where the UK company has a subsidiary, perhaps due to similar working methods; it is when operations are carried out in what are known as ‘Red Flag’ countries that complications may arise. Business practices in these countries may pose a greater risk to the UK company due to particular entrenched working methods which, whilst not the norm in those countries, are used to develop work or capture the market in a particular field. Facilitation payments, which remain unlawful under the BA, are an example.

C will have a defence if it proves there are adequate procedures in place to prevent persons associated with it from undertaking such conduct. The real test, however, is whether those procedures are being implemented. Implementation must go beyond mere knowledge and will require the assessment of risk, bespoke advice to agents, which will be dependent on which country the organisation is operating from, and finally, the thorough training of agents not only not to engage in any conduct that could render its parent company liable under the BA, but also to be aware of any risks of entering into conduct of this nature. Fundamentally the culture of the company must make it plain that it does not tolerate any act(s) of bribery.

A way round this dilemma would be for the UK company to carry out regular audit checks of sales figures and commission payments in Red Flag countries where it has an operation. Unusual spikes in both could be indicators that there is an issue which requires investigating. The company should generally follow the six overarching principles reflecting UK and international good practice for bribery prevention. The principles are identified in the guidance to the BA and should be tailored in accordance with the firm’s sector, size and business.

It will be up to the individual organisation to take appropriate steps, but as highlighted above, large organisations will have to be on their toes when conducting business in high risk areas to ensure they are not caught out by the BA.

For further information, please contact Sophia Purkis, Partner, Fladgate LLP (spurkis@fladgate.com)

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