Would you know if you were liable for bribery and corruption overseas?

The issue of bribery and corruption is a major concern for businesses operating overseas and one where the legislative environment is both complex and expanding. Companies can ill-afford to take the view that ‘out of sight is out of mind’, as failure to adhere to ‘high standards of business conduct’ brings heavy penalties and directors can be held personally liable. To protect themselves and the business it’s essential that directors fully understand the relevant laws of the jurisdictions in which they operate and address any potential weaknesses.

While many UK businesses are embracing the opportunities in emerging markets, managing the associated risks can prove a challenge. Often companies underestimate the extensive legal compliance required and struggle to deal with locally accepted business practices that contradict UK and international legislation. They can also fail to put sufficient compliance policies and measures in place, however, even where a breach occurs without the company’s knowledge or authorisation, the responsibility remains. Understanding the implications of UK and global anti-bribery legislation is therefore essential and requires specialist legal advice to ensure the high standards are met.

Under existing legislation, it is a criminal offence to bribe or attempt to bribe members of public bodies in the UK (Prevention of Corruption Acts 1889-1916). The more recent Anti-terrorism Crime and Security Act 2001 builds on this further by extending the rule extra-territorially for UK nationals or bodies incorporated under UK law. As a result any act performed outside the UK, by a UK national or body incorporated within the UK, that would constitute an offence if performed in the UK is liable to prosecution here.

Added to this, the new Companies Act has introduced certain provisions relating to directors’ duties that require ‘high standards of business conduct’ to be maintained when promoting the success of the company. These changes allow shareholders to bring an action on behalf of the company (a ‘derivative action’) against a director of the company (or against more than one director if applicable) where they can show a breach of duty under the Act. Should this be the case, the company is entitled to damages for any loss incurred and individual directors may be held personally liable.

There is also the legislation of the territories in which the business operates that needs to be considered, as well as the United States Foreign Corrupt Practices Act which can affect UK companies. While identifying the relevant laws and their implications can be complicated, this is an important compliance exercise and should be approached carefully. Directors need to be aware of the potential issues and their responsibilities in order to demonstrate they have fulfilled their statutory duties.

Taking this into account, key things to consider are: development of a clear and enforced code of ethics; design and communication of an anti-bribery and corruption policy with key measures to monitor compliance and resolve potential issues; documentation of relevant procedures; training and education for all staff; the procurement of anti-bribery warranties where possible when dealing with local intermediaries; and maintenance of up-to-date records of such actions, decisions and communications.

These practical steps will go some way to keeping the business on the right track, however, the importance of seeking good advice and conducting thorough legal compliance should not be overlooked. Overall, the best form of protection is to be transparent in doing everything possible to safeguard the company from risk and ensure both directors and employees rise to meet the high standards.

Contact details
Email: Helen Flear
Tel: +44 (0)121 265 6568