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U.K. Bribery Act Finally Takes Effect
The American Lawyer
After being delayed for almost a year, the new U.K. Bribery Act finally takes effect today.
The controversial and wide-ranging legislation, rushed through Parliament before the 2010 general election, was originally scheduled to take effect last October. The new law's start date was pushed back twice, however, to allow companies to put in place what the U.K. Ministry of Justice describes as "adequate procedures" for preventing bribery.
The final guidance, issued in April, eased worries among multinational companies by stating that a listing on the London Stock Exchange will not, in itself, make a business subject to the act. However, any company that has a U.K. office, has employees who are U.K. citizens, or provides any services to a U.K. organization will still be covered by the bill, which carries unlimited fines and an increased maximum jail term of 10 years.
Although the act is primarily designed to tighten the U.K.'s regulatory framework -- the first change to the country's bribery laws in more than a century -- its broad jurisdictional reach means that the majority of U.S. public companies are likely to be affected by what some regulatory experts have described as the world's most draconian anti-corruption legislation.
"It's wider ranging even than the [U.S.' Foreign Corrupt Practices Act]," said Lord Peter Goldsmith, the former U.K. attorney general, now head of Debevoise & Plimpton's European litigation practice. "It's going to affect all companies with business in the U.K., even if they're not incorporated here. The enforcement agencies have greater powers and the penalties are much tougher than under previous U.K. law. Boardrooms throughout America and beyond should have this on their agenda."
While the U.K. and U.S. laws will regularly act in tandem, there are a number of key differences. Most fundamentally, where the U.S. FCPA deals only with governmental bribery, the U.K. act also covers corruption between commercial entities. And where U.S. law requires prosecutors to prove intent and awareness of the bribe at a senior level, the Bribery Act imposes strict liability on any company that fails to prevent bribery from taking place, regardless of awareness or intent. This not only covers bribes made by its own employees, but also by any individual "associated" with the company, a fact likely to concern smaller enterprises, which are more likely to rely on third-party agents for international matters.
The U.K. Bribery Act also makes no distinction between bribery and facilitation, or so-called "grease payments" -- a key safe harbor under the FCPA. It even prohibits corporate hospitality if it is determined to "subvert the duties of good faith or impartiality that the recipient owes his or her employer," although Secretary of State for Justice Kenneth Clarke said in the guidance that "no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix." A company's only defense under the act is to prove that it has adequate anti-bribery procedures in place.
Robert Amaee, a white-collar crime specialist at Covington & Burling, said the Bribery Act "marks the start of a new era of enforcement." It is also a new opportunity for law firms practicing in the country.
Historically, U.K. bribery law has been the reserve of smaller boutique practices such as Byrne and Partners, Peters & Peters, and BCL Burton Copeland. The Magic Circle and major London firms have been less attracted to what tended to be lower-value work defending individuals accused of bribery, but with the new act and a more aggressive approach by prosecutors likely to generate more corporate investigations, many have been bolstering their teams.
Freshfields Bruckhaus Deringer and SJ Berwin both launched investigations practices in 2010, while many firms have hired former prosecutors from the U.K.'s Serious Fraud Office (SFO) -- a practice common in the U.S. but that until recently had been rare in the United Kingdom, barring former SFO director Robert Wardle's 2008 move to DLA Piper.
Former SFO anti-corruption prosecutor Matthew Cowie joined the London office of Skadden, Arps, Slate, Meagher & Flom June of last year. In January, White & Case brought in SFO assurance head Charlie Montieth as counsel, while Covington hired Amaee, who led the SFO's Anti-Corruption and Proceeds of Crime units. In February, Arnold & Porter announced the hire of SFO fraud business group head Kathleen Harris.
Additionally, Dechert hired DLA's head of corporate crime and investigations Neil Gerrard and joint global head of litigation Jonathan Pickworth in April. In May, Sullivan & Cromwell brought in white-collar crime expert Louise Delahunty from U.K. firm Simmons & Simmons in a rare lateral hire; and Willkie Farr & Gallagher launched a London anti-bribery practice with the hire of Peter Burrell, head of investigations and corporate crime at Herbert Smith.
The act also spawned the formation of the first barristers set specializing in bribery work. Fulcrum Chambers was set up in 2010 by several senior counsel including David Williams of Essex Court Chambers and former SFO assistant director Helen Garlick, of 18 Red Lion Court.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.