White-collar criminal lawyers on both sides of the Atlantic are gearing up for the introduction of a new U.K. Bribery Act, which looks set to generate significant work for teams throughout the U.S. when it comes into force next year.
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 experts have described as the world's most draconian anti-corruption legislation.
"It's wider ranging even than the [Foreign Corrupt Practices Act]," said Lord Goldsmith QC, 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."
Any company that has a U.K. office, that has employees who are U.K. citizens, or that provides any services to a U.K. organization will be subject to the bill, which carries unlimited fines and an increased maximum jail term of 10 years, meaning that U.S. lawyers already advising clients on FCPA violations are likely to face an increased workload and new reporting obligations to the U.K.'s Serious Fraud Office.
But while the two laws will regularly act in tandem, there are a number of key differences. Most fundamentally, where the FCPA deals only with governmental bribery, the U.K. act also covers corruption between commercial entities.
And where U.S. legislation 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. This not only covers bribes made by its own employees, but also by any individual "associated" with the company -- a fact likely to be of major concern to smaller enterprises, which generally lack their own international networks and are therefore regularly forced to deal with third-party agents abroad.
"Intent has always been a sticking point, as it’s hard to prove," explained Winston & Strawn's London compliance head Barry Vitou. "[Strict liability] is going to make life a whole lot easier for agencies looking to mount successful prosecutions against corporates."
The Bribery Act also makes no distinction between bribery and facilitation or so-called grease payments -- a key safe harbor under the FCPA -- and 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." It does allow a defense if companies can prove they have adequate anti-bribery procedures in place, although this represents a potential grey area.
"It might be hard for a company under investigation for bribery to prove its procedures were adequate," said one London-based corporate fraud partner who wished to remain anonymous. "After all, if they were truly adequate, then surely the bribe wouldn’t have taken place?"
It’s likely, though, that the SFO will take a commercial stance. After all, to prosecute ethical companies that have tried their best to prevent bribery would send out entirely the wrong message: that compliance is a waste of time if you're going to be pursued anyway.
The new act should also change the type of law firm handling bribery work within the U.K. Historically, the market has been the reserve of smaller boutique practices such as Byrne and Partners, Peters & Peters and BCL Burton Copeland. The Magic Circle and major City firms have been less attracted to what under the existing legislation has tended to be lower-value work defending individuals accused of bribery. However, with the combination of the new act and an increasingly aggressive approach by prosecutors likely to generate an increase in major corporate investigations, these larger corporate firms have been busy bolstering their teams.
In February, Freshfields Bruckhaus Deringer launched a "global investigations" practice, bringing together 60 partners from a range of practices under London international commercial disputes head Geoff Nicholas and fellow litigator Adam Siegel in New York, while in June, Proskauer Rose merger target SJ Berwin put together its own group comprised of financial services, litigation and competition partners. The market will also shortly see the first barristers set specializing in bribery work. Fulcrum Chambers, set up by several senior counsel, including David Williams QC of Essex Court Chambers and former SFO assistant director Helen Garlick of 18 Red Lion Court, will open its doors later this year.
The new act is also likely to result in an increase in law firms hiring former prosecutors, a practice popular in the U.S. but a rarity in the U.K. (DLA Piper is one notable exception, having hired former SFO director Robert Wardle two years ago for its 70-strong corporate crime and investigations team.)
After being rushed through Parliament before last spring's elections, the new act was due to come into force this month. However, the government has delayed implementation by six months to allow companies to prepare. The Ministry of Justice is currently halfway through a two-month consultation, where parties have until Nov. 8 to provide feedback before the act finally becomes law in April 2011.
When it does, the greater experience, better contacts and wealth of prosecutorial talent of the U.S. firms mean that they will have the initial advantage over their U.K. counterparts. The SFO, criticized as ineffectual and politically influenced for many years, has successfully upped its game. It’s time for the country's law firms to follow suit.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
