The United Kingdom’s new Bribery Act 2010, which received Royal Assent April 8 and is expected to be enacted by October 2010, extends far beyond the British Isles.

“The act is far-reaching; its scope is worldwide; its potential defenses unclear; and its sanctions include unlimited fines and prison terms of up to 10 years,” says Marc Hansen, a partner at Latham & Watkins.

While the legislation overlaps significantly with the U.S. Foreign Corrupt Practices Act (FCPA), it diverges in several important ways. Under the U.K. legislation, for example, perpetrators will be held liable no matter where the offense happens so long as it is committed by a resident of the U.K. or a company that is incorporated or conducts parts of its business in the U.K.

“It doesn’t matter if the activities or functions that the bribe seeks to affect have no connection with the U.K.,” says Greg Williams, a partner at Clayton Utz. “It’s also no defense that local custom doesn’t require these activities to be performed impartially–unless the practice is enshrined in a written law.”

The U.K. legislation also extends to the bribery of private citizens, while FCPA does not. Additionally, the Bribery Act does not require explicit knowledge of an illegal payment. Its language more clearly covers payments for bribery purposes other than securing contracts. Finally, the Bribery Act does not provide a defense for reasonable and good faith business expenses directly related to certain promotional activities and makes no exceptions for “facilitating payments.”

Because of the Bribery Act’s broad reach, it would be a mistake for U.S. corporations to assume that existing FCPA compliance policies will suffice.

Tricky Ties

Generally speaking, the Bribery Act criminalizes the giving or taking of a bribe by individuals in the public or private sector.

“The U.K. has become one of the first countries to codify anti-corruption legislation in the private sector,” Hansen says.

But perhaps the most daunting aspect of the legislation is the new strict corporate liability for failing to prevent bribery by persons “associated with” the company. This means that international businesses will have to consider how much they monitor the activities of subsidiaries or joint venture partners.

“Traditionally, British law limits corporate criminal liability to circumstances in which a person who is the ‘directing mind’ of the company is guilty of the offense,” says Katherine Addleman, a partner at Haynes and Boone. “The Bribery Act, however, broadens corporate liability by making a company liable to criminal prosecution if anyone associated with it pays a bribe in connection with any aspect of its business.”

Unlike its sister provision in the FCPA, this strict liability attaches to all types of business–not just large or unusual transactions, but mundane services such as connecting a telephone line.

Nonetheless, the U.K. legislation lets companies avoid liability by demonstrating the existence of “adequate procedures” to prevent bribery–but that might be easier said than done.

“The Bribery Act does not provide detailed guidance concerning what constitutes ‘adequate procedures,’” Addleman says. “But key issues likely to factor into the determination are a top-level commitment to anti-corruption efforts and the maintenance and enforcement of suitable policies concerning payments, gifts, due diligence of agents and consultants, and proper monitoring of relevant company activities.”

Measured Response

Many indications suggest that the requirements for adequate procedures will resemble the sentencing guidelines for FCPA offenses. It will not be enough for companies to attempt to discourage bribery through their policies. Rather, companies seeking exculpation must actively attempt to detect and prevent it throughout the organization.

The U.K. government has suggested it will issue guidance three months before the provisions come into force, but all appearances are that the guidance will not be prescriptive. Rather, Lord Willy Bach, one of the Bribery Act’s sponsors, has stated publicly that the guidelines will “set out relevant principles backed up by illustrative good practice examples.”

Lord Bach also specifically referenced the Organization for Economic Co-operation and Development’s “Good Practice Guidance on Internal Controls, Ethics and Compliance” and the anti-bribery strategies published by the Transparency International and Global Infrastructure Anti-Corruption Centre. Otherwise, the GC100, a group of general counsel from prominent U.K. companies, has already published a draft guidance that offers perspective on the key components of adequate procedures.

These materials emphasize an appropriate tone at the top of the corporate hierarchy, characterized by a statement of values; a code of conduct including clear policies regarding bribery, gifts, hospitality, political and charitable donations, and facilitation payments; vetting of agents, business partners and other representatives; the hiring of a compliance officer; training and reporting procedures; disciplinary consequences; individualized risk assessments; appropriate risk management by way of monitoring and re-assessment, including adaptation of accounting and financial procedures; and whistleblowing procedures.

Even if companies implement bribery prevention programs, Homer Moyer, a partner at Miller & Chevalier, believes the “adequate procedures” defense is a double-edged sword.

“On the one hand, there’s nothing in the FCPA that is such an explicit incentive to good compliance,” he says. “But the defense is also potentially a huge loophole for U.K. offenders.”

Wild Card

Despite the breadth of the Bribery Act, it is too early to assess its precise impact.

“The U.K. legislation is something of a wild card so far as compliance is concerned because no one knows how authorities will enforce it,” says Pat Brady, a partner at Barnes & Thornburg.

Moyer observes that British regulators have indicated they will act reasonably. Overall, he expects enforcement patterns in the U.K. to approximate those in the U.S.

Because the FCPA covers any domestic or foreign company listed in the U.S., authorities could in theory prosecute a U.K. company for paying a bribe in Malaysia.

“But we haven’t done that unless the issuer’s conduct has significant impact on the information provided to U.S. investors or some part of the illegal activity has occurred in the U.S.,” Moyer says.

Similarly, British authorities could prosecute an international company with a U.K. sales office that has paid a bribe in Malaysia. “But no one expects that to happen,” Moyer says.