The United Kingdom is cracking down on corruption, and businesses the world over will be forced to respond. 

On July 1,  the U.K. Bribery Act 2010 came into force, giving Britain the toughest anti-corruption legislation in the world. The Act has an extremely wide reach, affecting all companies that do business in the U.K. or employ British citizens.

Parliament passed the Act in April 2010 in response to pressure to reform the U.K.’s outdated anti-corruption legislation, some of which dated back to the 1890s. Difficulties arising from the old legislation, such as a requirement to prove the intent of the briber, made it difficult to prosecute corruption. “The U.K. had a dreadful record of investigating and prosecuting overseas corruption,” explains Nicholas Burkill, a partner at Dorsey & Whitney and head of the firm’s London trial department. “Before two years ago, there were none. So when I say that the U.K. had a poor record, they just didn’t have a record.”

Although Burkill says there’s been an increase in corruption prosecutions in the past two years, even under the old legislation, he expects an even greater increase under the new provisions, which provide more opportunities for prosecution.

“The new legislation is much tougher in relation to both jurisdiction and particularly in having a strict liability offense for failing to have adequate procedures,” he says.

Worldwide Reach

Perhaps the most significant aspect of the Act is its reach. Any corporation with business operations in the U.K. or British employees will be subject to enforcement—even if the violation occurs outside of the U.K. and doesn’t directly involve any British citizens.

“Even if you have a U.S .company that is registered in the U.S. and the alleged bribery is not even taking place in the U.K., but in another territory, the fact that that U.S. company may do some business in the U.K. takes it under this Act,” explains Matthew Arnold & Baldwin Partner Paul Gershlick. “That’s how far-reaching it is. It’s been described as the strictest anti-corruption law in the world now, which is changing things quite significantly.”

Mayer Brown Partner Matthew Ingber says U.S. companies can’t afford to ignore the Bribery Act and that it’s important to look beyond the Foreign Corrupt Practices Act (FCPA). “You’re always safer making sure that you’re complying not only with the FCPA, but also comparable statutes, and the U.K. Bribery Act is obviously one of them,” he says. “Although there are differences between the FCPA and the U.K. Bribery Act, I don’t think, as a U.S. company, you can view it as irrelevant to the business that you do.”

New Offenses

The law creates four new offenses: bribing (giving, promising or offering a bribe); being bribed (requesting, agreeing to receive or accepting a bribe); bribing a foreign public official; and failing to prevent bribery where an associated person pays a bribe to obtain or retain business advantage for a commercial organization.

Of the new offenses, experts say that the fourth, which criminalizes failure to prevent bribery, will have the largest impact on corporations. After all, even the most well-intentioned companies may find themselves faced with an employee who acted against company policy and engaged in a bribe.

“The point [of the failure to prevent bribery offense] is to make companies think it’s better that they try to prevent bribery,” Burkill says. “It’s accepted that the payment of a bribe is not always within the power of the company.”

Although the Serious Fraud Office (SFO), the U.K. agency responsible for investigating and prosecuting corruption, has been clear in its intent to crack down on enforcement, there is protection for corporations with “adequate procedures” in place to prevent bribery. Exactly what constitutes “adequate procedures” is not expressly defined, but the U.K. government has released guidelines to help companies meet the standard. The  guidance includes six principles—proportionate procedures, top-level commitment, risk assessment, due diligence, communication and training, and monitoring and review—which, if met, will help companies protect themselves. Although the SFO ultimately has discretion in deciding whether or not to pursue criminal proceedings, Burkill says companies that can demonstrate efforts to meet the six principles set forth in the guidance can help to safeguard themselves against unfavorable decisions.

“Good ethical companies have bribes paid on their behalf [due to] a lack of control, and that is not really a criticism of the company,” Burkill says. “This means that such a company will commit an offense if it’s in the U.K.’s jurisdiction unless it’s had adequate anti-bribery procedures. It’s a bit like buying insurance.”

Above all, experts say, in-house counsel must be diligent in reviewing and enforcing anti-bribery procedures internally to avoid violation.

“It’s all very well for a company to decide that it should introduce some procedures or amend its procedures in order to be in compliance with the U.K.’s requirements, but what’s also important is that in two years’ time, it’s actually using those procedures and hasn’t put them in a drawer somewhere,” Burkill says. “The guidance is absolutely clear: If all that happens is there’s a set of procedures that they’ve since forgotten about, that’s not adequate.”

Forget FCPA

For U.S. companies within the reach of the U.K. Bribery Act, compliance will mean adhering to stricter regulations than under the FCPA and, in some cases, adjusting business practices. Burkill says it’s important to remember, however, that the goals of the two pieces of legislation are the same.

“Because of its broad jurisdictional reach, the U.K. Bribery Act can be used to level the playing field and to help British companies that have gone out of business because of the unfair business practices of foreign-based companies,” he says. “That’s very much the point of the FCPA; it’s the Department of Justice trying to level the playing field for U.S. companies by its broad jurisdictional reach.”

Experts note several differences between the U.K. Bribery Act and the FCPA, including the U.K. law’s criminalization of the receipt of bribes, the application to both the public and private sectors and, of course, the failure to prevent bribery offense. However, the biggest change facing U.S. companies, experts say, is likely the criminalization of facilitation payments (small payments made to foreign officials to expedite a routine action), which are allowed under the FCPA, but not under the Bribery Act. 

“You can certainly see circumstances under which foreign government officials, in order to do the most basic of tasks, are going to get paid for it,” Ingber says. “It’s sort of an unfortunate consequence of doing work in other markets, but there are government officials that perform their business in that way. I think the FCPA was mindful of that in not outlawing facilitation payments. The U.K. authorities just have taken a different tack.”