UK Bribery Act turns ten lessons for Australian companies

Last month marked the ten year anniversary since the UK Bribery Act 2010 came into force in the United Kingdom, representing a landmark date in the UK's anti-bribery and corruption (ABC) history.

Considered an international gold standard for ABC legislation, the UK Bribery Act will be of even more relevance to Australia if long awaited reforms to Australia's ABC laws are implemented later this year or next.

A key reference for Australian companies implementing best practices

The Australian Crimes Legislation Amendment (Combatting Corporate Crime) Bill proposes significant reforms to Australia's ABC laws, perhaps most notably including a new offence under which corporates can be automatically liable for failing to prevent bribery of a foreign public official by an associate of the corporate. This "failure to prevent" type offence is no stranger in the UK, with similar provisions having been in force in the UK since 2011 and has subsequently been adopted in respect of other types of conduct (for example, facilitation of tax evasion) as a means to hold corporates in the UK criminally liable for their actions.

The Australian Bill was recommended to be passed by a Senate Committee in March 2020, and received the support of the Australian Government in February 2021. However, it is currently unclear when the Bill will be back before Parliament for discussion after having taken a backseat to COVID-19 and other issues seen as a higher priority.

Should the reforms come into effect, Australian companies and authorities will no doubt be looking closely to their UK cousins for guidance on how they can best put themselves in a position to demonstrate that they have taken steps to implement proportionate ABC practices to benefit from the "adequate procedures" defence in the event of a bribery incident. In any event, given the broad extra-territorial scope of the UK Bribery Act, any Australian companies presently carrying on business or a part of their business in the UK are within the scope of the UK Bribery Act provisions, and should therefore already be assessing the adequacy of their ABC procedures.

On the occasion of the anniversary of the  impacts that the regime has had over the years and where it might be headed in the next 10 years.

For more detail on the UK Bribery Act itself, please see our Quickguide, here.

For more detail on the anticipated reforms in Australia, please see our update here.

Establishing the UK as a 'jurisdiction with teeth'

The UK Bribery Act modernised the UK's bribery laws introducing new separate offences for active and passive bribery. The application of the UK Bribery Act to private bribery in addition to bribery of public officials extended its scope beyond the US Foreign Corrupt Practices Act 1972, which had long been the standard bearer for ABC legislation globally.

However, it is in a commercial context that the UK Bribery Act has had the most profound impact with the new section 7 offence bringing about a fundamental change to the legal test for establishing corporate liability for bribery and corruption. Section 7 of the UK Bribery Act removed the need for prosecutors to prove that conduct carried out was by those representing the 'directing mind and will' of the corporate, instead introducing a strict liability model (with no proof of intent or knowledge necessary) based on a corporate's "failure to prevent" bribery occurring within its business. At the time, the new model received significant push-back but the "failure to prevent" approach has gained traction and become a feature of the legal landscape in the UK, and the flagship approach for legislation overseas.

The UK Bribery Act is not retrospective in its effect meaning that it does not apply to conduct prior to its introduction in July 2011. This has led, inevitably, to a slow start from an enforcement perspective while law enforcement worked to detect and investigate conduct which occurred after its entry into force. Despite some high profile cases in the second half of the decade, the overall level of enforcement action against corporates based on section 7 has remained low, leading to criticism from many observers. Indeed, a number of constituent elements of the offence (notably, the adequate procedures defence and the interpretation of associated persons) have yet to be tested or receive any meaningful judicial consideration.

The introduction of the deferred prosecution agreement (DPA) regime in 2014 provided an alternative method of enforcement to criminal prosecution. In the past seven years, DPAs have become the preferred enforcement tool of the Serious Fraud Office (SFO). Of the nine DPAs agreed, seven include offences under the UK Bribery Act, racking up over £600 million of fines. The DPA regime has undoubtedly provided the SFO with a number of successes and positive publicity. Juxtaposed to the headline grabbing fines, however, is a weak track record of successfully prosecuting corporates – to date there has only been one conviction secured by the SFO under section 7. Moreover, the SFO's reliance on DPAs and the viability of the regime has been called into question after a series of cases where the office has failed to secure convictions against individuals connected with a company which acknowledged wrongdoing by entering into a DPA (see our briefing here). The Australian Combatting Corporate Crime Bill proposes the introduction of a similar DPA scheme.

Triggering a seismic shift in corporate culture and the adequate procedures defence

The only defence to the section 7 offence is for the corporate to demonstrate that at the time of the relevant conduct it had "adequate procedures in place designed to prevent [bribery]" . Following its implementation, this specific provision precipitated a major compliance effort across businesses of all sizes and in all sectors and regions who subsequently invested heavily in devising, implementing and maintaining ABC systems and controls.

As a result, the UK Bribery Act has directly brought about a seismic shift in corporate culture and behaviours across businesses in the UK and internationally including:

• fostering a zero-tolerance policy towards bribery;
• raising the profile of bribery as a real business risk and making ABC compliance a board agenda item. Many businesses have established standalone ABC committees and designated a senior manager as ABC Champion;
• a greater understanding of risks within front office/customer facing teams and a corresponding improvement in the identification of red flags leading to more effective detection, escalation, and remediation of issues; and
• increasing prominence for in-house legal and compliance professionals with responsibility for ABC and financial crime compliance more broadly. These individuals and teams have assumed a more central role both operationally and in terms of risk management.

An emerging theme, however, is whether the relatively low level of enforcement activity may have started to weaken corporate appetite for continued investment in ABC as boards and senior management balance the escalating costs of compliance against the risk of enforcement. The absence of a strong deterrent in the form of corporate prosecutions and convictions could lead some companies to reassess their attitude to ABC risk and move away from a zero-tolerance approach.

Influencing global ABC efforts

Perhaps the single, greatest impact of the UK Bribery Act over the course of the decade is the influence it has had on ABC efforts globally. This was recognised by the 2019 Report of the House of Lords select committee review of the UK Bribery Act which concluded that it "is an excellent piece of legislation" and "an example to other countries, especially developing countries, of what is needed to deter bribery". The UK Bribery Act has become the benchmark for ABC legislation and there has been a global proliferation of laws analogous to the UK Bribery Act since its implementation including in France, Brazil and Spain. More specifically, the "failure to prevent" bribery model for corporates has been adopted in the Kenyan, Chilean, Indian, Italian, Malaysian, and Swiss ABC regimes. If passed, Australia's Combatting Corporate Crime Bill and proposed DPA regime will increase the liability risks for corporates as well.

Despite concerns from commercial staff, who argued that (i) UK companies could not do business without paying bribes; and (ii) key counterparties would never agree to eliminating kickbacks and other forms of bribery, robust ABC contractual clauses and detailed due diligence checks have become routine compliance requirements which are now widely accepted by counterparties of UK companies (wherever those counterparties are located).

From an enforcement perspective, the extra-territorial nature of the UK Bribery Act means law enforcement agencies are operating increasingly on a cross-border basis. It is no coincidence that in the decade since its implementation, the SFO has forged closer working relationships with enforcement agencies in multiple jurisdictions across the world.

Looking ahead to the teenage years

Looking to the future, it seems certain that ABC will remain a priority item in both the UK and globally as demonstrated by the Government's 'UK anti-corruption strategy' (2017 – 2022), the establishment of the European Financial and Economic Crime, and recent commitments from the Biden administration and G7 to tackle corruption.

The "failure to prevent" model pioneered in the UK Bribery Act has since been extended to the facilitation of tax evasion in the UK Criminal Finances Act 2017. Moreover, the current UK Law Commission Review into Criminal Corporate Liability is exploring the possibility of extending the "failure to prevent" model to all economic crime (including money laundering, false accounting, tax evasion and fraud).

The nature of bribery itself has changed over the last decade and looks to continue to do so as criminals develop new methods. Far beyond 'cash in brown envelopes', bribery now encompasses a variety of other forms of conduct (including in recent years, for example, hiring practices). The COVID-19 pandemic has presented its own unique challenges from an ABC perspective, particularly reliance on technology, remote working and the lack of oversight of front office staff.

The tenth anniversary of the UK Bribery Act is an opportune time to update risk assessments, enhance policies and procedures to reflect emerging risks, and refresh staff awareness and training. Pending similar legislative changes in Australia, Ashurst can help you to:

• undertake an ABC "health check" of your organisation and, where necessary, update your current policies and procedures;
• prepare and deliver ABC training programmes tailored to your organisation, in person, remotely, or online through an e-learning module;
• advise on ABC risks in relation to specific transactions or dealings; and
• conduct internal investigations and/or advise on the implications of anti-bribery and corruption incidents that arise in your organisation.

Authors:  Australia: James Clarke, Partner; and Stephanie Cameron, Senior Associate. UK: Ruby Hamid, Partner; Ross Denton, Partner; and Neil Donovan, Senior Associate.