Closing the net
The net is about to tighten on bribery and corruption in international businesses
The net is about to tighten on bribery and corruption in international businesses, among them the ports industry, and particularly for British citizens who transact business overseas.
New perils for both the guilty and the careless will arise for those who step over the sometimes fine line between innocent gift-giving or hospitality, into the age-old trap of bribery, and inducement.
Imprisonment of individuals for up to 10 years, and heavy fines for commercial organisations, are foreshadowed by the UK Bribery Act 2010 which will come into force in April next year. Sections of the UK judiciary already view some instances of bribery as the equivalent of corporate murder, and the new Act will have an even broader extra-territorial effect than the US Foreign Corrupt Practices Act of 1977, which made it unlawful to make payments to foreign government officials to assist in obtaining or retaining business.
The fresh risk factors at play in the legislation are being closely monitored by insurers, both for the sake of their clients, and for the potential impact on their own traditional ways of doing business via intermediaries.
Serving the London insurance company market, the International Underwriting Association has deemed the Act of sufficient import to make it the subject of one of its recent market briefings. IUA members heard Maurice Kenton, a partner with law firm Barlow, Lyde & Gilbert, say that the Act will require a commitment from the very top level of businesses to establishing a culture in which bribery is never acceptable.
Of particular note is a new strict liability corporate offence in respect of “associated persons.” The definition of an associated person has yet to be clarified, but it may turn out to apply to an employee, agent, subsidiary, or joint venture partner carrying out business on your behalf: perhaps people you have never even met. A commercial organisation can commit an offence of failing to prevent bribery where a person associated with it is the guilty party. To this, there is only one defence – that there were adequate procedures in place designed to prevent such conduct.
The Act will clamp down on anyone offering financial advantage to someone to perform improperly a public or business function, whether or not this has a connection with the UK. Elsewhere in English law, criminal cases can normally only be brought if some part of an offence is committed in the UK.
And it is no good saying, “well, this is how they do business in such-and-such a country". In a UK criminal case, the test is what a reasonable person in the UK would expect.
Bribery is certainly a live issue: in January this year, US authorities took enforcement action over an alleged illegal payment aimed at winning a container terminal construction project in Chittagong. In February a company set aside $56m for an expected settlement with the US authorities arising from violations in India and Kazakhstan over Customs and other issues. In Malta last year, two businessmen and three Customs and port officials were given suspended jail terms in a bribery case of Customs duty avoidance 17 years earlier.
It is essential to carry out in depth due diligence to understand the risk, and do business accordingly, said Mr Kenton. Like their large clients such as port organisations, underwriters rely on a wide network of employees and others to source and arrange business. Some firms have relied heavily on an informal ‘market view’ of the integrity of third parties, without taking steps to check further.
Disclosure is a good weapon to resolve issues, says Mr Kenton. Very few frauds happen in the light of day.
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