ABU DHABI BRUSSELS DUBAI FRANKFURT HONG KONG LONDON MADRID MILAN

MUNICH NEW YORK PARIS ROME SINGAPORE STOCKHOLM TOKYO WASHINGTON DC

Presentation to CIPS Financial Services Purchasing Procurement Forum – Bribery Act 2010

Angela Pearson

Overview?

• Why is bribery a hot topic?

• When can bribery occur?

• The offences under the Bribery Act

• What procedures could be put in place to prevent bribery re: procurement?

Weather London

• SFO expects to carry out more investigations now the Bribery Act has become law

• SFO recent notable successes

• 2008 - Balfour Beatty – £2.25 million settlement, monitor appointed

• 2009/2011 - Mabey & Johnson • Conviction

• £3.5 million fine

• A £1.1 million confiscation order, £1.4 million repatriation, £350,000 SFO’s legal costs, appointment of monitor

• Prison Sentences Board Director, Sales Director, Sales Manager

UK Enforcement

UK Enforcement

• BAE – Pleads guilty – Fines, £225 million in US and £30 million in UK -

judicial review rejected - Court approval of global settlement

• Innospec – Conviction – Global settlement for $12.7 million in the UK – Court “reluctantly” approved the settlement due to the specific

circumstances of the case

• Robert John Dougall (Former Executive - Depuy International Ltd) – First British Director to be arrested on bribery charges – 12 month sentence – Reduced to suspended sentence by Court of Appeal – Court of Appeal: not in SFO’s power to agree or recommend

sentences

Bribery Act: Coming into force 1 July 2011

“The ultimate aim of this legislation is to make life difficult for the minority of organisations responsible for corruption, not to burden the vast majority of decent and law-abiding businesses.” (Statement from Kenneth Clarke on implementation of the Bribery Act 2010)

What is a bribe?

Any kind of

advantage

Gifts and corporate hospitality

Travel expenses and accommodatio

n

Vouchers or other cash equivalent

Provision of services

Employing public officials

or their relatives

Making political or charitable donations

Facilitation payments

Giving free advice or at

heavily discounted

rates

Classic high risk areas

• Use of agents and intermediaries

• Sales and marketing

• Procurement

• Customs controls

• Permits and licences

• Interaction with foreign government and FPO

• M&A transaction

Bribery Act: Offences

• Giving a bribe (active bribery)

• Receiving a bribe (passive bribery)

• Bribery of a Foreign Public Official (FPO)

• Corporate offence of failure to prevent bribery

Bribery Act: Penalties

• Maximum ten years imprisonment

• Unlimited fine

Bribery Act: Extra jurisdictional reach

• Giving, receiving or bribing FPO apply also to cases of bribery outside the jurisdiction provided:

– If it would be an offence in England and Wales

– Person accused is connected with the UK (i.e. a national of the UK, an individual ordinarily resident in the UK, a national of UK overseas territory or a body incorporated in the UK)

Bribery Act: Extra jurisdictional reach

• Corporate offence can be committed irrespective of

where bribes take place

• Offence can be committed by:

– Body incorporated in UK and carries on a business (here

or elsewhere)

– Body incorporated elsewhere and carries on business or

part of a business in UK

When will a company be liable?

• For section 1, 2 and 6 offence:

– Directing mind test

– Any “body corporate” if commits an offence in the jurisdiction

– only UK incorporated bodies if the offence is committed overseas

• Potentially under section 7 offence if it fails to prevent bribery being committed on its behalf

Bribery Act: Liability of directors, officers and other employees

• Employees personally liable if they actually bribe or

receive a bribe

• Directors, managers, company secretary or similar

officer personally liable if they consent to or connive

in the commission of a bribery offence

• No personal liability for corporate offence of failing to

prevent bribery

Giving and receiving a bribe

The giving/receiving OR offering/requesting

of any kind of advantage

To induce/reward/in itself constitutes

improper behaviour

A director of Cleaningco invites Mr Richards, a Procurement Director of Financialservicesco to Wimbledon (corporate hospitality costing £1,500) hoping that this may persuade Mr Richards to renew a cleaning services contract with Cleaningco. Has a bribery offence been committed by Cleaningco?

Issues of concern: corporate hospitality

“…no-one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix…”

(Kenneth Clarke, Foreword to the Guidance)

A director of Cleaningco invites Mr Richards, a Procurement Director of Financialservicesco with his wife, to an all expenses paid trip to Wimbledon including two nights at the Savoy and a west-end show (corporate hospitality costing £5,000) during a tender process for a substantial cleaning services contract. - Has a bribery offence been committed by

Cleaningco?

- Has a bribery offence been committed by

Mr Richards?

Bribery of an FPO

• Where a person bribes an FPO • Intending to influence the FPO in its capacity as an FPO • Intending to obtain or retain business or a business

advantage

UNLESS the written law applicable to the FPO permits or requires the advantage to be paid Improper performance on the part of the FPO is not required for a bribery offence to have been committed • Facilitation Payments

Bribery Act: Failure by company to prevent bribery

• Company is guilty of an offence if a person associated with the company (e.g. employee, agent, subsidiary) bribes another person intending:

– to obtain or retain business for the company; or

– to obtain or retain an advantage in conduct of business for the company

• Associated Person is person who performs services on behalf of the company

• Defence for company to prove it had adequate procedures

Financialservicesco agrees to outsource its call centre facility to Indiancommsco. To provide that service Indiancommsco has to build a new call centre. Indiancommsco pay a substantial cash payment to a government official to get the planning permission needed for the call centre.

Has Financialservicesco committed a bribery offence?

Adequate procedures -Six Principles

• Proportionate Procedures

• Top Level Commitment

• Risk Assessment

• Due Diligence

• Communication and Training

• Monitoring and Review

What proportionate procedures are needed for procurement?

• Part of Company wide anti-corruption policy and procedures • Recruitment (Procurement) – Due diligence? • Gifts/hospitality procedures - procurement

– Prohibition? – Limits? – Timing? – Gift/hospitality register

• Transparent procurement process • Approval process • Due diligence on any at risk suppliers of services

– Risk sectors – Risk locations

• Due diligence on contract terms – Is market price being paid – Does the contract have legitimate objectives

What proportionate procedures are needed for procurement?

• Anti bribery contractual boiler plate

– Anti-bribery and corruption warranties and undertakings

– Audit rights

– Termination rights

– Renewable contract

• Centralised procurement function?

Tailored Training: Procurement

• Type of training

– Seminar/face to face

– E-learning

• Content of training

– Identifying risk of bribery

– Anti-bribery corruption policy and procedures

– Specific procurement policies and procedures

• Frequency and tracking

These materials are for training purposes only and are not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Please take legal advice before applying anything contained in these materials to specific issues or transactions. For more information please contact the presenters or your usual Ashurst contact.

ABU DHABI BRUSSELS DUBAI FRANKFURT HONG KONG LONDON MADRID MILAN

MUNICH NEW YORK PARIS ROME SINGAPORE STOCKHOLM TOKYO WASHINGTON DC

Presentation to CIPS Financial Services Purchasing Procurement Forum – Bribery Act 2010

Angela Pearson

20182752