The Bribery Act seminar with the CBI

Bribery Act

Philip SomarakisPartner

[email protected]

7 April 2011

mailto:[email protected]

How corrupt is UK PLC?

Transparency International Corruption Perception Index

180 Countries Ranked – low score is good

UK ranked 11th 2005 (better)

UK ranked 20th 2010 (worse)

Presenter�

Presentation Notes�

UK has faced criticism in recent years The discontinuance of the investigation into the Al Yamamah arms sales contract involving BAE Systems PLC and the Government of Saudi Arabia In 2009 we also had the expenses scandal. Index ranking in 2005 was 11th out of 180 Index ranking in November 2009 was 17. Hong Kong 12, Germany 14 World Bank estimates that 15% of all companies in industrialised countries have to pay bribes to win or retain business In Asia 30% companies… In former Soviet Countries, 60% = $1trillion per year�

Main features of the Bribery Act 2010 General offences - bribing or receiving a bribe

Paying or offering to pay a bribe

Requesting or receiving a bribe

Presenter�


This is quite wide. It should be not be forgotten that a company can be guilty of giving or receiving a bribe if the controlling mind of the company (i.e the board members or senior executives with power to bind the company) was implicated in the wrongdoing. So, if the MD authorised the giving of a bribe to secure a contract then the company itself could be criminally liable The first offence can be described as the active offence and the Act describes the person committing it as P The promising, offering or giving can be to induce a person to perform a function improperly or to reward them for having done so. In other words there is an intention to induce the person to do something wrong or to reward them for having done it. You should note straight away that the person giving promising, offering or giving the bribe does not have to benefit from it themselves. It could be another subsidiary of the company.. The offence can be also committed if you get someone else to make the offer etc and even if the offer is made to a different person to the one who is to or who has performed the function. i.e the subsidiary In some cases, the offence is committed in circumstances where P knows or believes that the acceptance of the bribe would in itself constitute the improper performance of a relevant function or activity e.g you put in a planning application and then invite the Planning Officer to the football. The second offence is the passive offence of requesting, agreeing to receive or accepting the bribe. Equally, here the offence is committed by someone (R) who makes the approach or takes the bribe with the intention that the function is performed improperly either by him or by someone else. Again, the mere asking can in itself constitute the improper performance ; eg the planner officer phoning up asking to be taken to the football. The offence can be committed where the bribe is requested or received as a reward for the improper performance, which has taken place. e.g the planner phones up after he has improperly granted PP and asks for tickets to the football as a reward. The offence can also be committed where the improper performance takes place in anticipation of making the request for a bribe or in consequence of making it. Again, the acts can be done by R or by someone else and equally it does not matter whether it is R or someone else who will benefit. Even in the 3 cases where it is not necessary to prove that R intended that he should perform a function improperly (the mere asking, the request to reward after the improper act has taken place and the act done in anticipation of or in consequence of making the request) the Act also makes it clear that it does not matter whether R knows or believes that the performance of the function or activity is improper. So there is no “honest belief defence” �

Main features of the Bribery Act 2010 examples

Bribing a planning officer to grant you planning permission

Planning officer asking you for a reward for granting permission

Sometimes making the offer itself is enough

Corporate hospitality is ok provided it is reasonable and proportionate

Presenter�


No definition of financial or other advantage was given by Parliament. The Guidance accompanying the Act states “this is left to be determined by the tribunal of fact” – it is submitted that this could be wide indeed bearing in mind we are all worried about corporate hospitality… The Government has accepted that corporate hospitality is part of modern business practice and this Act is not intended to penalise hospitality for “legitimate commercial purposes” However, “lavish or extraordinary hospitality may lead a jury to conclude [that it was offered with the intention that the recipient would be influenced to act improperly” Lord Tunnicliffe, MoJ spokesman in letter dated 14/1/10 He also added: “Most routine and inexpensive hospitality would be unlikely to lead to a reasonable expectation of improper conduct… It is sufficient to rely on prosecutors to differentiate between legitimate and illegitimate corporate hospitality and to decide whether it would be in the public interest to bring a prosecution” In the Consultation on the Guidance, it states “Generally, the higher the expenditure and the more lavish the hospitality or expenditure provided to the public official the greater the inference that it is intended to influence the official to grant business..”�

Main features of the Bribery Act 2010 Bribing of Foreign Public Officials (FPO)

Cannot bribe overseas officials

Local written laws that permit investment in the local economy or paying for training is acceptable

Facilitation payments are prohibited unless permitted by local law

SFO will prosecute if payments are routinely made

Presenter�


Given the scope and breadth of the general offences of bribing or receiving a bribe, one might wonder why this section was necessary. However, it is because it mirrors article 1 of the OECD Convention on Combating Bribery of Public Officials in International Business Transactions. However, whilst the Act mirrors the Convention, the noticeable omission is that there is no requirement that any advantage intended by P need be improper. FPO given a wide meaning – legislative, administrative and judicial roles; public agencies; regional governments etc public international organisations There is also NO REQUIREMENT that P should intend that the FPO should carry out his function in an improper way. The requirement is that P must intend to influence FPO – meaning that he performs the function in a given way (or does not perform) the function; he must intend to obtain or retain business or an advantage in the conduct of business, that he must offer, promise or give a financial or other advantage to FPO or a third party and that the FPO is neither permitted nor required by written law to be influenced Note that P can make the offer etc through a third party and the offer etc can be made to a third party Written law is widely defined. If the FPO’s functions would be subject to any part of UK law then that UK law applies If the FPO is a representative of an international public organisation, then the rules of that organisation And if neither of the above apply the written rules of the country to which the FPO is an FPO. Facilitation Payments Under Secretary of State for Justice Claire Ward stated in the Commons (3/3/10 at Column 981) “Facilitation payments, no matter how big or small and no matter what they are called, still amount to bribery.. A specific defence [to this practice] risks legitimising corruption at the thin end of the wedge].. Tackling petty bribery is a key element of changing the culture of corruption �

Main features of the Bribery Act 2010 Territorial jurisdiction

Rules relating to the two general offences and bribing a Foreign Public OfficialOffence committed if any act or omission takes place in the UKOffence committed if the person has a “close connection” with the UKDefined as a UK citizen, resident, company or Scottish Partnership

Presenter�


Offence committed in E, W, Scot or NI if any act or omission takes place in that country So, telephoning or emailing or sending a letter will count even if the recipient is abroad However, in some circumstances the UK courts still have jurisdiction if the person who commits the act or omission has a close connection with the UK What this means is that ALL of the acts could take place outside the UK committed by an ex pat living in a banana republic �

Main features of the Bribery Act 2010 Corporate offence of failing to prevent bribery

A relevant commercial organisation (C) is guilty of an offence if a person (A) associated with C bribes another person intending to obtain or retain:business for Can advantage in the conduct of business for C Relevant commercial organisation :UK company or partnership doing business here or elsewhereOverseas company/partnership carrying on business or part of business here

Presenter�


As I have said there are two ways in which a corporate commits an offence under the Act. If the controlling mind of the organisation carries out the act or omission it binds the company. It is of course very difficult to prove this However it is anticipated that the offence of Failing to Prevent Bribery is more likely to be prevalent You will note that it applies to UK companies carrying on business here or abroad but equally could apply to a parent Wide definition of business – includes trade or profession so would include a centralised division of DHL offering professional services Note that the Act can apply to the parent company (Deutsche Post) if the parent company is carrying out business here. It is immaterial if the bribe took place elsewhere. �

Main features of the Bribery Act 2010 Corporate offence of failing to prevent bribery

A relevant commercial organisation (C) is guilty of an offence if a person (A) associated with C bribes another person….A person is associated with C (disregarding any bribe under consideration) if A performs servicesfor or on behalf of CCan be an agent, subsidiary or parent company but will depend on all the relevant circumstancesAn employee of C is presumed to be providing services for C

Presenter�


This needs some explanation Whether or not a person is associated with C will not be limited to the relationship that exists between A and C. Window dressing will not suffice and it will be open to the court to look at all of the circumstances of the case There are some interesting considerations German parent company with a Chinese subsidiary and a UK subsidiary. German parent company instructs Chinese subsidiary to make facilitation payments to Chinese officials for the benefit of UK subsidiary There may not be any services performed by the Chinese subsidiary apart from the fact that the Chinese subsidiary has greased someone’s palm. You will note that unless it can be proven that there is an association between the Chinese subsidiary and the UK subsidiary, then the UK subsidiary does not commit an offence. For the purposes of the Act, the performance of the bribe as a service is to be disregarded. Although an employee is presumed to be performing services for C, the Act allows for the contrary to be proven. A does not need to be connected to the UK. He could be living in Mexico Prosecution must prove that an offence of bribery has taken place. Obviously in this context we are not concerned with a member of staff receiving a bribe. We are only concerned with persons associated with C who bribe another or who bribe an FPO. Normally, the prosecution would obtain a caution or conviction against A, but owing to the international dimensions of the Act – they are not going to extradite the Mexican, the prosecution can simply set out to prove that the Mexican has committed the offence, as part of its case against C �

Main features of the Bribery Act 2010 Corporate offence – adequate procedures defence

C has a defence that it had in place adequate procedures designed to prevent persons associated with C from undertaking such conductAdequate procedures not defined in the Act but Guidance now published to assist companiesObjective is to support businesses in determining the sorts of bribery measures they can put in placeCBI has lobbied hard to get better clarification from Government on the Act

Presenter�


In his foreword to the Consultation, the Lord Chancellor and Sec of State Kenneth Clarke stated “It is essential that any guidance the Government publishes is informed by the wealth of knowledge, experience and expertise to be found outside Government in for example the business community It is stated in the consultation document that the Guidance is designed to complement, not replace or supersede other forms of guidance published by industry or sector representative bodies or by non governmental organisations (such as Transparency International) Nb Joint guidance to be drawn up between DPP and Director of SFO �

Main features of the Bribery Act 2010 Guidance on adequate procedures

Six principles which underpin Bribery Prevention:Risk Assessment is first then

Top Level Commitment )Due Diligence )Proportionate Procedures ) Risk MitigationCommunication and training )Monitoring and Review )

Presenter�


Starting with risk assessment make sense and you will be familiar with concept Principles 2-6 deal with how the risk assessment will inform the development, implementation and maintenance of effective anti-bribery policies and procedures. �

Six principles First – undertake a risk assessment

You must regularly and comprehensively assess the nature and extent of risks relating to bribery which you are exposedNo “one size fits all”Skills of persons performing risk assessmentInternal risks - unawareness of staff of risksExternal risks – Country, Transaction, Partner, Sector

Presenter�


Risk Assessment – Knowing and keeping up to date with the bribery risks you face in your sector and market. You must regularly and comprehensively assess the nature and extent of risks relating to bribery which you are exposed to I am hoping that I do not need to teach you how to suck eggs. You are a risk aware business. You will have a strong health and safety culture and will be used to identifying risks and training staff in light of the HSWA and Corporate Manslaughter Act The problem here is that you will not be turning to the Transport Manager or the CPC Holder to fulfil this task. Your people need to assess the risk in the country they are in as some are more corrupt than others; I have told you about the country league tables for corruption Transactions involving political contributions.. Partners – what do you know about them? �

Six principles Top level commitment

The Board of Directors are committed to preventing briberyPublish statements of commitment to counter bribery for internal and external communication Appoint a senior person to oversee implementation of anti bribery programme

Presenter�


You could get the MD to put his name to this. Important to lead from the top Communication to subsidiaries and business partners�

Six principles Due diligence

You have due diligence policies and procedures in place which cover:– all parties to a business relationship– agents and intermediaries– all forms of joint ventures– all markets in which you operate

Presenter�


You need to make the appropriate enquiries and gather the right information to satisfy yourself that your risk assessment and mitigation will be effective You need to document these enquiries You may wish to ensure that enquiries are made of partners’ internal corruption procedures �

Six principles Proportionate procedures

Revised Guidance much more conciliatoryProcedures and therefore resources expended need to be proportionate to risks you faceProcedures should ensure that there is a practical and realistic means of achieving your anti-bribery policy DHL example to follow

Presenter�


Gift and Hospitality Policy It is important to commit these to writing. Where DHL operates in such diverse business sectors, these need to be sector specific If you are operating overseas then you need to provide staff access to information concerning relevant rules and regulations. You also need to issue guidance on how to deal with threats, blackmail Tailor existing procedures – financial and auditing controls Managing incidents of bribery – the Consultation suggests that you should consider putting in place procedures to deal with incidents of bribery. Risk and Compliance Manager to investigate and report to the Board. Whether you then take the matter to a law enforcement agency will need to be considered. �

Six principles Communication and training

Anti-bribery policies and procedures are embeddedand understood throughout the organisationAppoint someone senior to oversee the implementation– Internal and external communication– Method and timescale of training

Various methods of trainingArrangements for MonitoringPenalties for breaching policy

Presenter�


You need to have a strategy for implementing the policy to have clear records to show that these have been read and understood. It is no good to have a policy sat on a shelf gathering dust. You need to have proper training, references on the intranet and adding to existing policy documents �

Six principles Monitoring and review

Monitoring and review mechanisms to ensure complianceInternal monitoringTransparency is importantExternal auditors

Presenter�


Transparency is a key tool – the Consultation recommends that organisations avoid secrecy and a failure to disclose information. It is important that there should be a flow of information particularly given the challenges posed by distance and unfamiliarity with overseas customs and regulations External auditors – this is a matter that you will have to consider when you have undertaken the risk assessment. The high risk areas of the business will need greater attention and having external verification may be useful. Getting a risk health check may be helpful. �

Miscellaneous matters

The likelihood of a prosecution– Resources– Evidential Test– Public Interest Test– Must have regard to Guidance

Sentence– 10 years imprisonment for an individual convicted of an

offence (NB senior officer liability where corporate offence committed)

– Unlimited fine for company

Presenter�


Resources MoJ has to publish an impact assessment when any new piece of legislation is implemented. MoJ concedes that there will be a relatively few number of prosecutions. £2m available per year to the SFO/CPS to investigate and prosecute. Poor current economic climate means the impact of the Act will not be great Two tests which must be satisfied: Evidential test. Prosecutor must establish BYD that an offence under s1 (2) or 6 has taken place. That might be quite difficult to do in practice particularly with overseas operations. Public interest test Both in the Parliamentary proceedings and in the Consultation do we see references to Prosecutor’s Discretion. This is a fudge. It is hoped that the prosecutor will consider which cases to charge and which not. In light of the limited resources available one wonders whether there will be the resources to go after the big guns. �

Legal Services, UK & Ireland

Steven Fink Southampton, Thursday 7 April 2011

CBI Presentation

19Steven Fink/ Southampton/ Thursday 7 April 2011 Page

Contents

1. Corporate Structure of DP DHL

2. Compliance within DP DHL

3. Bribery Act

• What have we done?

• Particular concerns/ implications

• Next steps

Steven Fink/ Southampton/ Thursday 7 April 2011 Page

The postal service for Germany

The logistics company for the world

Corporate structure: One company with two strong pillars


MAIL EXPRESS

GLOBAL FOR-

WARDING, FREIGHT

SUPPLY CHAIN

Corporate Functions

GBS

Corporate Center

Corporate structure


• Express courier services using ground and air transport for companies and private customers alike

• Widest reach in the industry, with own network covering more than 220 countries and territories in Europe, Americas, Asia/Pacific and emerging markets; and with a choice of transit times in each market

• Core business comprises Time Definite and Day Definite international transportation of conveyable shipments, door to door

• Progressively more focused on industry-specific solutions, among others for Technology, Life Sciences, Consumer goods and Automotive sectors

Corporate division EXPRESS (I)

DHL Express


• 120,000 destinations in more than 220 countries and territories

• Approx. 100,000 employees worldwide

• Over 8 million customers

• 6 main regional DHL Air Hubs: Bahrain, Cincinnati, Hong Kong, Lagos, Leipzig, Miami

• Approx. 4,500 facilities worldwide

• Approx. 62,000 vehicles

• Global QCC: A Global Quality Control Center located at DHL Express’ Head Office in Bonn

– Key functions: Real Time Shipment Management and Crisis Command Center

Corporate division EXPRESS (II)

DHL Express


• World’s No.1 in air freight and ocean freight

• Presence in 150 countries and territories


• 810 terminals, warehouses and offices

• Air freight volume: approx. 3,700,000 t

• Ocean freight volume in TEU: approx. 2,600,0001)

• Business units and products:

– Air freight

– Ocean freight

– Industrial projects

– International Supply Chain Management

Corporate division GLOBAL FORWARDING, FREIGHT (I)

DHL Global Forwarding


• No. 2 in European road freight

• Presence in 53 countries and territories


• More than 160 terminals

• 2 million full truck load movements p.a.

• More than 40 million tons transported p.a.


– Full truck load

– Less than truck load

– Customs brokerage

– Intermodal transports

– Trade Fairs and Event Logistics

DHL Freight

Corporate division GLOBAL FORWARDING, FREIGHT (II)


Corporate division SUPPLY CHAIN (I)

• World’s No.1 in contract logistics

• Presence in more than 60 countries and territories


• 2,400 logistic centers, warehouses, terminals

• Approx. 23 million sqm storage capacities worldwide

• Expertise in key sectors including fashion and retail, consumer goods, technology, health care, automotive, chemical & industrial


– Warehousing

– Distribution

– Managed Transport services

– Value-added services (e.g. packaging, technical services, procurement)

– Business process outsourcing

– Supply chain management & consulting

– Lead Logistics Provider

DHL Supply Chain


• Leading global provider of Corporate Information Solutions

• Business Process Outsourcing solutions for the largest organizations and companies with international presence

• Transformation of business processes of information and communication management in a strategic and holistic way

• Global presence: Approx. 9,000 employees in Europe, North America and Asia/Pacific.

Corporate Information Solutions

Corporate division SUPPLY CHAIN (II)


Compliance within DP DHL

• Global Compliance Office

– Based in Bonn HQ

– Functional move to Global Legal Services July 2010

• Regional Compliance Officers

• Online ‘elearning’ modules.

– Mandatory for Corporate Executives

• Full suite of Policies and Procedures

• Local bespoke updates


Bribery Act – what have we done?

•Compliance training

– 10 sessions held October 2010 – March 2011.

– Attended by over 300 people across all DHL business units.

– Senior level sponsorship.

– Small groups of 20 – 30 people.

– Mix of internal and external presenters.

– Raised awareness of implication of new legislation as well as existing policies and procedures.

– Also dealt with directors’ duties, health and safety and competition law.

– Very interactive, prompting much discussion (some heated).

– Often divergent views.


Bribery Act – particular concerns and implications

• Corporate Entertainment

– Perceived as part of ‘day to day’ business.

– Concern over ability to develop and maintain customer/ supplier relationships.

– Existing high profile activities: F1, Man United.

– Olympics 2012?

• Facilitation Payments

– Belief legislation goes too far

– Concern at activities in Africa/ Emerging Markets/ Russia

– Unfair advantage to FedEx and UPS

– Concern over wide-scale application

– Watered down in guidance?


Bribery Act – particular concerns and implications

• Scope

– Wide-reaching outside UK

– Effect on expatriates

– Offence under Bribery Act and FCPA?

– Control over employees in other jurisdictions.


Bribery Act – next steps in DP DHL

•Review of particular risk areas

•Procedure for vetting corporate hospitality requests

•Review Policies and Procedures to bring in line with legislation

•Re-affirm top level commitment

•Continue roll-out of training to increase awareness

•Consider impact of Guidance.

AIM: Have Adequate Procedures in place.

33Steven Fink/ Southampton/ Thursday 7 April 2011 Page

Thank you for your attention.

The Bribery Act seminar with the CBI

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