8 JURISDICTION
Individuals
152. Under the current law, an individual of any
nationality can be convicted of a bribery offence under the draft
Bill where any of the relevant acts or omissions took place inside
the UK. Where none of the relevant acts or omissions took place
inside the UK, an individual can only be convicted of a bribery
offence if they are a citizen, which for these purposes includes
British Overseas citizens.[256]
The draft Bill would extend the jurisdiction of the new offences
to include actions by anyone who is "ordinarily resident"
anywhere in the UK (clause 7(4)). We welcome this proposal, which
ensures that individuals cannot live within the UK without being
subject to the same criminal law as citizens.
Companies
153. The jurisdiction of the new offence for commercial
organisations that fail to prevent bribery includes any company
(or partnership) that is incorporated (or formed) in England,
Wales or Northern Ireland. It also includes any company or partnership
that "carries on business, or part of a business" in
any of those countries. This creates an ambitious and far-reaching
jurisdictional test for the new offence. It has been welcomed
by the OECD, among others: "such coverage is necessary, since
foreign bribery is often committed by multinational enterprises
that operate in multiple jurisdictions around the world".[257]
154. These provisions have, however, attracted criticism
for creating jurisdiction over foreign companies without the need
for this jurisdiction to be connected to the bribe other than
through some (potentially unrelated) part of its business being
carried out inside England, Wales or Northern Ireland. Herbert
Smith cited the example of a French company paying a bribe in
the far East, and stated:
These proposals extend the jurisdiction beyond
that enjoyed even by the US authorities under the FCPA [Foreign
Corrupt Practices Act]. We are not sure these consequences were
intended and would consider that in the situation outlined above
it should be a matter for the French Courts to take jurisdiction
over.[258]
155. Professor Horder viewed the US as a "special
case" that is justified in taking broad jurisdiction over
its criminal law in view of its "political and legal power".[259]
He stated that the Government's proposal for broad jurisdiction
under clause 5 was "reasonable" but he warned about
the risk of "tit for tat legislation":[260]
[I]f we were to start taking jurisdiction over
companies based in, say, tyrannical regimes, just because those
companies did business here, what would be to stop those regimes
using that as a justification for doing likewise vis-à-vis
British companies? The result would be that British business people
would be liable to find themselves arrested and imprisoned in
those regimes […] We did not find that an attractive prospect,
but the Government feels the risk ought to be shrugged off.[261]
156. Herbert Smith called for an amendment to narrow
clause 5 so that it only applies to foreign companies when the
bribe benefits that part of their business carried on in England,
Wales or Northern Ireland.[262]
However, the Director of the Serious Fraud Office viewed the wide
jurisdictional reach of clause 5 as an important part of creating
a level playing field internationally. Both he and the Director
of Public Prosecutions emphasised the potential for resolving
any clash in jurisdiction by entering prosecution agreements and
liaising with foreign law enforcement agencies on an ad hoc
basis. The Secretary of State for Justice agreed.[263]
We also believe that this is an appropriate way to proceed.
157. However, there are two matters that the Government
must consider clarifying in relation to the jurisdiction of clause
5 prior to the Bill's introduction:
- The meaning of "carries
on a business" and "part of a business".
The Director of Public Prosecutions stated: "It is not clear
on the face of the draft Bill what 'carries on business' means.
We wonder whether a foreign body without a place of business in
EWNI [England, Wales or Northern Ireland] would be a 'relevant
commercial organisation'".[264]
We note that there are a variety of other legal terms that are
already used to determine jurisdiction, such as the concept of
"establishment" under the EC Regulation on Insolvency
Proceedings 1346/2000.
- The need to prove an offence under clauses
1, 2 or 4 as part of proving an offence under clause 5.
In particular, the policy aim of the draft Bill is to prevent
a company being able to stay at arms length from corruption by
using a commercial agent who operates outside the UK. The draft
Bill aims to address this potential loophole through clause 7(5)
which states that it does not matter where the acts took place
for the purpose of establishing an offence under clause 5. However,
it is unclear whether this overrides clause 5(2) which limits
any offence under clauses 1, 2 and 4 to acts that take place within,
or by a person connected to, England, Wales or Northern Ireland.
We note the comments of the Director of Public Prosecutions and
Lovells on this issue, which could be addressed by an appropriate
amendment to the draft Bill.[265]
158. We also note that the OECD encourages the Government
to consider extending jurisdiction to any company with its "seat"
or principal place of business within the territory.[266]
This approach is taken in France, Greece, Italy and the US.[267]
The UK Anti-Corruption Forum also called for the jurisdiction
to extend to any company that is listed on a stock exchange inside
the UK, or which has received public funds from the UK through
the Department for International Development or otherwise, or
which negligently failed to prevent bribery where one or more
steps took place inside the jurisdiction.[268]
159. We note that a range of options has been
proposed for extending the jurisdiction of clause 5, and anticipate
that the Law Commission's review of corporate criminal liability
will valuably inform the Government's consideration of them.
Overseas Territories and Crown
Dependencies
160. The draft Bill takes nationality jurisdiction
over individuals who are British Overseas citizens (clause 7(4)),
but not companies that are incorporated in an Overseas Territory
or a Crown Dependency. This reflects a difference that exists
under the current law.[269]
The OECD has previously urged the UK to extend the draft Bill
to include companies incorporated in those territories, such as
the Cayman Islands, the British Virgin Islands, Bermuda and Gibraltar.
Bond, the UK membership body for non-governmental organisations
working in international development, believes that the lack of
provision in relation to such companies represents a "major
loophole" given that a significant number of parent companies
are based in those territories.
161. Professor Horder stated that the UK cannot force
those territories to accept any law made by Parliament, though
additional pressure could be applied to bring a territory's law
into line with the UK. The Secretary of State for Justice added:
Whilst we are responsible for the overseas relations
of the Crown Dependencies and also for those of the British Overseas
Territories, neither the British Overseas Territories nor the
Crown Dependencies are part of the United Kingdom.[…] We
would only legislate in respect of the Crown Dependencies where
their government systems had broken down. I am perfectly
clear that the Crown Dependencies, when and if we have legislation
on the statute book, will go ahead and implement equivalent legislation.
That normally happens and I will be very strongly encouraging
them to do so. There is a similar but not exactly the same situation
with the British Overseas Territories. Again it is a matter for
them, although if governance is breaking down - and there is a
case in point at the moment - we can seek to impose direct rule.[270]
162. We hope that the Government will succeed
in its aim of ensuring that Crown Dependencies and British Overseas
Territories bring their laws into line with the proposals in the
draft Bill, including clause 5. The size and significance of the
corporate community in some of those jurisdictions makes this
a task that should be pursued vigorously.
Scotland
163. We noted in the introduction to our report that
the extent of the draft Bill is largely limited to England, Wales
and Northern Ireland. There are, however, some provisions which
apply to the UK in its entirety. This creates at least one anomaly
in relation to the draft Bill's jurisdictional reach. In particular,
the offences under clauses 1, 2 and 4 apply to companies incorporated
anywhere in the UK, while clause 5 only applies to companies incorporated
in England, Wales or Northern Ireland. Herbert Smith states: "a
Scottish company incorporated in Scotland but which does not do
business in whole or in part in England and Wales or Northern
Ireland, could not be guilty of an offence under clause 5, but
could however be guilty of an offence under clauses 1, 2 or 4,
regardless of whether or not there is any connection to England
or Wales".[271]
The Government should work with the Scottish Executive to ensure
that no such anomaly finds its way into the statute books.
164. We are surprised that the Government has
not reached an agreement with the Scottish Executive about the
approach to be taken, given the length of time that the draft
Bill has been subject to consultation and the importance of meeting
the UK's international obligations, and we urge that this be brought
to a conclusion without further delay.
256 Anti-terrorism, Crime and Security Act 2001, s109 Back
257
BB31, para 5 Back
2 258 59
BB49 Back
259
BB06, para 7 Back
260
Q68 Back
261
BB06, para 7 Back
262
BB49 Back
263
Q606 (Jack Straw MP) Back
264
BB48 Back
265
BB48, para 5; BB39, paras 4.28 to 4.29 Back
266
BB31, para 4 Back
267
BB31, para 4 Back
268
BB04, para 20 Back
269
Anti-terrorism, Crime and Security Act 2001, s109 Back
270
Q603 (Jack Straw MP) Back
271
BB49, para 15 Back
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