Memorandum submitted by Professor Jeremy
Horder (BB01)
This is a note from Professor Jeremy Horder,
Law Commissioner for England and Wales. I was responsible for
the Law Commission Report, "Reforming Bribery" (Law
Commission No 313) which led to the draft legislation currently
being considered.
It may assist the Committee, and save time,
if I make some comments on a few differences between the Government's
draft Bill, and the Law Commission Bill ("the Lawcom Bill").
I apologise if these comments seem to appear in a somewhat random
order.
GENERAL COMMENT
1. The Commission is delighted that its
recommendations, that followed wide consultation, have been influential
in shaping the current Bill to the extent that they have.
CLAUSE 4 (BRIBING
A FOREIGN
PUBLIC OFFICIAL)
1. This clause, which otherwise closely
follows the Lawcom Bill, omits the excusatory defence (Lawcom
Bill, clause 5) to this offence that the Commission recommended.
This defence would have applied when the accused
(the burden of proof being on him or her) mistakenly but reasonably
believed that making the payment was lawful, where his or her
reasonable belief followed the taking of steps to ascertain the
legal position.
"Ignorance of law is no excuse" is
a well-known maxim, but the maxim refers, of course, to the law
of one's own country, not to the domestic law of another jurisdiction
("Ignorance of the law might be an excuse" would be
a better maxim in the latter case). The Law Commission concluded
that, in fairness to businesses and individuals, perhaps seeking
to do a particular kind of business in a country for the first
time, they ought to be excused conviction for so serious an offence
as bribery when, for example, they had been given legal advice
from UK lawyers that making a particular payment was lawful in
that country.
However, I perfectly understand the reasons
that the Government has omitted this clause (clause 5) of the
Lawcom Bill. During our consultation, it proved unpopular with
both the OECD and anti-corruption groups. Some members of the
judiciary, whilst sympathetic to the aim, were uneasy about departure
from the "ignorance of the law is no excuse" maxim.
For our part, (a) we could not see how the excuse
would be abused, given the stringent test for satisfying it, (b)
we thought it would be likely to arise only rarely, and (c) we
thought that it did something to strike a balance between the
need to combat bribery with firm action, and the need to ensure
that both companies and individuals were not unfairly labelled
as, in effect, "corrupt", when they had only done what
they reasonably believed to be perfectly lawful in the country
in question.
There are no easy answers. I merely wish to
highlight our contrary view on this difficult issue.
CLAUSE 5 (FAILURE
OF A
COMMERCIAL ORGANISATION
TO PREVENT
BRIBERY).
1. Whose negligence counts? To commit
the offence under clause 5, a commercial organisation must "negligently"
fail to prevent bribery by one of its employees or agents anywhere
in the world. Whose negligence matters?
The Lawcom Bill [clause 7(1)(c)] spoke of the
negligence of, "any person…connected with or employed
by [the business], whose functions…included preventing [relevant
persons] from committing [bribery] offences". The Government's
Bill replaces this [clause 5(1)(c)] with a reference to negligence
on the part of "a responsible person, or a number of such
persons taken together".
I believe that the Commission's original clause
7, referring to "any" person, could have been read so
as to produce the same result as in clause 5(1)(c). The Government's
Bill is obviously clearer on the point. The point is that a number
of individuals within a firm (perhaps one or more here, and one
or more in a foreign country where the bribe is offered) may,
through their conduct, collectively contribute to what amounts
to a culpable failure to prevent that bribery.
In practical terms, there may be advantages
(as well as disadvantages) to the prosecution in alleging that
the conduct of more than one person in the company contributed
to the commission of bribery. It means that the company in question
cannot perhaps quite so easily seek to retain shareholder and
market credibility simply by hanging one individual out to dry,
possibly dismissing them for negligence in advance of the case,
having heaped all the blame for what happened on that luckless
individual. In some countries, there have been concerns that prosecutors
are prone to accept such action, in lieu of prosecution, which
may not serve the public interest. Taking such a "multi-party"
course, in prosecuting, also makes more likely the fulfilment
of the prosecutor's "dream ticket", where those giving
evidence about fault all seek to blame each other.
2. Collective fault. Clause 5(1)(c)
will inevitably invite comparison with the analogous part (section
1) of the Corporate Manslaughter and Corporate Homicide Act 2007.
That Act requires the relevant negligence to be substantially
attributable in part to failures on the part of "senior management"
[section 1(3)]. Neither the Lawcom Bill, nor the Government Bill,
contains any such restriction. That may not be a bad thing, in
that—as is sometimes the case with price fixing, for example—both
the wrong (bribery) and the failure of supervision may well occur
at lower, perhaps local, levels of management.
However, it should be noted that the presumption
at common law is that with a fault based offence the fault must
be attributable to the directors (or equivalent persons) who can
in effect be identified with the company itself: the so-called
"identification" doctrine. There is currently nothing
express in the Bill to stop the courts reading that doctrine in
to clause 5, and hence requiring that "a responsible person"
etc means someone at that high level. However, the wording of
clause 5(5), which deals with a situation where a director (or
equivalent) is the one who has been negligent—see 3. below—suggests
that for the courts to take such a course would be wrong. Clause
5(5) implies that the offence can be committed through the negligence
of someone other than a "senior officer".
There is perhaps a case for being clearer on
the point in the Bill than either the Law Commission, or (following
the Commission's lead) the Government, have been; but it may be
ok because nowadays the courts take a more context-specific approach
to interpreting the nature and scope of corporate criminal liability.
The Law Commission is currently considering
the legal status of the identification doctrine, as a part of
a general project on corporate criminal liability.
3. The "adequate systems defence".
Clause 5(4) is absolutely crucial to the legitimacy of the offence
created by clause 5. It introduces an "ongoing compliance"
element to the essentially retributive and deterrent function
of the offence. In other words, the message is not simply, "don't
let carelessness lead your employees or agents to commit bribery";
the message is, "put systems in place capable of sustaining
an anti-bribery corporate culture in your firm".
The OECD were understandably anxious that there
should be greater clarity over what would count as an "adequate
system", something important not just from their point of
view, but from the perspective of firms seeking guidance. It was
simply not possible for the Law Commission to address this issue
in the time available.
There is a case for saying that, even if it
reaches the statute book, this clause should not be brought into
force until some work has been done with the CBI, other business
representatives, anti-corruption experts, and others, to hammer
out some basic standards and procedures.
There are some serious issues to be addressed.
For example, there is the "red tape"
problem. If an "adequate system" is one in which every
payment/gift, no matter how small, must be logged, this will create
major administrative problems for global companies whose employees
or agents move frequently across borders or in and out of (air)ports,
where small "grease" payments may have to paid routinely
(but which would never be the subject of prosecutions). Some may
scoff at such an objection, but the question is whether the generation
of paper mountains in respect of conduct that will never be subject
to prosecution is worth the effort.
Secondly, there is "external supervision"
problem. The Woolf Committee recommended that current and prospective
contractors should all be interviewed to check compliance issues
(recommendation 11). Nice idea; but how realistic is meeting that
ideal for a company with hundreds or even thousands of contractors,
perhaps changing daily or weekly, across the globe? How realistic
is meeting that ideal, in cost terms, for a small company which
(reasonably) may be asked for compensation for travel/accommodation
costs from the contractor who is to be interviewed, if that small
company cannot itself visit its prospective contractor?
In practice, it is likely to be specialist lawyers
or other professionals in the area who do any such interviewing,
or who engage in corruption policing on behalf of their client
more generally. They will not offer their services free of charge.
Moreover, there is the problem of whether interviewing
will in fact reveal defects in suppliers' own procedures, or whether
some other kind of evidence is needed if the whole process is
to be meaningful. In general, site visits are considered to be
more effective, but again, these are costly and time-consuming.
Moreover, only a party in a dominant bargaining position may be
able to insist on them.
Accordingly, there is a risk that big firms
will come to dominate certain markets in certain countries, amongst
other reasons, because smaller firms do not have the "clout"
or the resources to meet the cost of compliance and to make compliance
meaningful. Their choices will be: quit the market, or cut corners
through bribery. The consumer may not benefit in that situation.
I should stress that these are not insuperable
problems; but the solutions must be thought through, on the basis
of wide consultation, and a careful look at what is done in, eg,
the USA. We cannot afford to lead businesses into the classic
regulatory "dead end", where businesses incur costs
and waste time formally complying with procedures imposed from
on high that, because they are regarded by almost everyone as
mere formalities, amount to "box ticking" that does
nothing to achieve the desired goal.
4. Directors' negligence and the adequate
systems defence. Clause 5(5) was something suggested to the
Law Commission by the OECD during consultation. It is meant to
be a purely common sense measure. What is says is, in effect,
that if the directors responsible for drawing up systems to prevent
bribery themselves negligently fail to prevent it, it cannot be
right that the directors should subsequently be able to employ
the adequate systems defence.
I believe that this clause has proved to be
unpopular in some quarters, because it is regarded as discriminating
against small firms who have no "middle management"
to whom the responsibility for preventing bribery can be devolved.
It may be that the criminal law does sometimes
discriminate against small firms, but I believe that this is not
an instance of it.
Inevitably, a small firm with no middle management
must take responsibility for compliance at directorial level,
whether that be health and safety, environmental, or bribery-related
compliance. That is just a matter of logic, really.
The "adequate systems" defence is
a defence aimed at larger firms with middle managers and agents
(with devolved responsibilities) operating partly independently
of direct control at board level. It may well be far more cost-effective
for a small firm to take responsibility for compliance at board
level, rather than employing a middle manager to take it on; but
with responsibility comes the prospect of liability.
In any event, with very small firms, any bribery
committed on their behalf may well raise a suspicion of knowledge
or intention at board level. In such cases, the company—and/or
the individual directors can be prosecuted directly under clauses
1 or 4.
May 2009
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