Memorandum submitted by Clifford Chance
LLP (BB 05)
INTRODUCTION
1. This submission is made on behalf of
Clifford Chance LLP in response to an invitation by the Joint
Select Committee to submit evidence on the draft Bribery Bill
published by the Ministry of Justice on 24 March 2009.
2. Clifford Chance is one of the largest
global law firms with 30 offices in 21 countries, and
over 3,500 legal advisors, the largest number of whom are
based in London. We are regulated by the Solicitors Regulatory
Authority of England and Wales.
3. We have followed the government's attempt
to reform the law in this area closely over the past ten years.
We have seen over that period an increasing demand for advice
and assistance in relation to corruption-related issues, including
the development of corporate compliance codes and training programmes,
as well as advice and assistance in drawing up, and advising on,
anti-corruption contractual provisions in transactional work and
representation in corruption-related litigation.
4. We have contributed to the Law Commission's
several papers on this subject, to the previous Parliamentary
Joint Select Committee's Inquiry, and to the Home Office's consultation,
and are pleased to have the opportunity to contribute to this
Inquiry.
5. The current UK law on bribery is flawed,
as sufficiently demonstrated by the Law Commission's arguments.
Moreover, it has been heavily criticised, both domestically and
internationally—particularly by the OECD. We therefore consider
it imperative that legislation in this area is passed at the earliest
opportunity. But it is also essential that the legislation be
clear and effective, and that it should not criminalise behaviour
where no criminal intent is present. We have identified four areas
in which we consider the Bill could be improved, and we set them
out below.
CASE 2 AND
CASE 4: ACCEPTANCE
CONSTITUTES IMPROPER
PERFORMANCE
6. We consider that there are difficulties
in applying the definition of improper performance contained in
Clause 3 to the offences set out in the context of Case 2 and
Case 4 (Clause 1(3) and Clause 2(3) respectively).
7. Bribery is generally considered to be
an offence in which one party gives the other party a payment
(or some other advantage) in exchange for an improper act. In
the Case 2 and Case 4 offences, however, only one act—ie
the acceptance of the advantage—is required to make out
the offence. This raises a policy question of whether it is right
that a person should be guilty of a bribery offence when no improper
act has been performed, or was expected to be performed, in return
for the payment or advantage.
8. In addition to this policy question,
we consider that the requirement that acceptance itself constitutes
improper performance puts an unnatural strain on the definition
in Clause 3, making it difficult to interpret. Further, it may
mean that it is more likely that these offences may embrace acts
which most people would not consider to be criminal.
9. While we understand the objective of
having one overarching definition of improper performance, and
the desire to ensure that all potentially corrupt acts are caught,
we are concerned that these aims may, in Cases 2 and 4, have
led to draft legislation which may not be workable.
10. For example, a director of a company
gives £1,000 to a local councillor. In order to establish
that the director has committed a Case 2 offence, the prosecution
must show that the director knew or believed that the acceptance
would "constitute the improper performance of a function
or activity to which section 3 applies". If the prosecution
cannot show this, then there is no offence. In the action of accepting
the £1,000, is the local councillor carrying out a function
of a public nature, an activity connected with a business, trade
or profession, an activity performed in the course of his employment,
or an activity performed by or on behalf of a body of persons?
Or would he argue that he is accepting the £1,000 (or
a car, tickets to the opera, or a luxury family holiday) in a
purely private and personal capacity?
11. Where the prosecution is able to show
that the acceptance of the money falls within Clause 3, the policy
question raised in paragraph 7 above must still be addressed.
In this example, if the company director at no time requests or
expects the councillor to perform any sort of function or activity
which has an impact on the director or his company, should the
provision of the payment or other advantage be classified as a
bribe, or should this rather be a question of conduct and ethics
for the local councillor? Conversely, if the director does request
or expect the councillor to perform a function or activity improperly,
then this will fall within the Case 1 offence, the Case 2 offence
being redundant.
12. Creating a serious criminal offence
based on acceptance alone also raises, we believe, potential problems
under human rights legislation. The Prevention of Corruption Act
1916 created a presumption of corruption where money, or
a gift, is paid, or given, to a public official where the person
giving the money or gift holds or is seeking to obtain a contract
from the public body. Persuasive arguments have been made that
this presumption is not human rights compliant. The Case 4 scenario,
in particular, appears to go even further than this, creating
criminal liability—not just a rebuttable presumption—for
an act which may flow from a misunderstanding, or a mistake, as
to the propriety of acceptance, rather than from any criminal
intent.
CLAUSE 2(7): NO
MENS REA
13. In both the Cases of bribing another
person, the wording of the offence includes a clear element of
mens rea on the part of the offeror. However, the draft
Bill produced by the Ministry of Justice has amended the wording
of the offence of being bribed contained in the Law Commission's
draft Bill to include a new sub-clause (Clause 2(7)), which provides
that it does not matter whether the recipient knows or believes
that the performance of the function or activity is improper.
14. We understand that the purpose of this
new sub-clause is to clarify that a person receiving an improper
payment is not able to evade liability by claiming he did not
know it was improper to do so when, in the circumstances, he ought
to have known.
15. However, the risk must be that this
could criminalise an act on the part of a person who genuinely
did not know that the performance of the function or activity
was improper. For example, a senior bank official of the lead
arranger in a syndicate, deciding on allocation of debt, allows
a particular bank to participate on the basis that that bank will,
in return, take some of the lead arranger's poorly-performing
mortgage portfolio. All the elements of the offence of receiving
a bribe intending improper performance are present (ie the bank
official is in a position of trust, and a reasonable person would
expect him to perform the function of allocating the debt for
reasons unrelated to the bank's mortgage portfolio). Therefore,
even if the bank official did not realise that he was doing something
improper, he may still be guilty, because no element of intent
or knowledge of impropriety on his part is required.
16. We consider the formulation of these
offences with no reference to mens rea, and Clause 2(7)
in particular, to be inappropriate in a criminal statute.
CLAUSE 4: BRIBERY
OF FOREIGN
PUBLIC OFFICIALS
17. We understand that this clause is specifically
designed to meet the UK's obligations under the OECD Convention
on combating Bribery of Foreign Public Officials in International
Business Transactions ("the OECD Convention"), and to
put UK anti-corruption legislation on a parity with U.S. legislation,
particularly the Foreign Corrupt Practices Act ("FCPA").
18. Article 1 of the OECD Convention
requires that:
"Each Party shall take such measures
as may be necessary to establish that it is a criminal offence
under its law for any person intentionally to offer, promise or
give any undue pecuniary or other advantage, whether directly
or through intermediaries, to a foreign public official, for that
official or for a third party, in order that the official act
or refrain from acting in relation to the performance of official
duties, in order to obtain or retain business or other improper
advantage in the conduct of international business."
19. The FCPA makes it an offence for defined
entities:
"to make use of the mails or any means
or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay, or authorization of the
payment of any money, or offer, gift, promise to give, or authorization
of the giving of anything of value to—
(1) any foreign official for purposes
of—
(A) (i) influencing any act or decision
of such foreign official in his official capacity, (ii) inducing
such foreign official to do or omit to do any act in violation
of the lawful duty of such official, or (iii) securing any improper
advantage; or
(B) inducing such foreign official to
use his influence with a foreign government or instrumentality
thereof to affect or influence any act or decision of such government
or instrumentality,
in order to assist such issuer in obtaining
or retaining business for or with, or directing business to, any
person;".
20. Both the OECD Convention and the FCPA
include a criminal mens rea as part of the offence, the
Convention by the use of the word "intentionally", and
the FCPA by using the word "corruptly".
21. In contrast, the draft Bill before the
Committee would create what is essentially an offence of strict
liability, where it would be possible for someone to be found
guilty, even if that person had no intention to bribe a foreign
public official, and did not realize he was doing so (the word
"intentionally" in Clause 4(1) relates only to influencing
the foreign public official, and does not import any criminal
knowledge or intent).
22. The Law Commission draft Bribery Bill
included a defence to this offence, that the person providing
the financial or other advantage reasonably believed that the
advantage was legitimately due. The omission of this defence in
the Ministry of Justice's draft Bill, coupled with the lack of
any specific requirement of impropriety (beyond that the advantage
is not legitimately due) in the delineation of the offence, would
make it possible for a person to be guilty of this offence, without
any criminal intent of any kind.
23. For example, a person legitimately owing
money to a foreign government for, eg a licence (which would,
for these purposes, comprise "an advantage in the conduct
of business"), may be given incorrect account details by
a corrupt public official, with the result that the payment is
made to the official, rather than to the correct governmental
authority. Since the payment would not be "legitimately due"
to the corrupt official, the person making the payment would be
guilty of a criminal offence, even if he had no knowledge of the
corruption and believed the payment to be entirely innocent.
24. In another example, a company makes
a payment to a foreign public official in return for a service
which benefits the company's business, following—in good
faith—local legal advice that the payment is legitimately
due. However, the legal advice is incorrect and the payment is
not legitimately due. The company (or the individual who made
the payment) is guilty of an offence under Clause 4, even though
it had no criminal intent, and indeed, took steps to avoid committing
a criminal offence.
25. In both these examples, it is of limited
comfort to the person or company that the UK prosecuting authority
may decide to exercise its discretion not to prosecute. If it
constitutes a criminal offence, and the company becomes aware
of this, this may give rise to obligations to report under anti-money
laundering legislation, and to issues as to whether related proceeds
can be dealt with without the risk of committing a substantive
money laundering offence.
26. It will not always be easy to ascertain
whether payments or, for example, the provision of corporate hospitality
is "legitimately due". Many countries will have rules
in place on corporate hospitality setting out what their officials
may and may not accept. However, even in the UK, these rules vary
considerably for different government departments, for local government,
and for individual public bodies, and are not always easy to obtain.
The task, for a UK company, of ascertaining and understanding
these rules in a foreign country is likely to be more difficult,
or even impossible.
27. For example, a Minister of another country
accepts an offer of hospitality from a company seeking to establish
a presence in that country. The company believes that the hospitality
proffered is appropriate to the Minister's status. In fact, the
hospitality is in breach of strict internal rules drawn up by
the Minister's government, but these rules are not publicly available.
It is likely that the company would be guilty of an offence.
28. It is not unreasonable to expect those
making payments or providing other forms of advantages to foreign
public officials to take reasonable precautions to guard against
corruption. However, we do not believe that it is appropriate
to ascribe criminal liability on the basis of an innocent mistake.
29. We would therefore support the re-insertion
of the defence as drafted by the Law Commission.
CLAUSE 5: FAILURE
OF COMMERCIAL
ORGANISATIONS TO
PREVENT BRIBERY
30. While we consider that the Ministry
of Justice's draft Clause 5 is, in some respects, superior
to that of the Law Commission, we fear that, as currently drafted,
Clause 5 would encourage companies to appoint a junior employee
to be responsible for anti-bribery compliance. This runs counter
to best practice advice to companies formulating policies, which
is to appoint the most senior person feasible. However, Clause
5 would mean that a company which appoints a senior person,
who is then negligent, would be unable to rely on the fact that
it had put in place procedures to prevent bribery, regardless
of how stringent these measures may be and how deeply they had
been embedded in the culture of the company.
31. We consider that this sends the wrong
signal to companies and will not encourage them to appoint effective
compliance officers, or to put in place anti-bribery procedures,
if such procedures are capable of being simply disregarded by
a court.
32. We would therefore support the deletion
of Clause 5(5), with the result that companies would be able to
provide evidence of their anti-bribery compliance procedures in
defence to a charge of failure to prevent bribery, even if the
compliance officer, or a senior officer of the company, was negligent.
33. We understand the anxiety that a company
may be able to avoid liability for this offence by reference to
procedures which, perhaps, are in form only and not fully implemented.
However, we consider that these issues (as to full implementation,
training etc) should be considered as part of the defence and
not simply excluded from the court's deliberations. The deletion
of Clause 5(5) would not prevent a court from finding a company
guilty of this offence, on the particular circumstances of the
case, on the sole grounds that it had compliance procedures in
place.
34. Despite the addition of Clause 6, we
believe there remain ambiguities in the statement of the Clause
5 offence, particularly in the interpretation of the phrases
"performing services on behalf of C" (in Clause 5(1)(a))
and "in connection with C's business" (in Clause 5(1)(b)).
35. These ambiguities may create practical
difficulties for banks in syndicates, companies in joint ventures,
and large group companies. Is the lead bank in a syndicate performing
services on behalf of the other banks? Is a company in a joint
venture performing services for its joint venture partner? Is
a bribe paid by an employee of a subsidiary of C in order to gain
a contract for that subsidiary made in connection with C's business?
Does the answer differ if C is the sole holding company, a 51%
shareholder, or a 20% shareholder? Further clarity would be helpful.
36. We, further, have some concerns about
the wording "adequate procedures". It could be argued
that the fact that bribery has occurred and that the relevant
person has been negligent, means, in itself, that the procedures
have not been adequate. We would therefore prefer that the defence
be based on the existence of "appropriate" or "reasonable"
"systems and controls" rather than "adequate procedures".
"Appropriate" finds a parallel in Schedule 46 of
the Finance Bill 2009[9]
and its use would therefore promote consistency, while courts
are well accustomed to interpreting the word "reasonable".
Either of these would provide the necessary flexibility to accommodate
the fact that companies in particular sectors, or operating in
particular countries, would be expected to have more stringent
controls in place.
CONCLUSION
37. Attempts to reform the UK law on bribery
are long over-due, and there is now an urgent need for progress
to be made. However, it is equally important that the new law
be clear and that it should not cast its net indiscriminately
over acts where there is no criminal intent. All businesses are
struggling in the current economic climate; whether this is a
result of poor regulation, or whether the credit crisis is likely
to cause an increase in crimes of fraud and corruption, it would
still be a mistake to introduce legislation which, because of
a lack of clarity, or an overly mechanistic approach, places unrealistic
and onerous burdens on companies. Many UK companies have already
invested heavily in compliance policies, procedures, training
and other anti-corruption initiatives. It is right that those
who have not done so should follow suit, as appropriate. Companies
need to feel assured, however, that the efforts they make will
not be negated by legislative drafting which creates criminal
liability without significant failings, and that these efforts
can be fairly judged in court where the company itself is charged
with an offence.
June 2009
9 "1(1) The senior accounting officer of a large
company must take reasonable steps to ensure that the company
and each of its subsidiaries (if any) establishes and maintains
appropriate tax accounting arrangements", Schedule 46, Finance
Bill, HC Bill 90, Session 2009-09 Back
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