Additional memorandum submitted by Jeremy
Horder (BB 06)
Jeremy Horder, Law Commission for England and
Wales.
1. Comparing the "improper conduct"
model with the law in other jurisdictions. The Law Commission
looked at the law in other jurisdictions in its Consultation Paper,
"Reforming Bribery" (CP No 185, 2007), appendix B. I
attach a copy below. Comparing legal language, against different
legal backgrounds, is inevitably a potentially misleading business.
In France, language such as "without a right" and in
Germany "in violation of duty" are words used that could
be compared with "improper conduct", but they are used
in France and Germany exclusively for public sector bribery. In
Germany, in the private sector, the word "unfairly"
is used to identify transactions that, in exchange for benefits,
will be regarded as involving bribery. Following the Commission's
lead, the Bill tries to avoid these differing standards, as well
as the problematic public/private sector distinction, by using
a definition of "improper conduct" to cover both the
public and the private sector. The overwhelming majority of the
Law Commission's consultees favoured this "single test"
approach and emphatically rejected a division between public sector
and private sector bribery.
2. Leaving "improper" and "not
legitimately due" undefined. The Commission addressed
this issue in its Report at paras 3.100-3.110. Leaving key elements
undefined has the attraction of simplicity, but would risk creating
a situation in which the reforms would not improve on the current
law. To seek to answer 2(a), one of the very problems with the
current law is that courts have been at odds over what directions
should be given to juries on the meaning of "corruptly",
given that it is undefined. Moreover, turning to 2(b), in fairness
to eg public servants and companies, some guidance on what is
permitted/forbidden should be provided in law. The Commission
took the view that, by defining "improper" as breach
of trust, breach of impartiality, or breach of duty of good faith,
at least some guidance would be provided, giving public servants,
companies and juries something to go on. In the end, given that
"good faith", "impartiality" and "trust"
are ordinary English words, with the benefit of a common sense
direction from the judge I think that a jury will perfectly well
understand what is being asked of them. On "not legitimately
due", it is essential that the clause 4 offence shuts
out in terms any possible attempt to extend it to customary law,
otherwise the clause 4 offence will simply fail to meet our
international obligations. Would it really be better if the courts
were left to fill in the meaning of "improper" and "legitimately
due" on a case by case basis? For a start, too few bribery
cases are litigated in the higher courts for such a policy to
get off the ground; and in any event, this is not an appropriate
area for piecemeal common law development.
3. The applicability of the "what
a reasonable person would expect" test. Certainly, the
clause 1 and 2 offences have an international application.
That follows—but seeks to improve on—the current law,
and the law would be grossly deficient without such an application.
Two points here.
First, your question may show that we are in
danger of missing the point about the clause 4 offence. The
clause 4 offence is there specifically to meet our international
obligations. Whilst those obligations could be met in other ways,
the creation of a specific offence using particular wording allows
English courts to look to international jurisprudence on the meaning
of those words as they fall to be applied. Clause 4 also
constitutes a visible commitment to our international obligations,
rather like the creation of the offence of "torture"
in 1988. Most kinds of torture would be covered by offences under
the Offences against the Person Act 1861, but the Government in
1988 decided that a specific offence should be created to
demonstrate our commitment to our international obligations. All
these points are set out in the Commission's Report at paras 5.61-5.70 and
were supported by the overwhelming majority of consultees. When
a case raising alleged bribery of an foreign public official is
being considered by prosecutors, they will in effect be duty-bound
to charge clause 4, in any case where, if they do not do so, the
defendant may seek to exploit the "what the reasonable person
might expect" provision to say that what s/he did was only
to be expected in country X. It needs to be kept in mind that
complying with our international obligations is not just about
passing laws. It is about prosecuting them in a way that makes
compliance a real prospect, not just a prospect on paper.
Moving on from that, secondly, when a case falls
outside the scope of clause 4, but still involves foreign bribery,
I think that it becomes harder to justify some alternative test,
such as "not legitimately due". In cases involving purely
private sector bribery overseas, the "not legitimately due"
concept begins to lose all meaning. More importantly, clause 4 is
as it is, in relation to public officials, because we wished to
avoid "gold-plating". However, a company that bribed
a candidate for public office, so clause 4 was not engaged,
would be taking a huge risk respecting whether the jury would
be sympathetic to his or her view that it was ok, say, to boost
a candidate's expenses to astronomical levels, "because that
is the sort of thing that they expect in country X [and I wanted
to have them in my pocket]". Sure, a jury might buy that
explanation, but then again they might not. We need to have faith
in juries to make the right call, given the right guidance from
the bench.
4. Gaps in the law? To take the first
point about two Boards of Directors carving up market share, the
House of Lords has made it clear time and again that conspiracy
to defraud should be used only exceptionally in such a situation,
because it is a matter to be governed by competition law. The
same is true of bribery law, which should in no circumstances
ever be used in such a way that it undermines Britain's competition
policy and the law that embodies that policy. Other than in unusual
situations, agreements about market share are competition law
matters, period. The Commission sought to explain this in its
Consultation Paper, Appendix D. There is no "gap" in
the law, if one is willing to look beyond bribery and consider
the effect of the law governing fair competition, bribery and
fraud, taken together. So far as paying voters to vote a particular
way is concerned, it is hard to see why that should be regarded
as bribery, as the voter is under no duty to vote at all, and
if if s/he does vote, he or she is under no duty to vote only
for certain reasons. So, there is no "improper conduct"
in any of the three senses set out in the Bill. It would, of course,
be different if it is, say, a Returning Officer who is bribed.
Again, the issue is one for other legislation, namely legislation
about voting and representation of the people. After all, when
any sitting politician canvasses a voter, s/he is a public official
offering an advantage (better local/national politics if his/her
party wins the election) in exchange for something (a vote). Does
that mean we should think of this as a potential case of bribery,
if only we could find some impropriety? No.
More broadly, it is a conceptual truth about
law that the greater the specificity in legislation the more the
potential for gaps, even though greater specificity may involve
better guidance. Contrariwise, vaguer or undefined concepts may
reduce the potential for gaps (although that depends how "prosecution-minded"
an Appeal Court is in interpreting an offence) but they provide
less by way of guidance. The Bill attempts to provide at least
a degree of specificity by naming the three key concepts (trust;
impartiality; good faith) under the aegis of "improper conduct",
and in that way may risk some "gappiness", but in my
view the risk is low and outweighed by the benefits.
5. The 1925 Act. As I indicated
at the meeting, our agreement with the Home Office (as was) was
that we would not stray into misconduct concerning Parliament/Government,
and the 1925 Act was thus excluded from our remit. It may
be that this Act would be made redundant by the Bill if it passed
into law. If so, our Statute Law Repeal division within the Commission
might be persuaded to look at it with a view to abolition. Whether
it can and should be done now I could not say. It is worth perhaps
saying that there may be disadvantages in making a single statute
wholly and exclusively the source of bribery law, until some time
has passed to see if, indeed, other legislation is now unnecessary.
6. 6(a): The reason for the defence of "reasonable
belief" is that, quite simply, companies have to do business
in a huge number of very different countries around the world,
and they often have to make decisions whether or not to invest
etc at very short notice. Access to the relevant law is now a
much simpler task than it was years ago, because there are so
many good internet resources. However, it is still the case that
there are no English language translations of the law for many
countries, and it may be hard to know in some instances, just
by reading a statute, how the words will be understood in a particular
country. There will still be a need to rely on lawyers' advice
in some instances, and it is in such cases that the reasonable
belief test was meant to come into its own.
6(b) This is unrealistic. Jurisprudentially,
only the highest domestic court (or supreme ruler) can be a final
authority on what the law in a given jurisdiction requires. Hence,
in some instances, the need to rely on lawyers who know how the
court/ruler tends to see things, legally, in that jurisdiction.
6(c) A fuller explanation of these issues
can be found in the Commission's report, at 5.91-5.11. The OECD
regards the "not legitimately due" criterion as one
that respects the autonomy of states in determining on what basis
advantages should be received by officials. It is unlikely that
corporate hospitality, in particular, will ever be "legitimately
due", although some commission payments may be. As I said
at the meeting, we have to rely on prosecutorial and jury common
sense here. There is simply too little public interest in prosecuting
firms, at great expense, for the provision of hospitality or commission
payments, unless those reach levels any ordinary person would
regard as totally out of order.
6(d) This is dealt with in appendix B of
the Commission's Consultation Paper (below). In essence, several
countries have a "not legitimately due" criterion, or
a "without legal right" criterion, or something of that
nature, in relation to bribing foreign public officials.
7. Negligently failing to prevent bribery:
clause 5 How many countries have such an offence? This
is not as straightforward a question to answer as it seems. In
some—perhaps most—instances where one finds a basic
offence of "failing to prevent bribery" it will, in
effect, be treated as one of negligently or recklessly failing
to prevent bribery, either because negligence/recklessness will
be treated as an implicit element by the legislature or the courts
in the country in question, or because prosecution policy so dictates.
As in my answer to 1 above, it is important to stress how
misleading it can be to make crude, purely text-based comparisons
between the law in different jurisdictions.
That said, there is in fact a relatively long
list of countries that impose liability on the basis of what (in
the obfuscating Latin that is often insisted on overseas) is regarded
as, "culpa in eligendo, instuendo, et custodiendo" (basically
negligent or reckless failures in hiring, training and supervising).
Some such countries are listed in the Commission's report at para
6.94.
Putting national jurisdictions on one side,
the starting point in the Law Commission's report (paras 6.62-6.71)
was Article 5(2) of the European Council's Framework decision
(2003/568/JHA), which requires criminal liability to be imposed
by member states:
"where the lack of supervision or control
by a [natural] person…has made possible the commission of
[a bribery offence] for the benefit of that legal person by a
[natural] person under its authority."
In my oral evidence, I perhaps ought to have
mentioned article 5(2), which has hitherto been conveniently ignored
by Government for law reform purposes; but no longer, if the Government's
Bill goes through. It seems self-evident that article 5(2) is
aimed at negligent failures to prevent bribery by someone in the
company. The "failure to prevent" offence in the Bill
matches article 5's requirements. Similarly, the OECD itself has
laid emphasis on negligent failures by companies that lead to
bribery being committed on a company's behalf (Law Commission
Report, para 6.91).
7(a) I cannot answer this, because this
is a Government amendment to the Commission's recommendations.
7(b) Again, as this is a Government amendment,
the issue of its consistency with what the Commission said is
not a matter for me. However, in support of the Government's new
position one might say that companies, unlike people, can be in
several places at one time and often do not really have a true
national base: they carry on business—and are managed—
wherever is best from the company's viewpoint. I should stress
that if that seems an obvious point that the Law Commission should
have taken on board, it is important to remember that the Commission
only makes recommendations for England and Wales, and must be
wary of—indeed, ideally, avoid—making recommendations
that extend liability to persons or entities based elsewhere.
However, in support of the Commission's position, see further
the point made under 7(d) below.
7(c) I cannot really answer this properly,
as this is a Government amendment. However, in the Commission's
report, we employed a common phrase—"business, trade
or profession"—to describe the limits of private sector
bribery, and that phrase (or something like it) is in common use
in the criminal and civil law (Report, para 3.21-3.24).
7(d) I certainly drew the parallel with
natural persons ordinarily resident, as a way of explaining the
Government's amendment to the Law Commission Bill, but clearly,
given the point made above that companies may have no national
allegiances and may be in several places at one time (answer to
7(b) above), the analogy has limits.
By comparison, a company's corrupt activity
outside the US may be caught by US law if any element of it is
routed (eg via bank payment transfers) via the US.
However, as business organisations pointed out
to us in consultation, the US is commonly regarded as a special
case, when it comes to taking jurisdiction, because of its great
political and legal power world-wide. If 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 as soon as their plane
landed, just because that regime suspected that an allegedly corrupt
transaction by the business people had taken place in or been
routed through their country, with all that that might entail
in terms of the treatment of those people within that legal system.
We did not find that an attractive prospect, but the Government
feels the risk ought to be shrugged off. Certainly, the OECD would
like us to extend liability in the way that Government intends
to extend it. However, the OECD does not have to worry itself
about "tit for tat" legislation overseas that entails
British business people being held in what may be appalling prison
conditions abroad, facing indefinite detention respecting dubious
allegations that may quite possibly have been politically motivated
in the first place.
8. "Adequate procedures" under
Clause 5. I believe that the Bill fully meets the Woolf Committee
expectations, and that there will be no negative incentive of
the kind indicated. Clause 5 is set up so as to prevent directors
relying on the adequate procedures when it was their own negligence
that led to the commission of bribery in the first place. I find
it hard to see how that could encourage directors to take a "back
seat", having appointed someone to supervise, because it
is the Directors' responsibility to ensure that such a person
does their (supervision) job properly. In the Woolf Committee
report, we find an emphasis on the risk of bribery being committed
in the company's name being a regular item of Board business.
The Bill provides implicit support for such an approach, in that
it would no doubt be expected that the "supervisor"
would have to report at the relevant board meeting (or in some
other report back) to discuss that item on the agenda. Any Board
that appointed someone to supervise, and then conveniently forgot
all about the issue, would find themselves looking at a justified
claim that they had failed to ensure truly adequate procedures
were in place. Nowhere in the Bill, or in the Commission's report
on which it is based, does it anywhere say expressly or impliedly
to company directors, "so long as you set up some formal
system for checking, you can then just sit back and relax".
"Adequate" means just that: adequate. It does not mean
"adequate on the face of it", or "adequate in theory",
or anything of that kind. Adequacy may vary according to the nature
of a company's trade, its size, and its resources, but that is
pretty much it. The issue is discussed further by the Commission
in its report at paras 6.105-6.113.
9. "Meaning of Senior Officer".
This is something added by the Government to the Commission's
Bill, so I can only speculate. 5(7)(a) seems to imply that "manager"
goes beyond "managing director" and would cover, say,
a regional manager. It is perhaps worth enquiring of Government
whether the intention was to extend the notion of "senior
officer" as far as it is taken in the Corporate Manslaughter
etc Act 2007. In that Act, section 1(4)(c) explicitly extends
"senior management" to persons who play, "significant
roles" in the making of decisions and the actual management
of the company. Clearly, it is not desirable for companies to
have to grapple with many different understandings in law, for
the purpose of different offences, of who is "in charge".
10. Must a "responsible person"
be appointed? The adequate procedures defence is only ruled
out if the negligent failure to prevent bribery is wholly or partly
attributable to a senior officer. The general idea is that if
directors—who have ultimate responsibility for all procedures
to prevent offences being committed by employees etc—are
themselves guilty of negligently failing to prevent the offence,
why should they be able to rely on procedures (for which they
were in theory responsible) to stop the offence occurring?
A small company could decide that the (four,
say) directors would jointly take responsibility for preventing
bribery by following a procedure they have devised to that end.
In such a case, a failure to follow the procedure, or sticking
to it when it had clearly become outdated etc, would amount to
an arguable case of negligent failure to prevent on the part of
one or more of the directors, ruling out reliance on the procedure
itself obviously. Neither the Commission nor Government can profitably
hope to dictate to companies exactly how they arrange their internal
governance arrangements. What can be said is that those arrangements
must ensure that if it is senior officers who are to do the "barking"
they must bark properly, but if they employ a dog to bark, there
must be something in place to make sure the dog barks properly.
11. Directors and disqualification.
I am afraid I do not know the answer to this question as a matter
of strict law. However, (a) I think the answer is that it would
not be possible to disqualify a director for negligent failure
to prevent bribery, and (b) it might be thought inappropriate
in a case of negligence. It is unclear how one incident involving
negligence could make someone unfit to run a company. It would
of course be a different matter if a director had consented or
connived at bribery contrary to clause 8(2).
12. Professor Wells is an acknowledged authority
in this area of law, and a long-term advocate of the "corporate
culture" model, but I reject her contentions. First the "negligent
failure" basis for the offence is required by the European
Council Framework Decision (see above), and is employed in a number
of other jurisdictions (see above). So, it seems perfectly appropriate.
Secondly, the "corporate culture"
model is in my view hopelessly vague. Evidence of a corporate
culture, if such evidence can withstand challenge as "hearsay"
evidence, can certainly be a piece of evidence to support an allegation
of negligence (that is the role it plays in the Corporate Homicide
etc Act 2007). As a substantive legal test, I do think it even
gets to first base. How, for example, can a sole proprietorship,
or even family business, be said to have a "corporate culture"?
Yet, such businesses (micro businesses) are the overwhelming majority
of businesses in the UK, no less than 96%.
Thirdly, vicarious liability is commonly regarded
as anomalous in the criminal law, and is currently confined by
the legislature to such offences as selling intoxicating liquor
outside hours, or driving offences under the Road Traffic Act.
I do not see it suddenly being given a front-line role in relation
to the commission of a stigmatic offence like bribery. It would
obscure the reality that it is the employee/agent who commits
bribery, the company's fault lying in failing to prevent it. In
a way, it is actually nonsensical to suggest that (in virtue of
vicarious liability) the company itself actually commits
the bribery, but then permit the company to plead an adequate
systems defence. Such a defence presupposes that the person committing
the crime and the person responsible for the system are different.
So, "nul point" for this suggestion, I fear.
The only "runner" is the suggestion
that there be, in effect, strict liability for the bribery, coupled
with the adequate systems defence. I discussed this in response
to an early question from Lord Goodhart. I think we agreed that
it would make for greater simplicity. It would not be wholly inappropriate,
unworkable, or anything of that sort (unlike "corporate culture"
based offences). However, first, under the existing law, it would
put failing to prevent bribery on the same level as failing to
prevent a tin of food being contaminated during processing, but
these are very different things, because supervising people is
very different in nature from supervising mechanical processes.
Secondly, there is stigma attached to conviction for any bribery
related offence, and that fact should be reflected in a fault
requirement in the offence itself, as it is with corporate manslaughter.
Thirdly, the OECD and the European Council do not require strict
liability, so to introduce it would be "gold-plating"
unpopular with businesses, respecting whom this legislation may
already be a hard sell.
June 2009
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