Memorandum submitted by CBI (BB 07)
1. The Confederation of British Industry
(CBI) is the national body representing the UK business community.
It is an independent, non-party political organisation funded
entirely by its members in industry and commerce and speaks for
some 240,000 businesses which together employ around a third
of the UK private sector workforce. Our membership stretches across
the UK, with businesses from all sectors and of all sizes. It
includes the majority of the FTSE 100, some 200,000 small
and medium-sized enterprises (SMEs), more than 20,000 manufacturers
and over 150 sectoral associations. Through their worldwide
trading activities, UK businesses contribute 25% of UK GDP and
are the second largest providers of global foreign direct investment.
The CBI also represents UK business interests internationally.
It is the UK member of the Business and Industry Advisory Committee
(BIAC) to the OECD and we chair its Investment Committee under
whose remit anti-bribery falls.
OVERVIEW
2. Bribery, corruption and extortion are
morally wrong and distort the market. UK business retains a strong
anti-corruption reputation and the Government readily acknowledges
this, as do the various indicators seeking to produce country-by-country
comparisons.
3. Whilst we consider that current law meets
all of the UK's obligations, the CBI has long advocated the need
for modernisation of UK anti-bribery law. We will strongly support
the Government's objectives in this area as long as the proposals
are simple, easy to understand and able to be implemented by companies.
This requires well-defined offences with appropriate defences
which criminalise conduct appropriate for such treatment. But
it is equally important that conduct not intended to be criminalised
remains legitimate and is not inadvertently caught within the
ambit of the new offences.
4. The CBI broadly endorsed the key features
of the Law Commission's original consultation proposal, but our
analysis of the final report and of the draft bill that accompanied
it raised a number of concerns. The current draft bribery bill
before Parliament for pre-legislative scrutiny has not resolved
them. Indeed, in a number of vital areas it has actually raised
serious new issues which, taken together with the need to ensure
the competitiveness of UK companies is not undermined, mean that
the CBI is unable to offer unqualified support for the draft bill.
5. We agree that bribery law should not
draw a distinction between bribery in the private sector and bribery
in the public sector. The CBI also agrees that there is merit
in having a separate criminal offence of bribing a foreign public
official. But in both the general offences and in the foreign
one, as well as in the defences, there are significant legal and
practical difficulties in the draft bill. In addition, the new
corporate offence raises major problems. Detailed points on these
issues are explored in this submission.
CLAUSES 1-3: GENERAL
BRIBERY OFFENCES
6. The Law Commission's original approach,
which we supported, was to reform UK law based on conferring an
advantage by some act or omission by the payer and an improper
act involving a breach of trust or duty by the recipient or third
party. We agreed with this and also with the concept that the
advantage must be the primary reason for the recipient or third
party doing the improper act. This approach was attractive to
CBI members because it helped to deal with the difficult issues
of facilitation payments, corporate hospitality and promotion.
7. However, the Law Commission's final report
changed the structure of the general offences to include improper
performance of a function or activity and introduced the notion
of a failure to fulfil a relevant expectation. The draft bill
takes this course, which gives the offences—both the giving
and receiving of bribes—a common structure. A relevant expectation
is that the function will be performed in good faith, impartially
and by a person in a position of trust (Clause 3, sub-clauses
3, 4 and 5). These terms are not defined.
8. The draft bill then adds a reasonable
person test in sub-clauses 7 and 8. There is an explicit
statement that it does not matter whether the recipient of the
bribe or another performing the function knows or believes that
the performance of the function or activity is improper. This
means that behaviour which fails to meet the expectation of a
reasonable person is criminalised. The lack of a mens rea or intent
in the framing of these criminal offences is a particular concern
as this fails to meet a basic principle in criminal law. Bribery
should be an offence that requires intention, and it is this requirement
that the OECD Convention and the UN Convention place on their
signatories. Both use the term "intentionally" in relation
to the criminal offences. It cannot be right that a person can
be guilty of a criminal offence by doing something which that
person does not believe to be improper, or if that person reasonably
believed the payment was legitimately due, or if that person made
a genuine mistake.
9. If this structure is retained, it is
the courts that will have to decide how to apply these standards.
This would happen through a series of as yet unknown test cases.
In effect, every individual in any business would have to make
his or her own judgement on the giving or receiving of an advantage
of each and every action he or she undertakes that might be covered
by the criminal law. It would include trying to assess what a
reasonable person may or may not believe to be right or wrong.
We believe that this is an unrealistic scenario and, accordingly,
that the basic structure of the general offences needs modification
if they are to be workable in the business context.
10. It may be that the addition of the phrase
"in the circumstances" to Clause 3, sub-clause 8, would
clarify what is meant by the reasonable person test. We would
support this amendment.
11. There is one other point that raises
a concern in the offence in clause 1 given the extraterritorial
nature of the draft bill. Under this offence of bribing another
person, we believe it would make for a consistent approach if
the defence permitted by the Law Commission in its report under
clause 4 covering the bribery of a foreign official, which
we discuss in detail below, was to be available in the circumstances
of other jurisdictions for clause 1 offences too. This would
allow the defendant to show that the payment is legitimately due
in an international context and resolve the problem of a payment
legitimately given or required in one country constituting an
act of bribery in another.
CLAUSE 4: BRIBERY
OF FOREIGN
PUBLIC OFFICIALS
12. We recognise that, although current
law meets the UK's international obligations in relation to the
bribing of foreign public officials, there is some value in a
clearer demonstration of that. The CBI therefore supports in principle
the creation of this new and separate offence in addition to the
general bribery offences.
13. In the draft bill, no offence will have
been committed if the financial or other advantage is legitimately
due (Clause 4, sub-clause 3). This is defined in terms of the
laws of the country permitting or requiring it (sub-clause 4).
The CBI is very concerned this will mean that the there will be
significant debate over what these laws or regulations might be
and that these decisions in every case would reside with the courts.
Given that the burden of proof in criminal cases is rightly high,
the idea that courts would be making interpretations of foreign
laws and regulations seems to need re-assessment.
14. The draft bill compounds the problem
by failing to include the defence permitted in Clause 5 of
the Law Commission's proposed legislation. This defence—that
a reasonable belief existed that the payment to the official was
required or permitted under local law—would guard against
the possibility that a criminal offence may be committed without
a mens rea. It would also enable companies to assure themselves
that they are operating legitimately and it would put them on
a level playing field with companies based in other jurisdictions
which already adopt this approach. We therefore fail to understand
the motivation behind its removal from the draft bill.
15. In addition, the Law Commission's defence
requires a very high standard of proof from the defendant to show
that there was reasonable belief that a payment was due. This
would include what is in effect due diligence into the circumstances
pertaining to a particular jurisdiction. The CBI believes this
formulation to be a balanced and fair way of approaching the issue,
and we would recommend that this omission be rectified in the
draft bill.
16. In this regard, we would also point
out that in other jurisdictions, for example the US under the
Foreign Corrupt Practices Act, there is an express defence of
reasonable belief based on written provisions in a foreign law.
This is entirely consistent with the OECD Convention.
CLAUSE 5: FAILURE
OF COMMERCIAL
ORGANISATIONS TO
PREVENT BRIBERY
The offence
17. The draft bill introduces a new offence
of corporate liability for failing to prevent bribery based largely
on the Law Commission's final report. We had felt that it would
have been preferable to review this issue as part of the Law Commission's
project on corporate liability generally. As published, the provisions
in the draft bill present some major problems for business.
18. In framing this new offence, the draft
bill says in sub-clause 1 that a business would be liable
if a person bribes another while performing services for the business,
if the bribe was connected to doing business and if a responsible
person, or number of persons, was negligent in failing to prevent
the bribe. The CBI believes very strongly that the creation of
a criminal offence based on negligence is undesirable and not
acceptable. We recognise that negligence is a basis for imposing
civil liability, but negligence does not and should not equate
to criminal intent or awareness. If such an offence is to be pursued
in the final bill, we think that gross negligence or recklessness
should be the standard for criminal conviction.
19. It should also be noted that criminal
liability for the general bribery offences, and in respect of
bribery of foreign public officials, will not attach to corporates
except under the consent or connivance provisions of Clause 8,
which is clearly a higher test than negligence.
20. In addition, as drafted, failure to
prevent the bribe (sub-clause 1 c) brings an absolute character
to the obligation and imposes a very high bar that will be related
to negligence. This could mean that even if the business took
every precaution to avoid an act of bribery taking place, the
very fact that it happened could trigger corporate criminal liability.
We would note that the OECD Convention uses the term combating
bribery in its title and it seems to us that this should be the
intention of the draft legislation too.
Proof of an offence
21. In sub-clause 2 as written, we
are concerned that it may be possible for corporate liability
to be established without a prior prosecution of a person. It
would seem that this language should be amended to include reference
to an evidential test related to the courts. We would recommend
that clarification is required to ensure that the courts must
be satisfied beyond all reasonable doubt that a bribery offence
has occurred as a precondition to a finding under the corporate
offence.
Responsible person
22. The draft bill provides a definition
of a responsible person in sub-clause 3. This would mean that,
in the absence of an appointed responsible person, a senior officer
is assumed to have that function. Sub-clause 7 defines senior
officer as a director, manager, secretary or other similar officer.
We believe the definition should be clarified to ensure that directors,
senior officers and senior executives are recognised as the intended
categories of person. In addition, we believe that the term manager
is far too broad as it covers people of various seniorities throughout
the business and varies from one business to another. An appropriate
qualification might be a manager fulfilling a senior executive
role. Finally, it would be more appropriate to use the term company
secretary rather than secretary.
Adequate procedures defence
23. Sub-clause 4 provides an adequate
procedures defence. There is a parallel with sub-clause 1c in
that the use of this defence could automatically be nullified.
This could happen because if an act of bribery took place, it
could mean that procedures would be interpreted as not being adequate.
24. The CBI is very concerned that it is
totally unclear as to what will be sufficient to constitute adequate
procedures. This issue was recognised by the Law Commission in
respect of its report. We therefore believe that detailed guidance
will be essential as to what is expected of companies. The application
of this guidance may vary from one company to another, depending
on a range of circumstances.
25. In the absence of clarity, the CBI believes
that companies will be advised, or feel compelled, to adopt a
precautionary approach. This could involve putting in place complex,
costly and burdensome procedures which in reality have little
practical effect in combating bribery. For example, an annual
training session telling staff not to give or receive bribes may
not be likely to prevent a rogue employee who is inclined to offer
or take bribes from doing so. Likewise, a box-ticking exercise
may not produce the desired result of combating bribery.
26. We therefore propose that, in addition
to the guidance required, the phrase "adequate procedures"
should be amended and replaced by the phrase "reasonable
systems and controls". This would in effect frame the defence
in terms of risk management procedures, something that businesses
of all sizes understand and can apply in different circumstances.
27. Sub-clause 5 voids the defence
if the negligence was that of a senior officer. We have already
noted our concerns over the definition to include a manager in
sub-clause 7. The inclusion of manager could therefore render
the defence inoperative.
CLAUSE 6: SUPPLEMENTARY
PROVISIONS—PERSON
PERFORMING SERVICES
28. Clause 6 gives meaning to the phrase
person performing services for or on behalf of the company in
Clause 5, sub-clause 1a. The CBI strongly believes that legislation
should not make parent companies liable for all acts of their
subsidiaries. An attempt has been made to recognise that point
in Clause 5, sub-clause 1b, which refers to the bribe being in
connection with the company's business, and in Clause 6, sub-clause
4, which introduces the concept of relevant circumstances. But
we believe that this is not sufficient to meet our fundamental
point and additional language is required for clarification. We
would support the rewording of Clause 5, sub-clause 1b to read,
"the bribe was to obtain benefits for a business or businesses
operated by C".
29. The CBI has further concerns that relate
to the nature and variety of business relationships. As well as
employees, agents and subsidiaries mentioned in sub-clause 3,
there are other ways in which businesses operate that the draft
bill's language does not properly reflect. In fact, as written,
the draft bill will place certain types of business relationships
in an impossible position as they could be held liable for a criminal
offence despite not exercising control in that relationship. These
include joint ventures, which themselves can operate in a wide
variety of forms and degrees of control, development contracts,
profit sharing agreements with State and other entities, and banking
syndicates. We believe that it is unreasonable to expect criminal
liability to pertain in circumstances where there is no control
and the draft bill should be amended to reflect that.
CLAUSE 7: TERRITORIAL
APPLICATION
30. We note that the draft bill goes further
than the requirements of the OECD Convention to cover extraterritorial
jurisdiction for all the offences, not just the bribery of a foreign
public official. The CBI has long-standing and principled concerns
about the extraterritorial application of legislation. It is wrong
to criminalise action in the UK that is perfectly legal elsewhere.
We therefore agree with the Law Commission that a realistic and
fair law of bribery must take account of the variation between
jurisdictions in the circumstances under which payments may occur
as a matter of law. This provides a further reason to favour a
broad application of the reasonable belief defence. We also note
the draft bill provides for jurisdiction over individuals ordinarily
resident in the UK.
CLAUSE 10: CONSENT
TO PROSECUTION
31. The CBI supports the requirement in
the draft bill for the consent of a senior official to prosecutions—the
Director of Public Prosecutions, the Director of the Serious Fraud
Office or the Director of Revenue and Customs Prosecutions. We
believe that delegation of consent to a specific person, persons
of a specified description or related to specified circumstances
in sub-clause 3 should only be made to someone of sufficient
seniority.
GOVERNMENT IMPACT
ASSESSMENT
32. The CBI has reviewed the Ministry of
Justice's Impact Assessment issued with the draft bill. We would
make two observations. First, it is clear that the Impact Assessment
very significantly under-estimates the cost and activity related
to the operation of the draft bill. Second, we do not see much
evidence that the Government has fully grasped the need to ensure
UK companies can remain competitive by operating in or from a
jurisdiction that complies with international obligations but
does not go significantly beyond them, and which applies reasonable
anti-bribery measures without impeding the ability of companies
to operate effectively and legitimately around the world.
June 2009
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