Memorandum submitted by the GC 100 (BB10)
GC100 is the association for the general counsel
and company secretaries in the FTSE 100. There are currently over
120 members of the group, representing some 90 issuers.
Please note, as a matter of formality, that the views
expressed in this document do not necessarily reflect the view
of each and every member of GC100 or their employing company.
1. INTRODUCTION
Whilst our members are committed to ensuring
compliance with the highest ethical standards of corporate behaviour,
and we welcome the codification of the existing law of bribery,
we have significant concerns about the uncertainties which the
draft Bill creates.
The lack of certainty as to what companies are required
to do to comply with the law is likely to create confusion amongst
some companies, and impose a significant additional burden and
cost on companies in working out what they must do to comply with
the new law.
The Secretary of State for Justice has indicated
that a pre-legislative consultation process would be adopted in
relation to this Bill. We are not aware of how this process will
work but the GC100 would be very willing to participate in any
discussion on the practical implications of the Bill so that we
can remove areas of uncertainty and enable companies to achieve
the clarity which must be desirable especially in relation to
criminal conduct.
2. GC 100 KEY
CONCERNS
Our members are concerned to ensure that any
reform of the existing law creates a clear and unambiguous framework
within which business must operate.
2.1 Adequate procedures defence: it is
a defence to prove that the business in question had in place
adequate procedures designed to prevent bribery occurring, which
seems like a sensible defence for a business to claim, but there
is no guidance as to what "adequate procedures" actually
means. Without the necessary guidance, the like of which is given
by the Federal Sentencing Guidelines in the United States, different
businesses will introduce measures in good faith which may not,
with the benefit of hindsight, be sufficient to comply with the
law.
We would be happy to work with MOJ / BERR to
develop guidance which can support the new offence, to enable
companies to decide with clarity what is expected of them. We
attach, as Appendix 1 the GC 100 proposal for a list of the sorts
of procedures which, subject to an appropriate risk assessment
bearing in mind the size and activities of each company, should
be put in place in order to be "adequate" and therefore
comply with the new law.
2.2 Exclusion from adequate procedures
defence: the draft Bill removes the availability of the defence
where the negligence is that of a director, manager, secretary
or similar officer, or a person purporting to operate in such
capacity. This exclusion is very confusing, and renders it highly
unlikely that any commercial organisation would be able to rely
on the adequate procedures defence, and should be removed in its
entirety. A significant number of individuals within companies
will be termed "managers" and this term is used very
widely. It cannot be right that the adequate procedures defence
is not available to a company because a "manager" in
a position of some but limited authority behaves in a particular
way.
At a minimum, the term "manager",
"senior officer" or persons purporting to act in such
capacity must be removed. A more detailed description of our members'
position is set out at Appendix 2.
2.3 Negligence: negligence is not
the appropriate standard upon which such a serious offence must
be judged. Unlimited fines and debarment from tendering for public
contracts are real consequences of the new offence. As a basis
for criminal liability, negligence is not generally sufficient
to establish liability for serious offences. The only offence
for which negligence is arguably sufficient is public nuisance,
and the most recent corporate offence which is analogous is corporate
manslaughter, where "gross negligence" is the required
threshold.
No guidance is offered on what the test of negligence
is, and we assume that the test of negligence can be satisfied
where a person's conduct departs from the standard to be expected
of a reasonable person. This test can differ between individuals,
and there is a danger with the wording in the Bill that the well
trained and qualified person could be judged more harshly than
someone who has not been properly trained.
The appropriate test in this case should be
that of "gross negligence". This would apply where the
standards of behaviour fall well below what could reasonably be
expected, and is a more realistic test for an offence with such
serious consequences. It sits better with the analogous serious
offence of corporate manslaughter.
A more detailed analysis of the negligence test
and the issues associated with it is attached as Appendix 3.
2.4. Fines: there is significant
concern amongst our members about the level of fines which can
be levied against companies who are in breach of the law, and
there is no guidance given as to how the Courts would approach
the level of fine. Thought must be given as to the way in which
the Courts should approach the level of fine ie would they be
referable to turnover, the value of the contract, the profit,
the quantum of the bribe or some other criterion. Furthermore,
confiscation orders are also available, in addition to any fines.
Whilst we accept that penalties must be serious, they must also
be proportionate and reasonable.
3. OTHER ISSUES
3.1 Debarment: under the Public Contracts
Regulations 2006, in circumstances where a company has been convicted
of bribery or fraud, it can be automatically debarred from tendering
for public sector contracts, regardless of the seriousness of
the offence or any mitigating factor, in perpetuity. This could
be excessively punitive for the companies concerned, in respect
of what may be an act of the individual.
Further, the Regulations do not provide for "self
cleansing", as do comparative regulations in the US, so debarment
may follow for acts many years past. Consideration must be given
to amending the law to allow for such cleansing, so that debarment
is not either mandatory or perpetual.
3.2 Facilitation payments: other
jurisdictions accept the fact that facilitation payments are a
necessary evil in some countries. The current proposal does nothing
to change the present policy of forbidding "facilitation"
payments. It therefore remains technically possible for a company
to be prosecuted for failing to prevent such payments. Whilst
the policy appears to be that facilitation payments are best handled
through sensible use of the discretion not to prosecute, we simply
wish to flag the uncertainty caused for companies, particularly
those subject to other jurisdictions which take a different approach.
3.3 Local legal advice defence: the
Law Commission recommended that a safe harbour be available in
circumstances where local legal advice had been taken, but which
subsequently proved to be wrong. The defence did not appear in
the Bill, and we believe that this defence should be reinstated.
4. CONCLUSION
Whilst we welcome the introduction of the draft
Bill, we believe that there are some serious flaws in its approach.
The principle behind its introduction is accepted, but it would
be wrong to prosecute companies in circumstances where adequate
and functioning compliance processes are in place, merely as a
result of unforeseeable negligence on the part of an individual.
Action can always be taken against particular individuals who
are responsible for the particular course of action, and this,
in our submission, is the appropriate course in such circumstances.
June 2009
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