Memorandum submitted by BG Group (BB 19)
INTRODUCTORY COMMENTS
1. This written submission is made by BG
Group plc ("BG"). We are grateful to the Joint Committee
for seeking the views of interested parties during pre-legislative
scrutiny of the draft Bill. BG welcomes the UK Government's initiative
to modernise, and consolidate, anti-bribery legislation. We also
support much of the draft Bill's proposed core content.
2. We set out below some substantive comments
on the draft Bill. We also include some suggested changes to drafting.
If these aspects of the Bill can be satisfactorily addressed,
we believe that UK commercial organisations (and enforcement agencies)
will find it significantly easier to apply the proposed statute,
without the overall efficacy of the legislation being compromised.
3. It is essential to BG's business that
the legislation under which we operate is clearly drawn. This
is particularly the case with the proposed Bribery Bill, given
that it carries the potential to incur criminal liability, substantial
penalties and significant damage to corporate reputation. BG considers
that the draft Bill needs to specify more clearly: (a) the precise
scope of the offences created; (b) the extent of any available
defences; and (c) the categories of person capable of rendering
a commercial organisation criminally liable for bribery, when
acting on that organisation's behalf.
4. BG is a UK Stock Exchange-listed energy
company. Through our global activities, we have acquired considerable
practical experience of foreign anti-bribery legislation, especially
the US Foreign Corrupt Practices Act 1977 ("FCPA").
BG has subsidiary companies or participating interests in various
countries worldwide including India, Kazakhstan, Egypt, Libya,
Tunisia, China, Nigeria, Brazil, Australia, USA and UK. As the
Joint Committee will doubtless be aware, corruption monitors such
as Transparency International regularly classify some of these
countries as being of relatively "high" perceived bribery
risk. Whilst our corporate headquarters and some of our assets
are UK-based, the majority of BG's operational interests and activities
are abroad. Furthermore, at any given time, approximately 65%
of BG's staff is working outside of the UK.
5. BG participates in various incorporated
and unincorporated joint ventures worldwide, either as project
operator or minority partner/shareholder. BG subsidiary companies
regularly enter into long-term ventures with other international
energy companies, foreign state-owned corporations and local private
entities. These activities necessitate dealings with foreign public
officials, contractors and agents. Our operations cover the full
chain of oil and gas activities. These range from offshore exploration
and production to processing, transportation, distribution and
trading.
SUMMARY OF
SUBMISSIONS
6. BG's submissions may be summarised as follows:
6.1 We suggest that the draft Bill would
be greatly improved, if it expressly required a designated UK
enforcement agency to issue guidelines and (upon request) advisory
opinions to the business community. Our specific suggestions are
at Paragraph 7.1 below. The relevant guidelines and opinions
would clarify what kind of business conduct is deemed to be compliant,
under the relevant agency's then current enforcement policy. Aside
from the general statutory duties suggested below, we recommend
a specific statutory requirement for guidance on what would constitute
"adequate procedures", for the purpose of the Section
5 defence.
6.2 Greater clarity is needed on the circumstances
in which Section 5(5) will deprive a relevant commercial organisation
of the "adequate procedures" defence. In particular,
the meaning of the phrases "partly negligent" and "purporting
to act in the capacity of a senior officer" needs to be clarified.
Also, the term "senior officer" should be restricted
to that of "director or equivalent", consistent with
the Law Commission's recommendation, and the precise ambit of
persons "equivalent" to directors should be clarified.
6.3 As under the FCPA, the Bill should contain
a rebuttable presumption of compliant conduct. The presumption
would apply, where a relevant commercial organisation has obtained
an advisory opinion from the designated enforcement agency.
6.4 The proposed Section 4 offence
(bribing foreign public officials) should include an "affirmative
defence" concerning the hosting of foreign public officials.
This would clarify that a relevant commercial organisation has
a defence, where it pays the reasonable and bona fide business
expenses of visits by foreign public officials, in specified circumstances.
An equivalent "affirmative defence" exists under the
FCPA.
6.5 In order for a relevant commercial organisation
to be held criminally liable under Section 5 for "failing
to prevent" bribery:
(a) the culpability standard under the Section
5(1) offence should be that of "gross negligence" (not
mere "negligence");
(b) the concept in Sections 5 and 6 of
persons "performing services for or on behalf of" a
relevant commercial organisation needs to be clarified. It should
expressly exclude entities which a relevant commercial organisation
does not control. This would prevent an organisation being held
criminally liable for failing to prevent bribery in a joint venture
in which it has a non-controlling stake.
DETAILED SUBMISSIONS
7. Official guidance and advisory opinions
7.1 We recommend that the draft Bill should
require a designated UK anti-bribery enforcement agency to issue
official guidance and (upon request) advisory opinions on compliant
business conduct. As the Joint Committee has heard during oral
evidence, both the FCPA and the Independent Commission Against
Corruption Ordinance of Hong Kong ("ICAC Ordinance")
enshrine statutory duties for the giving of such guidance and
advice.[152]
For the Joint Committee's ease of reference, we attach relevant
extracts from those items of legislation: see Appendices A and
B.[153]
Specifically, we suggest that the draft Bill include the following
duties and powers upon the designated agency:
(a) a general duty to determine whether issuing
official guidelines (or general precautionary procedures) might
enhance compliance with the statute and assist the business community;
(b) a power to issue such guidelines or procedures
(based upon such determination), specifying business conduct deemed
compliant, in principle, with the agency's then current enforcement
policy;
(c) a specific duty to issue guidance on procedures
that would potentially constitute "adequate procedures",
for the purpose of the Section 5(4) defence; and
(d) a general duty to issue advisory opinions,
upon request by commercial organisations. Such opinions would
advise the applicant whether particular business conduct would
be compliant with the agency's then current enforcement policy.
The Bill should specify a reasonable time limit, within which
such advisory opinion would have to be provided. The opinion should
be made publicly available only with the consent of the applicant.
7.2 As the Joint Committee has also noted
during oral evidence, the ICAC Ordinance expressly imposes a statutory
duty upon the Commissioner of the Independent Commission Against
Corruption ("ICAC"). The duty is to guide and advise
any person, in relation to corrupt practices generally. We understand
that ICAC's Corruption Prevention Department administers an "Advisory
Services Group". Its Website commits to responding within
2 days to specific requests. Furthermore, ICAC provides free
guidance to commercial organisations on anti-bribery matters,
including best practice modules. One such ICAC module is a 70-page
"Corruption Prevention Guide for Listed Companies".
ICAC also undertakes to assist organisations in drawing up compliance
documents, such as codes of conduct.
7.3 Similarly, the FCPA expressly requires
the US Attorney-General to publish guidelines and to produce advisory
opinions (upon request), in relation to bribery of foreign public
officials. Periodically, the US Department of Justice publishes
such advisory opinions, with the consent of the entity requesting
the opinion. The published opinions do not represent a binding
precedent. However, commercial organisations may usefully have
regard to them, when framing their own corporate anti-bribery
procedures and controls.
7.4 The US Department of Justice regularly
publishes memoranda, summarising present prosecution policy in
respect of business organisations (the current version being the
"Filip Memorandum").[154]
These memoranda represent a clear statement to the business community
of the principles that prosecutors will apply. They cover important
issues such as (a) the factors considered to be relevant in determining
whether to charge a corporation and (b) the weight to be given
to corporate compliance programmes. BG sees value in a similarly
transparent approach being adopted in the UK, at least in relation
to bribery offences. In this way, commercial organisations can
readily understand how UK enforcement agencies will, in practice,
bring prosecutions under the proposed Bribery Act.
7.5 When giving oral evidence to the Joint
Committee, Professor Celia Wells acknowledged that an official
UK compliance code of conduct might be a possibility. However,
as regards prosecutorial guidelines or advisory opinions, Professor
Wells expressed the view that it would be an "unnecessary
public expense … to have that filter".[155]
She cited the different historical approach to prosecutorial discretion
in the USA, and legislative differences in the FCPA, as justifying
the absence in the draft Bribery Bill of any provision for official
UK guidance/opinions. We respectfully disagree with Professor
Wells' conclusion. BG recognises that there are currently differences
in prosecutorial approach and the anti-bribery statutory framework,
as between the USA and the UK. However, recent UK enforcement
action—coupled with information in the Ministry of Justice's
own impact assessment, published with the draft Bill—indicates
a likely future narrowing of such differences (see Paragraph 8.3 below).
We suggest that any remaining differences in US/UK approach should
not prevent the draft Bill from requiring a designated UK enforcement
agency to publish official guidance on compliance "best practice".
In our view, this would be a sound investment of public funds.
We acknowledge that the nature of such model guidance may need
to differ, depending on the size and industry sector of the organisation
in question.
8. "Adequate procedures" defence/Non-applicability
of defence
8.1 We suggest that the proposed Section
5 "adequate procedures" defence provides a compelling
example of why the Bill should require official guidelines on
compliant conduct. Currently, the draft Bill offers no definition
of the term "adequate procedures". Likewise, it contains
no mechanism for a commercial organisation to seek official guidance
on the meaning of the term. Commercial organisations need to understand
how relevant UK enforcement agencies are likely to apply the phrase
in practice.
8.2 As with other UK-listed public companies,
BG places very substantial corporate emphasis on ethical conduct
by our directors, employees, agents and contractors. We have various
mandatory governance procedures (including corporate "Ethical
Conduct" standards). These cover practical issues - for example,
undertaking due diligence, reporting corruption incidents and
the giving or receiving of hospitality. However, absent any official
guidance, these measures necessarily represent our subjective
corporate view of appropriate ethical conduct procedures.
8.3 We suggest that some common benchmark
is needed, in order to assess the "adequacy" of corporate
anti-bribery procedures, in relation to the Section 5 defence.
It would be unsatisfactory for the draft Bill to leave commercial
organisations (or their external legal advisers or representative
trade bodies) to second-guess what may be "adequate",
in this context. There seems little realistic prospect of guidance
from future prosecutions brought under the new legislation, once
enacted. The Ministry of Justice's impact assessment for the draft
Bill indicates that it anticipates only an additional 1.3 prosecutions
per year, in relation to the new corporate offence. This estimate
gives the perception that the Government does not envisage UK
prosecutors taking many Bribery Act cases to a full jury trial.
That perception is perhaps compounded by a recent report in the
legal press. From this report, we understand that the UK SFO is
actively considering seeking statutory powers for US-style "non-prosecution
agreements", "deferred prosecution agreements"
and "plea-bargaining" arrangements.[156]
Accordingly, it seems unlikely that a body of case law will develop
in the UK, which might otherwise have assisted organisations to
interpret the undefined term "adequate procedures".
8.4 BG would, therefore, welcome a statutory
mechanism that requires UK prosecutors to establish a base reference
point on the meaning of "adequate procedures". The Ministry
of Justice's impact assessment states: "The proposals should
support the Government's strategy for tackling international corruption
not only by deterring and penalising bribery, but also by encouraging
and supporting business to apply appropriate standards of ethical
business conduct" (BG's emphasis added here). [157]
We believe that the most practical way in which the Government
can encourage and support business in this regard is through a
statutory requirement for guidance on the term "adequate
procedures".
8.5 We also suggest that Section 5 should
specify a non-exhaustive list of evidential criteria, to assist
a criminal jury in deciding at trial whether an organisation,
in fact, had "adequate procedures" in place. Currently,
the draft Bill contains no such criteria. This leaves it unclear
how a jury might assess (or how a judge might guide a jury on
the issue of) whether a given organisation's procedures could
be considered "adequate", if the Section 5 defence
is invoked.
8.6 Furthermore, greater clarity is needed
on when Section 5(5) might deprive a relevant commercial organisation
of the Section 5(4) "adequate procedures" defence. In
particular, we suggest that the Section 5(7) term "senior
officer" be restricted to that of director or equivalent.
This would be consistent with the Law Commission's recommendation:
see Paragraph 8.8 below. The proposed Section 5(7)(a) definition
of "senior officer" encompasses the undefined term "manager",
which seems to go significantly beyond the Law Commission's recommended
position. In BG's experience, the term "manager" could
potentially cover a plethora of persons - operating at widely
different levels in a company—whose position does not equate
to that of director or equivalent.
8.7 The meaning of the Section 5(5) phrases
"partly negligent" and "purporting to act in the
capacity of a senior officer" also need to be properly clarified.
As regards a senior officer being "partly" negligent,
the draft Bill gives no guidance as to what level of negligence
might suffice to dis-apply the defence. Would it be assessed in
percentage terms, as with contributory negligence in tort? If
so, would (say) 25% "part" negligence of a senior officer
render the corporate defence unavailable to an organisation? It
is unclear how the concept would be applied, in practice. Additionally,
we would urge that the phrase "purporting to act in the capacity
of a senior officer" be clarified. Given that the proposed
culpability standard is the tortious one of negligence, can an
organisation rely upon the defence where a person purports to
act as a senior officer and commits a negligent "frolic of
his own" by bribing someone (assuming that the organisation
has in place "adequate" anti-bribery procedures)?[158]
8.8 The Law Commission Report includes
the following comment on the "adequate procedures" defence:
"The existence of this defence is an important limitation
on liability for the offence. It shows that our concern is to
direct the criminal law at companies that fail to make continuing
and systematic efforts to ensure that active bribery is not committed
on their behalf, even when the risk of that happening may be high.
Our focus is not on ethically well-run companies which have made
an error (albeit culpable) in a particular case leading to the
commission of bribery by someone providing services on their behalf.
However, the defence should not be available when the negligence
that led to the failure to prevent bribery being committed was
attributable to a director of the company (or equivalent person)
him or herself…. " (BG's emphasis added here).[159]
9. Rebuttable presumption
We suggest that the Bill contain a rebuttable
presumption of compliant conduct, where a relevant commercial
organisation has obtained an advisory opinion from the designated
enforcement agency. The FCPA contains just such a rebuttable presumption.
As under the FCPA, the presumption should be rebuttable by a preponderance
of factual evidence. Such evidence could include whether the organisation
had submitted complete information, when seeking the opinion.
We consider that including an equivalent provision in the draft
Bill would represent a fair and proportionate approach to enforcement
action. If a commercial organisation has taken the step of pro-actively
seeking advice on compliance conduct, it seems reasonable that
the evidential burden of proof should shift to the relevant enforcement
agency.
10. Affirmative defence/Hosting public officials
10.1 Periodically, businesses such as BG
are formally asked to meet the legitimate expenses of a foreign
public official's business visit. An example might be a request
to meet the direct costs of a foreign public official visiting
an LNG plant operated by BG or attending a particular technical
course. It is common for oil and gas licences (or production sharing
contracts) to impose express obligations to provide technical
training to the host government's officials. Under the FCPA, an
"affirmative defence" can be raised if an organisation
faces criminal allegations that particular hosting of a foreign
public official amounted to bribery. The defence applies where
a commercial organisation has paid the official's "reasonable
and bona fide" business expenses. In order successfully to
invoke the defence, the FCPA requires such expenses to be directly
related to: (a) the promotion, demonstration or explanation of
business products or services; or (b) the execution or performance
of a contract with a foreign government or its agency: see Appendix
A. BG recommends that Section 4 of the draft Bill should
incorporate an equivalent defence.
10.2 As currently drafted, the proposed
Section 4 offence would be committed through the giving to
a foreign public official of "any financial or other advantage … not
legitimately due…", assuming there exists the requisite
Section 4(1)/(2) intent. By Section 4(5), a particular financial
or other advantage is legitimately due to that official "if,
and only if, the law applicable to [the official] permits or requires
[the official] to accept it". In BG's experience, foreign
legislation does not necessarily explicitly state whether an official
is "permitted or required" to accept business hospitality.
Sometimes, the foreign law is simply silent on the point. Commercial
organisations need certainty over the extent to which it will
be legally defensible to host foreign public officials, under
the statute. If the draft Bill were to include a defence similar
to that in the FCPA, this - combined with the official guidance
suggested at Paragraph 7 above - should provide adequate
business certainty on what comprises non-corrupt hosting of foreign
public officials.
11. Corporate offence of failing to prevent
bribery
11.1 We suggest that the culpability standard
under the proposed Section 5 corporate offence (failing to
prevent bribery) should be that of "gross negligence",
not mere "negligence". This higher standard would seem
consistent with the Law Commission's view - namely, that the offence
should penalise "continuing and systemic" corporate
failures to prevent bribery, rather than criminalising organisations
for isolated incidents: see Paragraph 8.8 above. Our position
on the point is, therefore, the same as that in the written submissions
of ICC UK and GC 100 to the Joint Committee.
11.2 The concept in Sections 5 and
6 of persons "performing services for or on behalf of"
a relevant commercial organisation needs to be clarified. We consider
that it should expressly exclude entities which a relevant commercial
organisation does not control. It is important to ensure that
an organisation is not held criminally liable for failing to prevent
bribery in a joint venture in which it has a non-controlling stake.
Where an organisation has only a non-controlling interest in a
joint venture, the draft Bill should expressly make the "adequate
procedures" defence available. A suitable proviso would be
that the organisation undertook adequate due diligence and obtained
appropriate contractual anti-bribery assurances from the joint
venture participants. We suggest that any official guidance (of
the kind suggested at Paragraph 7.1 above) indicate the minimum
due diligence expected. It should perhaps also contain model anti-bribery
provisions.
12. BG would be pleased to supplement this
written submission with more detailed drafting suggestions, if
that were deemed to be of assistance to the Joint Committee. BG
representatives would also be willing to meet with officials from
the Ministry of Justice and the Department for Business, Innovation
and Skills to discuss the draft Bill in greater detail.
June 2009
152 Sections 78dd-2(e) and (f) of US FCPA and Sections
12(e) to (h) inclusive of Cap 204, 2003 Independent Commission
Against Corruption Ordinance of Hong Kong. See also Paragraph
8.1 of BG's submissions. Back
153
In this context, we refer to Question 205 by the Earl of
Onslow and Question 206 by Lord Thomas of Gresford (and the
responses of witness Andrew Berkeley of ICC UK): Joint Committee's
proceedings of Wednesday 3 June 2009: from the uncorrected
transcript of oral evidence (which remains subject to review by
Committee members and witnesses), to be published as HC 430-ii:
http://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/uc430-iii/uc43002.htm Back
154
"Principles of Federal Prosecution of Business Organisations"
dated 28 August 2008, issued by the US Department of Justice's
Office of the Deputy Attorney-General, Mark Filip. Back
155
Comment by Professor Wells in response to Question 80 put
by Lord Thomas of Gresford: Joint Committee's proceedings of Wednesday
20 May 2009 - from the uncorrected transcript of oral
evidence (which remains subject to review by Committee members
and witnesses), to be published as HC 430-ii: http://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/uc430-ii/uc43002.htm. Back
156
See article in Law Society Gazette of Thursday 7 May
2009: "Serious Fraud Office to ask Parliament to grant
it new powers". Back
157
Ministry of Justice's "Impact Assessment of draft
Bill on reform of the law on bribery" dated 20 February
2009, Version 1. Back
158
See the exchanges between Lord Thomas of Gresford and Professor
Wells: Questions 132-134 of the Joint Committee's proceedings
of Wednesday 20 May 2009 - from the uncorrected transcript
of oral evidence (which remains subject to review by Committee
members and witnesses), to be published as HC 430-ii: http://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/uc430-ii/uc43002.htm. Back
159
Paragraphs 6.6 and 6.7, Part 6 of the Law Commission
Report (LAW COM No 313) entitled "Reforming Bribery",
issued on 19 November 2008. Back
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