Memorandum submitted by Jeremy Cole (BB
39)
RESPONSES TO
THE JOINT
COMMITTEE ON
THE DRAFT
BRIBERY BILL'S
SUPPLEMENTARY QUESTIONS
TO MONTY
RAPHAEL, LOUISE
DELAHUNTY AND
JEREMY COLE
The following are the responses to the questions
the Committee has posed, following on from oral submissions to
the Committee by Monty Raphael, Louise Delahunty and I on 3 June
2009.
1. To the extent that the "improper"
performance test is unclear or unworkable, what changes should
be made to the draft Bill?
SUMMARY
1.1 We consider that the test is conceptually
easy enough to apply but that it is obscured by the way in which
clause 3 is drafted and the possibility of cultural questions
entering the jury's mind in foreign bribery cases. We suggest:
(a) the removal of the sub-tests of "good
faith", "impartiality" and "breach of trust"
(currently clause 3(3)-(5));
(b) the simplification of clause 3(6)-(8) into
a single sub-clause explaining that a function is improperly performed
when performed below the standards of integrity reasonably expected
of an "international business person"; and
(c) the inclusion of an explanation in the Explanatory
Notes to the Bill that the test referred to in paragraph 1.1(b)
above is intended to be applied by the jury as people of integrity
without reference to the social standards applicable in the state
(i) of the person performing the function or (ii) where the function
is to be performed.
We take the view that this should clarify the
test to make it sufficiently clear for a jury to apply and for
lawyers to be able to advise their clients.
REASONS
1.2 Some lawyers, academics and businessmen
have expressed the view that the word "improper" is
in some unparticularised way too conceptually difficult to be
included in the Bill. We take the contrary view. The basic idea
that the Bill is seeking to convey is simple, but it does not
follow that it is easily reduced to words. "Improper"
is the best word so far suggested. A properly directed jury could
quite easily cope with discerning what constitutes improper performance
of a function and what does not. In this regard, we would endorse
the view Professor Horder expressed before the Committee that
"improper performance" (and the linked issue of "reasonable
expectation": clause 3(8)) is supposed to be a jury question.
1.3 If a jury is trusted to be able to tell
when a function has been performed "improperly", the
Committee must ensure that the question of what is "improper"
is not obscured by distracting sub-tests or the possibility of
a jury trying to consider "impropriety" from a particular
foreign cultural perspective. In this light, the test of improper
performance is difficult on its face due to the manner in which
clause 3 of the Bill is over-drafted.
1.4 With the greatest respect to Professor
Horder and the Law Commission, the conditions of "good faith",
"impartiality" and "breach of trust" contained
in clause 3(3)-(5) unnecessarily complicate matters. These terms
seem to serve the function of glosses on the core question of
whether the function was performed properly. As such, they add
little and introduce scope for confusion. If a judge feels that
the particular case being tried would be more easily understood
by the jury if a term such as "good faith" were used
in
1.5 Summing up, then that judge would be
free to use it. A judge should not be forced to explain, nor should
a jury be forced to consider, every case in those terms.
1.6 On similar lines, clause 3(6)-(8) seems
unwieldy. The expectation of the reasonable person should be capable
of explanation in far simpler terms. If the "conditions"
set out in clause 3(3)-(5) are removed, then clause 3(7) is unnecessary
and can also be removed. Clause 3(6) and (8) can be collapsed
into a single, simple clause as suggested in paragraph 1.1(b)
above.
1.7 In collapsing the sub-clauses on improper
performance and reasonable expectation, some further content should
be given to the test. In particular, we refer to the problem of
the stance or position of the reasonable man that the Committee
has raised with several consultees. Given the Law Commission's
understandable concerns to apply standards that are as objective
as possible, and the scope for lawyers advising clients to raise
such a defence, we recommend that steps be taken to deal with
this problem.
1.8 We submit that the Committee should
consider using a standard of integrity of the "international
business person" as a clear way to give the most objective
possible content to the test. Further explanation can most appropriately
be provided in the Explanatory Notes to the Bill.
2. Does the draft Bill leave any gaps in the
law or can we rely on other legislation (for example the Competition
Acts) to prevent holes emerging?
We are inclined to agree with the views expressed
by both Professor Celia Wells and Professor Bob Sullivan in their
evidence to the Committee that there are no substantive gaps of
note left by the draft Bill. As they explained, the use of general
offences rather than attempting to particularise should ensure
that those gaps are not left to be exploited.
3.Should the draft Bill subsume any of the overlapping
statutory bribery offences (such as offences under the Honours
(Prevention of Abuses) Act 1925), or is there merit in keeping
them separate?
We have no strong views on this point.
4. Are there any specific changes that should
be made to the draft Bill that you have not had an opportunity
to identify before now?
WHEN A
PAYMENT IS
"LEGITIMATELY DUE"
UNDER THE
FOREIGN PUBLIC
OFFICIAL OFFENCE:
SUMMARY
4.1 During the course of my oral submissions
to the Committee, Lord Lyell quite rightly raised the question
of what the result would be under an FCPA-style "written
law" test if there was no written law on the point in the
jurisdiction in question. In particular, there is concern that
a normal common law approach would conclude that a payment would
be permitted where there was no specific prohibition. Emphasis
was laid upon an alternative "reasonable belief" test.
4.2 We consider that the Committee could
decide to deal with this in one of three ways. However, we submit
that a "reasonable belief" test is not appropriate.
The possibilities are:
(a) including a "written law" test
equivalent to that contained in the FCPA (see §§ 78dd-1(b)
and 78dd-2(b)) which is sufficiently broad in its drafting to
encompass many different written sources of law, while excluding
the difficulties presented by "practices" and soft law;
or
(b) including a "reasonable belief"
test, limited to belief arising from independent advice on the
local law; or
(c) leaving the question open.
4.3 On further consideration, we submit
that the "written law" test is preferable. A "reasonable
belief" that the law is X when it is in fact Y is not considered
appropriate in other contexts. Leaving the question open creates
too much scope for the use of socially relative arguments on the
local practice of accepting of bribes. These arguments are precisely
what the concept of "legitimately due" should be used
to exclude, given the apparent aim of the Bill to apply as objective
an international standard as possible.
4.4 A "written law" test not only
excludes such arguments but provides businesses with far greater
certainty.
"LEGITIMATELY
DUE": A "REASONABLE
BELIEF" TEST?
4.5 The application of the law of any country
to a particular situation is often not immediately clear. Individuals
and entities are in a position to take advice on the law if its
application to their situation is sufficiently important to them.
On receiving advice, they act on it and take the risk that it
is incorrect. This is precisely what happens in many different
areas of the law.
4.6 As the Bill stands at present, obtaining
legal advice does not remove the risk of prosecution, but rather
allows a company to understand the risk and make an informed decision.
An equivalent need to obtain and rely on advice might arise under
English law for a UK company because the law is not clear. There
is no reason in principle or in practice why the mere fact that
the unclear law is that of a foreign country should lead the Committee
to create such a defence.
4.7 The fact that a person seeks the advice
may, however, be relevant to their intention in making the payment.
This could be dealt with within the question of whether the person's
intention was to influence the foreign public official (clause
4(1)).
"LEGITIMATELY
DUE": LEAVING
THE QUESTION
OPEN OR
A WRITTEN
LAW TEST?
4.8 The reasons for our preference for a
written law test are as follows. First, the scope for socially
relative arguments to be put is too great without such a test.
This has already been dealt with at length by the Law Commission
and we agree with their position.
4.9 Secondly, the scope for lengthy academic
arguments on whether local customs count as law is introduced
without such a test. Given the point made in paragraph 4.8 above,
it is questionable how much a jury should be asked to take account
of such customs. Assuming that we would want to, but only where
they really constitute "law", the idea that defendants
could engage the court in protracted debate about the status of
customs and practices is unattractive from a practical perspective.
It seems unlikely that such a debate would so frequently lead
to a different conclusion than if the debate were excluded. On
balance, this would lead to the conclusion that the line of argument
should not be available to defendants.
4.10 Thirdly, such a test provides greater
certainty for businesses. While an extra defence of "reasonable
belief" could look like an attractive proposition for defendants,
in reality we believe that it would rarely be relied on as part
of a compliance programme. It is too uncertain in circumstances
where a conviction can often be a "bet the company"
issue. Therefore, a standard that is less open to varied interpretation
is to be preferred. We consider that the written law test would
achieve this.
4.11 Fourthly, the maxim that payment "is
permitted if it is not expressly prohibited" can be misleading
and is insufficient to require exclusion of such a test. In a
common law country there are often several sources of written
law. The concern that, in any common law country, this will necessarily
lead to the difficulty that a payment will look like it is permitted
seems more imagined than real. Unless the law is generally unwritten
in that country it is far more likely that the problem will never
arise.
4.12 Finally, a written law test is the
best way to deal with the Bill's indecisive stance on double/single
criminality. The Bill, and the Law Commission Report, seems to
suggest that there is a tendency towards a single criminality
approach in a bribery context. If the Committee is minded to agree,
a written law test would not present concerns of the type set
out in paragraphs 4.8 and 4.9 above. If we do not concern
ourselves with whether the payment is criminal in the foreign
country, the extreme conclusion would be not to concern ourselves
with whether it is permitted there either. This is the position
suggested by the Committee in its most recent question, based
on the oral evidence of representatives of the OECD.
4.13 However, the Bill is not presently
fully committed to single criminality. The mid-position it occupies
is understandable: UK businesses should be able to operate abroad
without undue fear of prosecution while adhering to an appropriate
bribery standard. The strict logic of single criminality would
leave a business no leeway to take account of standards in the
country in which they operate. To allow for some leeway while
maintaining bribery standards and legal certainty, some form of
written law test would be the best solution.
FURTHER QUESTION
CONCERNING THE
REMOVAL OF
ANY QUESTION
OF WHETHER
A PAYMENT
WAS "LEGITIMATELY
DUE"
4.14 We suggest that the OECD's views, while
informative, should not lead to the exclusion of any consideration
of the legal position in the foreign country in question. The
"written law" exception to Article 1 of the OECD
Convention[182]
is specifically allowed for in the Commentary to that Convention.
Despite the fact that the OECD has presented anecdotal evidence
that this exception has not be brought into law by many countries,
or relied upon by many defendants, we consider that it is an important
layer of protection for UK businesses.
4.15 It must be remembered that the complete
exclusion of the "legitimately due" test would leave
clause 4 of the Bill requiring only that a person confer
an advantage on a foreign public official with the intent to obtain
business. As others have observed, this would create an offence
without the several layers of protection provided by the OECD
Convention and the FCPA. In particular, the Convention utilises
two concepts: of a payment being "undue" and of the
advantage the payer seeks to obtain being "improper".[183]
The Law Commission has consulted on and considered the structure
of the offence at length. The result is that, while not specifically
referring to whether the business advantage sought is "improper",
it was considered necessary to maintain a concept of whether the
payment to the foreign official was due or not. Without either
concept, the offence would have no explicit reference to a fault
element at all.
4.16 As indicated in paragraph 4.12 above,
the removal of any consideration of foreign law is therefore an
extreme step not contemplated by the Bill. It is a point that
the Law Commission consulted on and, after detailed consideration,
concluded that a level of reference to the law of the foreign
country was appropriate.[184]
While we have suggested, by reference to the OECD Convention and
the FCPA, to restrict the terms of reference to the "written
law" of the foreign country the Committee should note that
this still reflects the in-depth consideration of compliance with
the Convention and the interests of UK businesses engaged in by
the Law Commission. This can be seen from the statement in paragraph
5.83 of the Law Commission Report that the deliberate aim
was for the UK to meet the OECD's minimum standard.
4.17 English law is far from whole-heartedly
adopting a single criminality approach to offences with an international
element. The Law Commission has considered the position under
the OECD Convention and sought to ensure that UK businesses are
not unduly disadvantaged by an over-intrusive single criminality
approach. No real justification has been given for UK businesses
being unable rely on the same provision of foreign law as (for
example) a US company. Even if such a situation rarely arises,
the fact that it would remain possible is precisely what the Law
Commission considered and rejected. The desires of the OECD for
a maximalist response, while understandable given that organisation's
position, should not override the clear policy aims of the current
drafting of the Bill.
4.18 Even the minimal response should be
viewed in light of the concerns raised by entities such as the
ICC that the written law requirement may not cover all the permutations
of payments that are made in international commerce. We consider
that that risk is not significant enough to warrant rejecting
a narrow view of what is "legitimately due". The reasoning
of OECD and the Law Commission in its Report[185]
seems to support a narrow view, and our proposal is that the written
law test is more effective in achieving this than the current
drafting of clause 4(4) of the Bill.
CORPORATE OFFENCE
AND THE
REQUIREMENT FOR
NEGLIGENCE: SUMMARY
4.19 Some individuals giving evidence to
the Committee have expressed a preference for an absolute offence
of failing to prevent bribery subject to a defence of adequate
procedures. While we can see that greater elegance in drafting
would flow from such an amendment, we consider that:
(a) the conceptual simplicity that might result
may have been overstated; and
(b) the reduction in protection from prosecution
for international businesses that do put in place strong anti-bribery
procedures could be significant.
4.20 In considering the competing considerations
of elegant drafting and conceptual simplicity against the loss
of protection for businesses that appear to be fully compliant,
we submit that the Committee should favour protecting UK businesses.
We suggest that the best balance is achieved by maintaining the
requirement for the prosecution to prove negligence, while clarifying
which officers shall be considered a "responsible person".
CORPORATE OFFENCE
AND THE
REQUIREMENT FOR
NEGLIGENCE: THE
LOSS OF
PROTECTION
4.21 Our concerns in this area are as follows.
First, we consider that the "simplicity" arguments in
favour of removing the requirement for negligence are overstated.
Even without a specific requirement for negligence on the part
of a responsible person, consideration of whether procedures were
adequate will still lead to asking virtually the same questions
in any event. A jury is being asked to determine what caused the
failure to prevent bribery. If a procedure is in place the answer
to why it did not work will often, if not always, lead to the
question of whether a responsible person failed to perform their
oversight duties.
4.22 In circumstances where the two issues
seem to be so intertwined, it is less than obvious how removing
the negligence requirement will make the overall test more conceptually
simple. The Committee should therefore take great care to assess
what will be sacrificed in an effort to seek an elusive level
of clarity.
4.23 Secondly, there is a serious and considerable
risk that any attempt to pre-empt the Law Commission's consultation
process on corporate criminal liability will result in the enactment
of insufficient provisions. The Committee is not well placed to
consider the wider implications of adopting an absolute offence
subject to defences and, in our view, the Bill is not the place
to test them.
4.24 We agree with Professor Horder that
an offence carrying this reputational risk should carry an extra
requirement of "negligence" in order to justify attributing
criminal liability. Otherwise, we would have automatic vicarious
criminal liability subject only to a defence—the ambit of
which remains unclear. As discussed in oral evidence before the
Committee, for many companies reliant on public procurement, liability
is a "bet-the-company" issue. These companies need to
have sufficient certainty that their efforts to prevent bribery
will be recognised and not undermined.
4.25 Thirdly, the lack of a negligence requirement
gives the question of whether the bribing employee in question
was really on a "frolic of his own" which the policy
could not have prevented. We have a sense that, in many cases,
this could be the subject of hot debate. If this is accurate then
the ability of companies to rely on their policy, and protect
the life of their business, may hang on a very thin thread.
4.26 We suggest the following clarifications
to deal with the problems linked to the negligence requirement:
(a) That a "senior officer" (clause
5(7)) can only be a person in a position of influence in the formulation
of the bribery policy (or policies of that type in general). It
seems right that the company should not be entitled to rely on
that policy where such a person has been negligent in formulating
or implementing that policy.
(b) Therefore, the culpability of a person responsible
solely for operational implementation of a bribery policy does
not prevent a company's reliance on the adequate systems defence.
This should be covered by the amendment suggested in paragraph
4.26(a) above. Further clarification might be provided in the
Explanatory Notes to the Bill.
4.27 Applying the above clarifications,
a "negligent implementation" element to the offence
will ensure that companies are not faced with the extreme uncertainty
of whether a system will be considered to be "adequate".
THE CURRENT
JURISDICTIONAL GAP
IN THE
BILL: SUMMARY
4.28 There appears to be a gap in the Bill
which means that a company cannot be liable for failing to prevent
foreign private or public bribery by non-UK persons. This can
be fixed by adopting a sub-clause in clause 5 with wording
similar to that found in paragraph 8.60 of the Law Commission
Report. This reads as follows:
"(2) the payer's…act of bribery:
(a)constitutes an offence of bribery under English
law; or
(b)(b) would have constituted an offence of bribery
under English law had the payer…satisfied a condition relating
to citizenship, nationality or residence [in section 7(5)]."
[words in square brackets added for clarity and
completeness]
THE CURRENT
JURISDICTIONAL GAP:
EXPLANATION OF
THE PROBLEM
4.29 The problem arises due to the combined
effect of clause 5 (Failure of commercial organisations
to prevent bribery) and clause 7 (Offences under this
Act: territorial application). To understand this problem,
one must track through the provisions as follows:
(a) it is a condition of the company's liability
that "A" (ie. the person or entity performing services
on behalf of the company) is or would be guilty under clause 1 or
4 (clause 5(2));
(b) to be guilty of a clause 1 or 4 offence,
A must either
(i)have committed part of the offence in England,
Wales or N.Ireland (cl 7(1)), or
(ii)be a British citizen, etc (cl 7(2)-(4);
(c) clause 7(5) only seems to apply to the acts
or omissions which are part of the clause 5 offence—ie.
the negligent acts or omissions of the responsible person; and
(d) the words "is, or would be, guilty"
in clause 5(2) do not appear to prevent this effect.
4.30 The examples provided in the Law Commission
Report clearly indicate that clause 5 liability is supposed
to apply in such a situation (see paragraphs 6.106, 6.110-6.113).
If this gap is not plugged, a company may be able to organise
its affairs so that it is never liable for failing to prevent
foreign bribery. In addition, a company prosecuted for failing
to prevent foreign bribery will be advised to raise this argument.
THE CURRENT
JURISDICTIONAL GAP:
CONCLUSION
4.31 In light of the UK's obligations under
the OECD Convention to ensure that companies are held liable and
that sanctions are effective for bribery of foreign public officials,
the need to ensure that this gap is plugged is acute. Adopting
the clause set out above is a simple means of ensuring that this
occurs.
Use of the requirement for intention on the part
of the recipient of a bribe present in clause 2(2) and its removal
from clauses 2(3)-(5): follow up on discussions before the Committee
4.32 This issue was canvassed relatively
briefly in oral evidence before the Committee. A more full explanation
is provided here. Once understood, we believe that the Law Commission's
explanation is consistent and appropriate to the structure of
the recipient offence: both offences are essentially based on
improper performance.
4.33 The reason for including a requirement
for intention in clause 2(2) is that, at the point of prosecution
under that particular sub-clause, the "function" in
question has not been "improperly performed". Therefore,
that version of the offence must include a requirement as to the
recipient's intention in order to establish a level of culpability
that warrants a criminal prosecution.
4.34 Put another way—intention is
the factor which "completes" the offence, because there
is no possibility of connecting advantage to performance (because
there is no performance). If completing the offence without such
a connection is not possible, the mischief of seeking bribes would
not be sufficiently addressed by the Bill.
4.35 On the other hand, in sub-clauses 2(3)-(5)
the function will already have been performed. The prosecution
must prove that this performance was improper. As has been discussed
at length before the Committee, clause 3 is intended to leave
this as a question for the jury. The prosecution must also prove
that the advantage received is attributable to this performance—since
it is possible to connect advantage and performance.
4.36 Assuming that these elements are proven,
the recipient has:
(a) performed a function improperly; and
(b) received money for this.
In such circumstances, it seems appropriate that
the recipient's intention is not a necessary element as the offence
is already "complete". If justification in terms of
the level of culpability is necessary, it seems fair to say that
a recipient that has been found to have done (a) and (b) cannot
be heard to say that they did not intend there to be any connection.
At the very least, this would allow spurious defences and waste
the court's time.
4.37 Clause 2 thus operates on a similar
basis to clause 1 in this regard. Namely, where the offence
is drafted to be complete (and capable of prosecution) prior to
the actual performance of the "function", intention
is required. The apparent difference comes from the fact that,
in clause 1(2) and (3), prosecution must always be possible without
the "function" having been performed.
4.38 To do otherwise would probably create
a myriad of problems with having complete and inchoate offences
separately treated—something the Law Commission has tried
very hard not to have to deal with. In terms of enabling us to
advise clients, the present approach is far simpler and is to
be commended.
June 2009
182 Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions Back
183
ibid., Article 1(1) Back
184
See paragraphs 5.81-5.84, Law Commission Report No 313, Reforming
Bribery. Back
185
ibid. Back
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