Memorandum submitted by Colin Nicholls
QC (BB 56)
ANSWERS TO
SUPPLEMENTARY QUESTIONS
Q1 How does the draft Bill compare to the
anti-bribery laws adopted in other countries, particularly Australia
and the United States? Are there elements of foreign legislation
that could usefully be incorporated within the draft Bill?
1.1 I will restrict this answer to the general
offences and, except in so far as is necessary, deal with the
foreign public officials (FPO) offence when answering Question
2
AI(a) Comparison of the Draft Bill with
the anti-bribery laws adopted in other countries, particularly
Australia and the United States
The Draft Bill (Clause 1, 2 and 3)
1.2 The essence of the general bribery offences
is intentionally giving or receiving an advantage as an inducement
or reward for acting improperly. A jury has to decide whether
what was sought to be induced or rewarded is improper according
to the standards of a reasonable person of honesty and integrity.
In the case of the FPO offence the inducement to act in the prohibited
manner is itself improper.[192]
1.3 The insertion of the words "corruptly",[193]
"dishonestly" and "undue" is otiose as giving
an advantage as an inducement to act improperly is itself corrupt
and dishonest and the advantage is undue.
The Conventions
1.4 The essence of the OECD offence is intentionally
giving an "undue" advantage as an inducement for "acting
improperly".[194]
The essence of the UNCAC public sector offence and the COE[195]
offences is intentionally giving or receiving an "undue advantage"[196]
in order that an official act or refrain from acting in his official
capacity.[197]
The essence of the UNCAC private sector offence is intentionally
giving an "undue advantage" in order that a person act
or refrain from acting in breach of his duties.[198]
1.5 The repetition in the Conventions of
the words "undue" and the combined use of the words
"undue" and "improperly" is otiose. The simple
solution adopted in the Draft Bill of qualifying the advantage
as one which has been improperly obtained may well become "guidance
for other legislators in the future."[199]
Countries with Federal constitutions
1.5 The United States, Australia, Canada
and New Zealand are federal states. Their federal laws provide
for offences involving the bribery of federal officials and foreign
public officials. The provincial states provide for provincial
state bribery and private sector bribery.
The United States
1.6 The US Federal Code prohibits bribery
involving federal public officials.[200]
The essence of the offence is "corruptly" giving or
receiving anything of value to a public official to influence
any official act.
17. The word "corruptly" is not
defined in the Code but has been interpreted by case law as connoting
an evil motive or purpose; an intent to wrongly influence the
recipient.[201]
"The word corruptly is used in order to
make clear that the offer, payment, promise or gift must be intended
to induce the recipient to misuse his official position in order
to wrongfully direct business to the payer or his client, or to
obtain preferential legislation or a favourable regulation. The
word "corruptly connotes an evil motive or purpose; an intent
to wrongly influence the recipient".[202]
1.7 Other provisions of the Federal Code
provide for corruption and conflicts of interest offences committed
by specific groups.[203]
As in many jurisdictions, the specific group offences do not all
require an act to be performed "corruptly", the prohibited
conduct being deemed corrupt.
Australia
1.8 The Commonwealth Criminal Code 1995 makes
it an offence for a person "dishonestly" to bribe a
Commonwealth official or for a Commonwealth official "dishonestly"
to receive a bribe.[204]
1.9 The word "dishonestly" was
preferred to the word "corruptly" as being the best
available mechanism for assessing community standards in the political
context as well as in other contexts and being more accessible
for juries than the word "corruptly".[205]
The laws of the Australian states variously use the terms "dishonestly",
"corruptly" and "improper".[206]
1.10 I have been informed by the Financial
Crime and Border Management Section of the Attorney General's
Department that the use of the term "dishonestly has not
been a bar to prosecution."
Canada, New Zealand, South Africa.
1.11 The Canadian Criminal Code requires
a bribe to be given or received "corruptly". The word
"corruptly" is not defined, but has been held to refer
to an act done mala fides "designed wholly or partially
for bringing about the effect forbidden by the section" and
as not importing any concept of wickedness or dishonesty.[207]
As the forbidden act is inducing an official to act or refrain
from acting in his official capacity, the word "corruptly"
may be regarded as necessary to distinguish a bribe from a lawful
payment such as a salary.
1.12 The New Zealand Crimes Act 1961, as
amended also requires a bribe to be given or received "corruptly".
As in Canada, the forbidden act is inducing an official to act
or refrain from acting in his official capacity. There are further
offences relating to corruption in relation to specific officials.
1.13 In South Africa, the Prevention and
Combating of Corrupt Activities Act 2004 enacted a wide ranging
piece of legislation that, in part, provides for an international
example of good practice. It includes an extensive list of corruption
offences in both the public and private sectors.
A1(b) Elements of foreign legislation that
could usefully be incorporated within the Draft Bill
1.14 I do not recommend that the Draft Bill
should be amended to incorporate the element of "dishonesty
as set out in the Australian model, or to incorporate the 'corruptly'
test as set out in the United States" Federal Code. For the
reasons set out in paragraphs 3.136-3.227 of the Law Commission's
Report,[208]
I believe that lack of "good faith" and "impartiality"
and "breach of trust" are forms of dishonesty. The advantage
of these terms is that they particularise the relevant form of
dishonesty in a case thereby providing the jury with the necessary
guidance in reaching their decision. I agree with the witness,
Mr Vlassis, who said that "the approach the new Draft Bill
is taking in qualifying what is an undue advantage is probably
going to become guidance for other legislators in the future".[209]
Q2. Which other jurisdictions adopt a test
of whether an advantage is lawful under the foreign law applying
to a foreign public official? Has the test worked adequately in
those jurisdictions? What would be the implications of adding
reference to the "written" law of another country in
line with Australia and the United States?
A2(a) Other jurisdictions which adopt a test
whether an advantage is lawful under foreign law applying to a
foreign public official.
The Draft Bill (Clause 4)
2.1 The essence of the proposed FPO offence
is intentionally giving an advantage to an FPO which is "not
legitimately due" with intent to influence him in his capacity
as an FPO and with intent to obtain or retain business or a business
advantage. Clause 4(4) provides that an advantage is legitimately
due to an FPO "if and only if, the law applicable to [the
FPO] permits or requires [the FPO] to accept it." There is
no provision for a defence that an advantage is "legitimately
due", or for a defence of belief that it is "legitimately
due".
The United States
2.2 The Foreign Corrupt Practices Act 1977,
as amended in 1988 and 1998 makes it an offence for
US citizens and companies "corruptly to make a payment to
an FPO for the purposes of (1) influencing any act or decision
of such FPO in his official capacity, (2) inducing him to do or
omit to do any act in violation of his lawful duty, or (3) securing
an improper advantage, or (4) inducing him to use his influence
with a foreign government to affect or influence any act or decision
of such government in order to assist such domestic concern to
obtain or retain business.[210]
Provision (4) above "securing improper advantage" was
inserted in 1998 to conform to the OECD Convention.
2.3 "Corruptly" is not defined
by the FCPA, but is interpreted by case law.[211]
….the report of the House Committee that
considered the FCPA states that the "evil purpose" required
for a violation is similar to "that required under 18 USC
section 201(b), which prohibits domestic bribery. The meaning
of the term "corruptly" as used in the domestic bribery
statute is well established. A payment or promise involves corrupt
intent if it is knowingly made in exchange for particular conduct
on the part of the foreign official. The practical significance
of the corrupt intent requirement is rather limited because there
are few situations in which all the other elements of an FCPA
offence are satisfied (that is, payment made to a foreign official
to influence his performance of his public duties to obtain or
retain business) that would not also be corrupt. The most important
effect of this element may be to exclude goodwill gifts, that
are so small in value that it is inconceivable to believe would
induce the recipient to misuse his or her official position. The
corrupt-intent requirement also can operate to exclude instances
of true extortion, that is, instances in which a payment is made
in response to a threat to life or property.[212]
(Emphasis added).
2.4 It is not an element of the FCPA offence
that a payment shall "not be legitimately due", or "undue"
but the 1998 Act provides an affirmative defence for payments
that are lawful under the "written" laws of the relevant
foreign country provided those laws explicitly permit the payment
rather than merely not prohibit it. . The burden is on the defendant
to raise the "lawful payment defence" in the first instance.
2.5 The 1988 amendment to the FCPA
expressly excludes liability for facilitation payments.
Australia
2.6 Australia gave effect to the OECD Convention
in the Criminal Code Amendment (Bribery of Foreign Officials)
Act 1999. Its provisions were considered by the OECD Working Group
on Bribery in International Business Transactions on 4 January
4 2006.
2.7 Not legitimately due. The essence
of the offence is intentionally providing a benefit to another
person which is not legitimately due to that person with the intention
of influencing a foreign official, in the exercise of his duties
as a foreign official in order to obtain a business advantage
that is not legitimately due.[213]
2.8 It is expressly provided that in deciding
whether a benefit or advantage is legitimately due the fact that
the benefit may be or be perceived to be customary, necessary
or required in the situation; the value of the benefit; and any
official tolerance of the benefit should be disregarded.[214]
2.9 The defence of "not legitimately
due". The Criminal Code sets out a list of circumstances
in which a person would not be guilty of a foreign bribery offence.
In general terms, these are where he "would not have been
guilty of an offence against a law in force" in the place
where the central administration is located for which the official
performs his duties.[215]
The OECD criticised the use of the words "not guilty"
as extending the exception to apply even where pursuant to the
law of the foreign public official's country, the person would
not be guilty of an offence, eg, because of an amnesty or an expired
statute of limitations The Australian authorities agreed to amend
the provision on the basis that it might in some circumstances
operate more broadly than is contemplated by Commentary 8.[216]
2.10 The burden of proof that a benefit
is not legitimately due is on the prosecution because it is an
element of the offence. The burden of proving the defence that
a benefit is legitimately due is an evidential burden on the balance
of probabilities.[217]
2.11 The OECD Working Group recommended
in its follow up Phase 2 report, that Australia should amend
its "lawful conduct" defence to ensure consistency with
Commentary 8 of the Convention which states that conduct
is not an offence "if the advantage was permitted or required
by the written law or regulation of the FPO's country, including
case law.[218]
Australia adopted the recommendation in the International Trade
Integrity Act 2007 by requiring that the payment should be "expressly
permitted or required by written law".
2.12 In view of the importance which the
Joint Committee attaches to the FPO provisions of the Draft Bill
relating to the terms "not legitimately due", the insertion
of a defence that a benefit was "legitimately due" and
the insertion of a defence relating to facilitation payments,
I attach as Appendix A, a copy of the relevant articles of the
Criminal Code and the relevant Recommendations of the OECD Working
Group.
A2(b) Has the test worked adequately in those
jurisdictions?
Australia
2.13 I have been informed by the Financial
Crime and Border Management Section of the Attorney General's
Department that "no person (natural or legal) has been prosecuted
for the FPO offence. Accordingly, the words 'legitimately due'
in section 70 have not been judicially considered in the
context of an actual case."
The United States
2.14 In the United States the "legitimately
due defence"[219]
has been considered for the first time in U.S. v Kozeny et
al. No. 05-518 (S.D.N/Y filed 21 October 2008) in
the context of an extortion defence. According to legal opinion,
it has provided little guidance of the type of facts that would
establish a viable defence and appears to have raised more questions
than it has answered.[220]
A2(c) What would be the implications of adding
reference to the "written" law of another country in
line with Australia and the United States?
2.15 The advantage of adding the word "written"
would be that the Draft Bill would comply with the express requirements
of the OECD Commentary 8. Any arguments about contractual terms
would be avoided as contracts would be subject to the written
law.
Q3 A copy of Professor Wells' article on clause
5 is attached. What are your views on the three alternative
approaches to clause 5 that are proposed? (Clause 5)
A3 Professor Wells' alternatives
3.1 Professor Wells' three alternatives
are:
(1) The identification route plus the corporate
culture model (the Australian scheme);
(2) Vicarious liability with a due diligence
defence;
(3) A broader version of failure to prevent the
offence (minus the responsible officer's negligence or, better
without the responsible officer layer at all.
3.2 I prefer (1) above; the identification
route plus the corporate culture model (the Australian scheme).
In so far as the corporate culture provisions are concerned, I
prefer the adequate procedure provisions of the Draft Bill with
a definition of "adequate procedures" such as in Principle
3 of the FSA "the application of reasonable care to
organise its affairs responsibly and to have adequate management
systems dependent on the size and facilities of the company, or
as in the Health and Safety Act 1974.
Q4 The burden of proving "adequate procedures"
currently falls on the defence. What would be the pros and cons
of placing this burden on the prosecution? Is this something that
you recommend?
4.1 The principle to be applied should be
the same as in the Health and Safety at Work Act 1974. The prosecution
should be required to establish the bribery as alleged and the
defence should be required to establish an evidential burden on
the balance of probabilities. A simple test would be that it was
not reasonably practical for the company to do more than it did
to prevent the bribery offence.[221]
This approach is justified by the policy of the Conventions to
impose a duty on businesses to prevent bribery in their organisations.
Once bribery and its connection with a company is established,
it should be for the company to prove it had adequate procedures
in place.
OPTIONAL ADDITIONAL
QUESTIONS TO
COLIN NICHOLLS
QC
Clauses 1 to 3
Q5 Is there a need for specific provision
in the draft Bill to address facilitation payments or trading
in influence? (Clauses 1, 3 & 4).
A5(1) Facilitation payments (Clauses 1, 2,
and 3)
5.1 The test defined in the general offence
provisions in Clauses 1, 2, and 3 together with the Guide
for Crown Prosecutors should be sufficient to distinguish facilitation
payments from bribery.
5.2 The facilitation payment provisions in the
Australian FPO offence,[222]
which are largely modelled on the FCPA provisions, are impressive
and could be adopted by business organisations as part of their
codes of conduct in which case they would a useful aid to prosecutors.
The offence of extortion was replaced by blackmail in section
21 of the Theft Act 1968, the blackmail provisions are also
available.[223]
The advantage of specific provisions is that they can serve as
guidance to businesses of the kind which has been mooted during
the Committee's evidence hearings.
5.3 Facilitation payments (Clause 4).
One of the difficulties with Clause 4 as currently drafted
is that it catches facilitation payments. This is why it is necessary
in the FCPA and Australian FPO offence to have an express facilitation
payment defence. I have been informed that the Australian courts
have not had an opportunity to interpret this defence. Interpretive
guidelines on the application of the defence have not been issued
by the Commonwealth government. Unlike the Department of Justice
in the United States, the Australian authorities do not provide
a service whereby individuals and companies can request advice
regarding prospective payments to FPO's.
5.4 Trading in influence. The general
bribery offences, the FPO offence and specific offences such as
the Sale of Honours Act are sufficient to cover trading in influence.
Trading in influence is covered by clauses 1, 2 and 4 and
the Honours (Prevention of Abuses) Act. and can also be dealt
with by specific offences.
Q6 How should the test of what is "legitimately
due" operate in common law systems where acts are generally
permitted unless prohibited? For instance, would it catch matters
that are legitimate but which may not be expressly permitted (such
as commission or hospitality)? (Clause 5)
A6 The inclusion of the word "written"
enables a court in England and Wales to determine on expert evidence
whether a commission or hospitality is lawful according to a foreign
law, for example according to the provisions of a criminal code
or case law. For example, the intention "to influence a foreign
official in his capacity as a foreign official" appears to
be regarded as sufficient to exclude hospitality up to an acceptable
level on the basis that it is not the hospitality which influences
the official, but the excellence of the host's capacity to fulfil
the terms of a contract. .
Guidance (Clauses 1-6)
Q10 What would be the pros and cons of retaining
the terms "improper performance" or "legitimately
due" but without any further elaboration in the draft Bill,
with a view to giving them their ordinary meaning?
A10 There would be no advantage in retaining
the terms "improper performance" and "legitimately
due" without further elaboration.
10.1 The words "good faith, impartial,
and breach of trust" particularise the forms of impropriety
(or dishonesty) which are likely to arise in situations encountered
under the Bill. If the Bill did not elaborate on the terms "improper
performance" and "legitimately due" include the
judges would either not elaborate on them, as in the case of dishonesty,
or elaborate on them leading the "impressive disarray"
which has arisen in interpreting "corruptly" described
by Professor Lanham.[224]
10.2 The words "legitimately due"
need to be defined in order to comply with the requirements of
the OECD, as in the case of Australia.
Additional question of 15 June 2009 (Clause
4).
Should the "legitimately due" exception
be removed?
11.1 It is not correct that the "legitimately
due" defence exception has never been relied on in practice.[225]
It has been relied on in the United States in U. S. v Kozeny.[226]
As I have previously stated, there has been no FPO prosecutions
in Australia. I have not researched whether there have been any
prosecutions in Canada, New Zealand, or Korea.
11.2 The difficulty is in knowing whether
there is any circumstance in which a person would be entitled
to provide a benefit to an FPO with the intention of influencing
him in his official capacity and in order to obtain business.
If there is not, I agree, the exception is useless and the Legal
Director is correct.
Would it lead to the offence being overly strict
or criminalising conduct that would not be criminalised under
the present clause? If so, can you provide any scenarios where
unfairness may arise?
11.3 The only situation that occurs to me
is a case of extortion, but in that case the payment would not
be made to obtain or retain business. The difficulty is that as
drafted the offence is committed even if the FPO is merely provided
with hospitality subject to the proper interpretation of the intent
to influence him in his official capacity. The circumstances in
which the intent arises are set out in Clause 4(5) of the Draft
Bill. Whether they are too wide to exclude hospitality is a matter
of interpretation.
12. Q77. Lord Anderson of Swansea.
During my evidence I commented on the drafting
of the Draft Bill and the difficulty for a layman understanding
its terms. Monty Raphael also commented on this. In response to
Lord Anderson's invitation I have re-drafted Clauses 1-4 of
the Bill avoiding terms such as "Case 1-6", "P",
"R", "F" and "condition A" etc.
I have provided for each of the prescribed set of circumstances
in a separate section with its relevant provisions. Although this
results in repetition, it avoids the reader having to search for
the relevant provisions in each case, makes for easier understanding
and clarifies the mens rea. This form of repetition is
adopted in the foreign public official provisions of the Australian
Criminal Code when dealing with the meaning of "legitimately
due". I hasten to add that I have no experience as a parliamentary
draftsman and submit my effort with that reservation.
June 2009
192 The same applies to the existing offences relating
to the sale of offices and honours and electoral offences. Back
193
Q.470 Lord Lyell of Markyate. The common law interpretation
of the word "corruptly" has been described by Professor
Lanham as being in "impressive disarray". For a critique
see Nicholls, Daniel, Polaine and Hatchard Corruption and the
Misuse of Public Office, (2006) paras 2.35-2.37. Back
194
Art.1. Back
195
Council of Europe Convention Arts 2 & 3. Back
196
The Council of Europe's Convention states that 'undue' for the
purpose of the Convention should be interpreted as something the
recipient is not lawfully entitled to receive. Back
197
UNCAC Arts 15 and 21; ECC Arts. 2,3,7 and 8. Back
198
Art. 21. Back
199
Q497, Mr Vlassis to Lord Mayhew of Twysden. Back
200
18 USC §201(a) and (b). Back
201
U.S. v Liebo 923 F. 2d. 1308 (8th Cir. Minn)
(1991). Back
202
Report of Senate Committee that considered the FCPA in 1977."
International Lawyer's Deskbook, Lucinda A. Low, Daniel
M Crory, Patrick M Norton, American Bar Association Section of
International Law and Practice. Back
203
18 USC §203 and 205; 208-209, 210, 599-600. Back
204
Chapter 7, Part 7.6 of the Code ss. 141-2 Back
205
MCCOC Commentary, page 263. Back
206
English common law also favours the 'honesty' test in requiring
bribery to be 'contrary to the known rules of ' honesty and integrity.' Back
207
Canadian Criminal Code, section 119; R v Brown (1996) 116ccc
287 (Ontario CA). Back
208
No. 313. Back
209
Q497, Lord Mayhew of Twysden. Back
210
15 USC § 78dd-2(a) Back
211
US v Liebo 923 F. 2d. 1308 (8th Cir. Minn).(1991). Back
212
Report of Senate Committee that considered the FCPA in 1977."
International Lawyer's Deskbook, Lucinda A. Low, Daniel
M Crory, Patrick M Norton, American Bar Association Section of
International Law and Practice. Back
213
Australian Criminal Code section 70.2. Back
214
Australian Criminal Code section 70.2(2) & (3). Back
215
Section 70.3 of the Criminal Code. Back
216
Phase 2 Report, paras. 140-141. The issue has arisen in the
United States in U.S.v Kozeny, see para. 2.14 infra.. Back
217
Section 13.3 of the Criminal Code. Back
218
Convention, Art. 1, Commentary.) Back
219
'lawful under the written laws and regulations'. Back
220
First Judicial Construction of the FCPA Local law Affirmative
Defense Raises More Questions than it Answers: Thomas R. L.
Best and Lucinda A. Low (Steptoe & Johnson). Back
221
R v Chargot Ltd [2008] UKHL 73. Back
222
Australian Criminal Code, section 70.4. Back
223
Nicholls, Daniel, Polaine and Hatchard Corruption and the Misuse
of Public Office, (2006) para. 2.28. Back
224
Footnote 2. Back
225
Q499 Mr Bonucci to Lord Sheikh. Back
226
Para. 2.14 supra. Back
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