Jurisdiction - Taiwan
Reports and Analysis
Asia Pacific – The Bribery Act 2010 and Asia.

 

August, 2011

 

 

1.       Introduction

 

The Bribery Act 2010 (“the Act”), the UK’s new anti-bribery legislation, came into force on 1 July 2011 following a protracted passage through the UK parliament and much media attention.

 

Despite the Act coming into passage in the UK, it will have a significant impact upon companies operating in Asia because of its cross-jurisdictional scope and because gift-giving, which has traditionally been a customary activity in the region, is considered bribery under the Act if it is deemed to be “lavish”.

 

Asian companies with links to the UK will have to ensure that they comply with the provisions of the Act in order to avoid prosecution and will increasingly find themselves having to provide more information regarding their businesses to business partners based overseas.

 

However, it appears that many companies in Asia and their in-house legal teams still have a lot of work to do before they comply with the Act.

 

2.       Overview

 

Under section 7 of the Act, a company will be liable to prosecution if a person associated with it bribes another person intending to obtain or retain business, or an advantage in the conduct of business for that company.

 

Section 7 applies to companies that are incorporated in the UK as well as to bodies or partnerships, wherever incorporated, that carries on business or part of a business in the UK.

 

Companies successfully prosecuted for a section 7 offence can be punished with an unlimited fine. Where companies are found to have committed an offence with the consent of directors and/or senior management, those individuals will be held personally liable and could be subjected to unlimited fines and/or imprisonment for up to 10 years.

It is a defence, however, for companies to show that they have adequate procedures in place to stop bribery from taking place.

 

3.       The jurisdictional scope of the Act

 

Recent guidance from the UK Ministry of Justice indicates that having a UK subsidiary will not, in itself, mean that a parent company is carrying on business in the UK, since a subsidiary may act independently of its parent or other group companies.

 

However, Richard Alderman, director of the Serious Fraud Office (“SFO”), which will be responsible for prosecutions under the Act, recently said:

 

My view is that we have a very wide jurisdiction. We will be looking to see whether they fall within the Act. We will be looking to see what activities are carried on the UK… I would say companies should not rely on over-technical interpretations of the Act.

 

and

 

You bet we will go after foreign companies. This has been misunderstood. If there is an economic engagement with the UK then in my view they are carrying on business in the UK.”

 

He also stated that simply having a UK subsidiary company may be enough to generate liability for a foreign company.

 

Notwithstanding, this apparent discrepancy in interpretation between the Ministry of Justice guidance and Mr Hammond, it is evident that the SFO will be closely monitoring the activities of foreign companies, with any links to the UK.

 

Asian companies with such links would, therefore, be well-advised to ensure compliance with the Act.

 

4.       Gifts and Hospitality

 

Gifts and hospitality have traditionally been a part of business throughout the world, but perhaps nowhere more so than in Asia.

 

The issue of whether hospitality, promotional or other business expenditure is prohibited by the Act has therefore been a hot topic in the region.

 

The Act provides that corporate hospitality can be bribery if, for example, it is disproportionate or lavish.

 

The Ministry of Justice guidance stresses that genuine hospitality, or giving of gifts, that is reasonable and proportionate is not prohibited by the Act. As such, it appears that companies can continue to, for example, take clients for dinner and offer them gifts.

However, it is clear that companies will need to take care to ensure that any hospitality and gift-giving cannot be deemed lavish. Companies should also ensure that they retain receipts, as transparency will be vital.

 

5.       Adequate Procedures

 

It is a defence for companies to show that they have adequate anti-bribery procedures in place and, as such, vital that they understand what steps need to be taken to ensure that the procedures are adequate.

The UK Ministry of Justice has now set out the following six guiding principles with regards to what constitutes adequate procedures:

 

5.1               Proportionality: The steps taken by companies should be proportionate to the risks faced and the size of the business. So if a company is large, or a business is operating in an overseas market where bribery is commonplace, more might need to be done.

 

5.2               Tone from the top: Directors and executive management should ensure that staff and business partners understand that bribery is not tolerated.

 

5.3               Risk Assessment: Regular and extensive assessments of the bribery risks faced should be taken by companies. The country and sector within which business is being conducted will be relevant to the risk assessment.

 

5.4               Due Diligence: Companies should know exactly who they are dealing with. Adequate due diligence will need to be carried out on entities that perform services for the company. However, the Ministry of Justice guidance suggests than an entity that supplies goods to the business is unlikely to be performing services for it. 

 

5.5               Communications: Anti-bribery policies and procedures should be clearly communicated to staff and to others who perform services for the company. 

 

5.6               Monitoring and review: Companies should monitor and review anti-bribery steps being taken to ensure compliance. Improvements to policies should be made when necessary.

 

Mr Alderman also gave a recent insight into the SFO’s viewpoint on how it will expect companies to respond to the Act: 

 

I want to see companies police themselves and develop an anti-corruption culture. I want to get on and investigate those companies that are putting our ethical UK businesses at disadvantage by offering bribes”.

 

Essentially, companies will have to develop anti-bribery procedures that reflect their own circumstances, taking into account their size and the particular risks to which they might be exposed. In Asia, this is likely to involve, for example, additional emphasis on gift-giving.
 

 

It should be noted that the onus will remain on the company, where it seeks to rely on the defence that it had adequate procedures in place to prevent bribery.

 

6.       Conclusion

 

There is a significant risk that Asian companies with business links to the UK could find themselves falling foul of the Act’s anti-bribery provisions.

 

Whilst pro-active companies in Asia will have monitored the Act during its passage through Parliament and will have already implemented changes to their compliance procedures, there is a concern that many have yet to take the necessary steps and are currently exposed to the risk of an SFO prosecution.

 

It is therefore critical that companies review their existing anti-bribery procedures to ensure they are adequate, or alternatively put in place such procedures immediately. An effective anti-bribery policy should be capable of persuading the SFO that the company is taking the issue very seriously and has focused on the specific risks it faces. 


 

Asian companies should place particular emphasis on gift-giving policies and expect to have to provide additional information to prospective business partners, based overseas.

 

 

By Owain Jones

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