Paul Marshall, associate in the public law and regulation at Brodies LLP
Since 2008, the oil and gas sector has faced the most prosecutions for bribery and corruption offences in the UK, according to Ernst & Young’s recently-published UK Bribery Digest.
And yet, as the authors note, we are yet to see the first headline corporate prosecution under the new Bribery Act 2010.
That said, the level of recent prosecutions highlighted in Ernst & Young's report puts the oil and gas sector in the hot seat. What does the Bribery Act hold in store for the oil and gas sector? Is the Act overly ambitious in its international reach? And, in the real world, will cases ever come to court?
Bribery – a private affair
An important starting point is that the Act signals very clearly that bribery should not be viewed as conduct which must involve public officials – bribery can also take place in the context of “any activity connected with a business”.
Against that background, business leaders have, rightly, taken steps since the new Act came into force to protect against individuals within the business taking part in bribery. New, or at least improved, anti-bribery policies have been drafted and dedicated anti-bribery training has been rolled out across businesses.
It’s not what you know, but who you know
The real change for business is in the introduction of the 'corporate offence'. Under the legislation, a commercial organisation will be guilty of an offence where someone outside the organisation but acting on its behalf – a so-called 'associated person' – engages in bribery with the intention of gaining an advantage for the organisation.
There is a defence open to the organisation, which is to show that it had in place 'adequate procedures' designed to prevent bribery by associated persons. In other words, a business needs to carry out due diligence on, and monitor the activities of, agents and others acting on their behalf.
But there is a sting in the tale for businesses operating overseas. A UK business can be prosecuted for actions overseas if the conduct would amount to bribery in the UK.
Businesses can’t rely on assurances from agents on the ground that, for example, facilitation payments, sometimes called 'grease payments' are part of the 'custom and practice' of the overseas territory.
To be confident that no wrongdoing has occurred, an organisation must be satisfied that the actions of its agents are in accordance with the 'written law' of the overseas territory.
Upholding the law
At this stage the pragmatists in the oil and gas sector and elsewhere might be thinking, 'How on earth will the UK or Scottish authorities identify and investigate bribery taking place overseas?'
The short answer is that they would not do this on their own. The UK authorities, whether the Serious and Organised Crime Division (SOCD) in Scotland or the Serious Fraud Office (SFO) in the rest of the UK, would be relying on the assistance of overseas authorities to investigate allegations of bribery overseas on behalf of UK organisations.
But there is a more basic issue around enforcing the Act which arises without going overseas. How does bribery between consenting parties come to light in the private sector? Or rather, how do the authorities become aware of this?
Perhaps the answer can be found in the response of the SOCD and the SFO. Both have issued guidance to business explaining that early self reporting may lead to civil sanctions as opposed to a criminal prosecution.
But both regulators take care to advise that there can be no guarantees of immunity from prosecution. In the case of the Scottish self reporting initiative, two important qualifying conditions for taking part in the scheme are that any report (1) must be made on behalf of the company as a whole – rather than by an individual whistleblower, and (2) must be made by a solicitor.
However, readers should beware before rushing to self report under the Scottish initiative – this was a pilot project which officially came to an end in June 2012. At the time of writing, the Crown has yet to confirm whether or not that regime will be continued into the second half of 2012 and beyond.
Of course, there is another way in which allegations of bribery might come to the attention of the authorities. Businesses that are concerned about the actions of competitors – whether those concerns are justified or not – may complain to the authorities.
In these difficult economic times, with the state’s resources already stretched, one must assume that self reporting, whistleblowers, and complaints from unhappy third parties will be crucial to the UK government’s war on corruption.
What is clear is that business leaders should ensure that they have identified and assessed risks both within the business and externally. And for businesses operating overseas that will mean assessing and then taking the steps required to manage the additional risks associated with doing business abroad.
Paul Marshall is an associate in the public law and regulation team at Brodies LLP