iss uk advantage - anti bribery & corruption

Anti Bribery/Corruption and CompetitionJulia Ishak

Interim General CounselISS Advantage May 2013

Anti Bribery and Corruption

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Penalties

Overview

The offences

Key areas to consider

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WHY?

Criminal penalties

Individuals can be jailed for up to 10 years and/or receive an unlimited fine

Companies can receive unlimited fines (case law suggests fines for corruption should be in the tens of millions or more)

Public procurement

Mandatory permanent exclusion from carrying out public contracts in the EU for “active corruption”

Discretionary permanent exclusion for failing to prevent bribery

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Senior officers

Includes directors, managers, the company secretary and other similar officers

Where a company has committed certain offences senior officers can also an be liable if it can be shown they consented to or connived in the bribery

“Consent” and “connivance” are not defined

May mean being aware there is a good chance that bribery is going on and doing nothing to investigate or put a stop to it

May be wide enough to include not only the main individual responsible but also others who had knowledge but were not necessarily directly involved

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Bribery Act 2010

Came into force 1 July 2011

UK’s anti bribery and corruption law regime is one of the toughest in the world

It extends the crime of bribery to cover all private sector transactions (previously bribery offences were confined to transactions involving public officials and agents)

It contains a new strict liability offence of failing to prevent bribery

It is extensive in scope The offences are very broadly defined and the Act

has significant extra-territorial reach

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The Bribery Act contains 4 main offences

To offer, promise or give a bribe to another person (cases 1 and 2)

To request, agree to receive or accept a bribe (cases 3, 4, 5 and 6)

To bribe a foreign public official to obtain or retain business (case 7)

Where a commercial organisation fails to prevent bribery by those acting on its behalf (case 8)

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In relation to cases 1 to 7

An offence is committed if the relevant act or omission takes place in the UK

An offence is also committed if the relevant act or omission does not take place in the UK where

Such acts or omissions would constitute an offence if carried out in the UK and

The person has a close connection with the UK

In relation to case 8

An offence is committed regardless of where the offence takes place

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Case 1 - Offering, promising or giving a bribeWhere a person (P) intends the financial or other advantage to bring about or reward an improper performance of a relevant function or activity

Does not matter whether the person being offered, promised or given the advantage is the same person as the person who is to perform the function or activity

The advantage can be offered, promised or given by P or through someone else

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Case 2 - Offering, promising or giving a bribeWhere P knows or believes that the acceptance of the financial or other advantage offered, promised or given in itself constitutes the improper performance of a relevant function or activity

The advantage can be offered, promised or given by P or through someone else

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Case 3 - Offences relating to being bribedWhere the recipient (R) requests, agrees to receive or accepts a financial or other advantage

R intends that a relevant function or activity is performed improperly

It does not matter if the improper performance is by R or by another person

It does not matter whether it is R or someone else through whom R acts who requests, agrees to receive or accepts the advantage

The advantage can be for the benefit of R or another person

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Case 4 - Offences relating to being bribedWhere R requests, agrees to receive or accepts a financial or other advantage

The request, agreement or acceptance itself is the improper performance by R of a relevant function or activity

It does not matter whether R knows or believes the performance is improper



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Case 5 - Offences relating to being bribedWhere R requests, agrees to receive or accepts a financial or other advantage as a reward for the improper performance of a relevant function or activity

It does not matter if the improper performance is by R or by another person

It does not matter whether R knows or believes the performance is improper



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Case 6 - Offences relating to being bribedWhere a relevant function or activity is improperly performed by R (or another person where R requests, assents to or acquiesces in it) in anticipation of or in consequence of R requesting, agreeing to receive or accepting a financial or other advantage

It does not matter whether R (or the other person performing the function or activity) knows or believes the performance is improper




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Function or activity to which the bribe relatesTypes of function or activity that can be improperly performed:

All functions of a public nature

All activities connected with a business

Any activity performed in the course of a person’s employment

Any activity performed by or on behalf of a company

Function or activity does not need to have a connection with or be performed in the UK


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Function or activity to which the bribe relates

There must be an expectation that the functions are performed:

In good faith

Impartially

By a person in a position of trust

Improper performanceMeans performance or non-performance which breaches these expectations

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Case 7 – Bribery of foreign public officialsP is guilty of an offence if P’s intention is to influence the official in the official’s capacity as a foreign public official

A foreign public official includes government officials and those working for international organisations

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Case 8 – Failure of a commercial organisation to prevent briberyA commercial organisation (C) is guilty of an offence if:

A person associated with C

Bribes another person

Intending to obtain or retain business or a business advantage for C

The offence can be committed in the UK or overseasC has a defence if it can show that it had in place adequate procedures designed to prevent bribery

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Key areas to be considered

Failure of a commercial organisation to prevent bribery

Corporate hospitality, gifts and expenses

Facilitation payments


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C is guilty of an offence if

A person associated with C

Bribes another person

Intending to obtain or retain business or a business advantage for C

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This is a strict liability offence

There is no need to prove negligence

It does not matter whether C is aware of the corrupt conduct or not

This makes the offence easier to proveIt is anticipated that this will probably lead to more corporate prosecutions and convictions

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Associated withC is guilty of an offence if a person associated with C bribes another person intending to obtain or retain business or a business advantage for C

A person (A) will be associated with C if A is a person who performs services for or on behalf of C

It does not matter in what capacity A performs services for or on behalf of C

Deliberately wide as it is intended to catch the whole range of persons connected with CIt could include employees, subsidiaries, agents, consultants, intermediaries, collaboration partners, subcontractors and suppliers

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Failure of a commercial organisation to prevent briberyC has a defence if it can prove it had “adequate procedures” in place to prevent bribery

“Adequate procedures” are not defined

Guidance sets out 6 principles to follow

Proportionate procedures

Top level commitment

Risk assessment

Due diligence

Communication Monitoring and review


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Hospitality and promotional expenditure that is

Reasonable

Proportionate

Made in good faith

Is an established part of doing business and the Bribery Act does not seek to penalise it

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However carefully consider expenditure that is

Lavish

Beyond reasonable standards

Not clearly connected with legitimate business activity

Of a purely private character (such as jewellery)

Concealed – you are asked not to disclose it


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How do ISS do things?

Monetary gifts are forbidden

Private sector

A common and reasonable practice with regard to gifts and entertainment is not prohibited within ISS

Only gifts that are of modest value and customary and serve a business purpose are acceptable

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Public sector

Strongly discouraged

Only acceptable if it is

Legal

In accordance with local business practice

Not excessive

Infrequent

Appropriate for the occasion

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Facilitation Payments

English law does not distinguish between large or small bribes

“Facilitation payments” are not defined

Facilitation payments are generally considered to be

Small payments

Made to secure or expedite the performance

Of a routine or necessary action

To which the payer of the facilitation payment has a legal or other entitlement

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Examples may include

Obtaining permits or licences to do business in a foreign country

Processing government papers such as visas and work orders

Providing police protection

Providing mail pick up and delivery

Scheduling inspections associated with contract performance

Providing phone services, power and water supply

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Facilitation payments are forbidden

Except where

You may suffer harm (for example physical harm or retention)

Payment has initially been resisted

A record is made of the transaction

You notify your manager as soon as possible afterwards


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Red Flags

Payment needs to be provided in cash

Official is unable to provide evidence of legitimacy of payment

No receipts can be provided


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QUESTIONS?


Competition

Competition

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Penalties

Overview

The offences


Penalties

Overview

The offences


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Competition

WHY?

Individuals – criminal offences

Up to 5 years in prison

Unlimited fines

Companies

Fines of up to 10% of worldwide turnover

On-the-spot investigations with criminal penalties for obstruction

Contracts may be void and unenforceable

Liability to third parties for damages or injunctive relief for losses suffered

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Competition

UK’s competition law regime is now one of the toughest in the world

Proposed UK reforms

Generally focused on procedural improvements rather than substantive legal changes

To strengthen and improve the regime

To improve speed of process

Anticipated legislation by April 2014

This presentation focuses on the existing competition regime

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Competition

The Competition Act 1998

Chapter I prohibits

Agreements, decisions or concerted practices between undertakings

Which may affect trade within the UK (or part of the UK)

Which have as its object or effect the prevention, restriction or distortion of competition within the UK

Chapter II prohibits

The abuse of a dominant market position which has or is capable of having an effect on trade within the UK

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Competition

The Treaty on the Functioning of the European Union (TFEU)

Article 101

Article 102

Effect on trade between EU countries

Under the “consistency principle” UK competition authorities and courts must ensure as far as possible that questions arising under the Competition Act are interpreted consistently with Articles 101 and 102 TFEU

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Competition

The Enterprise Act 2002

Cartels – criminal offences where at least 2 competing companies fix prices, share markets, limit supply/production or rig bids

Mergers – where 2 or more enterprises cease to be distinct and there will be a

Combined market share of 25% or more or

The UK turnover of the business being acquired exceeds £70 million

Market investigations

Increased redress for third parties – private actions for damages

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Competition

Key areas to be considered

The Competition Act - Chapter I

The Enterprise Act - Cartels

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Competition

Chapter I Prohibits

Agreements, decisions or concerted practices between undertakings

Which may affect trade within the UK (or part of the UK)

Which has as its object or effect the prevention, restriction or distortion of competition within the UK

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Competition

Undertakings

Needs to be 2 or more independent undertakings

Any natural or legal person can be an undertaking provided it is engaged in an economic activity (whether or not profit making)

Can include

Individuals

Public authorities

Companies

Partnerships

Trade associations

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Competition

Agreements

An expression of joint intention to behave in a particular way

Does not need to be in writing

Does not need to be legally binding

Decisions of associations

Covers a “very loose knit organisation”

Includes trade associations

The recommendations of an association even if non-binding can be taken to constitute an agreement by the members

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Competition

Concerted practices

Falls short of an agreement or decision but consists of

Direct or indirect contact between competitors

With the object or effect of changing market behaviour in a way which may not be dictated by market forces

May be found where competitors inform each other in advance of the action each intends to adopt (for example future price increases)

May be found in “hub and spokes” arrangements where future pricing information is passed between competitors via a mutual supplier

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Effect on trade within the UK

No requirement to effect trade in a substantial part of the UK

May apply where only a limited geographical area is affected

The effect can be actual or potential

An effect on trade in the UK may be found even where all the participants are located outside the UK if the agreement is or is intended to be implemented in the UK

The effect on trade and competition must be appreciable and there are protections for agreements of minor importance (unlikely to apply for the most serious restrictions of competition)

Competition

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Prevention, restriction or distortion of competition

Non-exhaustive list of examples of anti-competitive agreements

Fixing purchase or selling prices or other trading conditions

Limiting or controlling markets, technical developments or investment

Sharing markets or sources or supply

Applying dissimilar conditions to equivalent transactions

Making contracts conditional on additional obligations that are not connected with the subject matter of the contract

Competition

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Prevention, restriction or distortion of competition

Non-exhaustive list of examples that could be anti-competitive depending on the particular facts

Collusive tendering or “bid rigging”

Joint buying or selling

Information sharing agreements

Exchanges of price or non-price information

Restrictions on advertising

Standardisation agreements

Competition

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Competition

Object

No need to prove anti-competitive effect

An agreement that is never implemented may still infringe if it has a clearly anti-competitive object

Examples of anti-competitive object

Price fixing

Market sharing

Limiting supply

Resale price maintenance

Effect

If unable to prove anti-competitive object need to look at effect taking into all surrounding factors and economic context

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Competition

The Enterprise Act - Cartels

A new criminal offence for individuals who dishonestly enter into hard-core cartel arrangements

An individual is guilty

If they dishonestly agree

With at least one other person

That 2 or more undertakings

Will engage in any prohibited cartel activity

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Competition

Prohibited cartel activity

Direct or indirect price fixing

Limitation of supply or production

Market or customer sharing

Bid rigging

Dishonestly

Objective limb – whether a reasonable, honest person would think the activity wrong and

Subjective limb – whether this particular person realised their conduct would be considered dishonest

The government is proposing to remove the need for dishonesty from the criminal offence

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Competition

QUESTIONS?

iss uk advantage - anti bribery & corruption

Business

foreign public official

corruption corporate hospitality

strict liability offence

corruption failure

commercial organisation

offences relating

prevent bribery

performs services