The Serious Fraud
Office is to crack down on multinationals that bribe foreign
officials or offer lavish hospitality to win lucrative overseas contracts.
SFO investigators will adopt “a zero-tolerance
approach” towards companies offering inducements or “kickbacks”
to foreign governments in return for preferential treatment. Behind the
crackdown is Britain’s new Bribery Act, which comes into force in April.
There could be a rise in prosecutions, SFO officials
warn, if firms fail to adhere to the principles of the act, which was drawn up
by the former Labour government after the SFO’s decision to abandon an inquiry into
BAE Systems’ £43bn al-Yamamah
arms deals with Saudi Arabia. The case was dropped in
2006, despite a long-running corruption investigation, after the then prime
minister Tony Blair intervened.
The head of the World Bank‘s anti-corruption
unit, Leonard McCarthy, met the SFO’s director, Richard Alderman, last month to
discuss strengthening co-operation between the two agencies.
McCarthy said the Bank wanted to work with the SFO to
ensure that funds stolen from developing countries were repatriated. The Bank
can bar companies guilty of corruption from securing future work in emerging
economies. “We need a few decisions. We need to inject some action,”
he said on Friday.
The Bribery Act replaces Britain’s patchwork of late
19th-century statutes and 20th-century common law, which has made it difficult
for the authorities to secure successful prosecutions.
For the first time, any company with British offices or
owning a UK subsidiary will be subject to the act, and for the first time the
SFO will not have to prove intent by a board’s directors – merely that fraud has
been committed. A company whose overseas agents, suppliers or joint venture
partners are involved in fraud will be held liable. The only defence for a
company is to show that it has rigorous anti-bribery systems in place.
London-based multinationals have been urgently consulting
law firms to clarify new rules on corporate hospitality and
“facilitation” payments to people such as foreign customs officials.
Some lawyers believe the act goes too far. Richard de
Carle, of Slaughter and May, said: “This is a highly unsatisfactory piece
of legislation as it criminalises activity previously regarded as perfectly
normal. If a firm takes someone to the Ryder Cup and buys them a drink, is that
deemed as improper? What about countries where there is no legal framework to
fall back on?”
Critics insist that a grey area exists and that, in some
jurisdictions, bribing customs officials to ensure goods get from one country
to another is par for the course.
But Barry Vitou of Winston & Strawn said: “Much
of what is required is common sense. If a minister from overseas is put up in a
five-star hotel for five days to justify a one-day visit to a factory, and
spends most of his time in the swimming pool, or out with his wife shopping …
that sort of thing is going to be very hard to justify. In addition to obvious
cases of bribery, facilitation or ‘grease’ payments – the payment of small sums
of money to ensure someone performs their duty – are illegal.”
The SFO cannot condone such payments but it is open to
question how it would police the new system. Corporate hospitality can amount
to bribery, for example, if “it is disproportionate or lavish”,
Andrew Legg of Mayer Brown said cases were unlikely to be
brought if a firm doled out $5 to an overseas contact, but if it became
routine, “they could find themselves in trouble”.