In August 2013 the UK's Serious Fraud Office began its first prosecution under the Bribery Act, charging two executives, a financial controller and an independent advisor of Sustainable AgroEnergy in relation to suspected bribery offences in Cambodia.

In August 2013 the UK's Serious Fraud Office began its first prosecution under the Bribery Act, charging two executives, a financial controller and an independent advisor of Sustainable AgroEnergy in relation to suspected bribery offences in Cambodia.

When the Act took effect in July 2011, one of its most controversial features was its extra-jurisdictional reach and its potential application to persons and organisations anywhere in the world, as long as there was a ‘close connection’ with the UK. The Act enables the UK’s authorities to pursue instances of bribery and corruption which take place outside the UK if the person/entity committing the offence is a British citizen, an individual ordinarily resident in the UK, a body incorporated under the law of any part of the UK and/or – most significantly – an organisation which carried on some or part of its business in the UK.

This means that any global business with any form of British presence is at risk of prosecution under the Act should it be unable to prove that it had systems and controls in place to prevent its associated persons from engaging in corrupt activities.

The Bribery Act offences

The Act created four principal offences:

• Bribing a person to induce or reward them to perform a relevant function improperly (the section 1 offence);
• Requesting, accepting or receiving a bribe as a reward for the improper performance (by them or a third party) of a relevant function (the section 2 offence);
• Using a bribe to influence a foreign official to gain or retain a business advantage (the section 6 offence); and
• Failure of a commercial organisation to prevent an associated person from committing a section 1 or 6 offence (the section 7 corporate offence).

An associated person could be an employee, an agent or a subsidiary of the commercial organisation. It could also be a so-called third party who performs services on behalf of that commercial organisation.

When an offence is committed in the UK

Bribery offences are committed in the UK if any 'act or omission' (see s12(1)) which forms part of the offence takes place in the UK, regardless of the nationality of the natural person, or the place of incorporation of the corporate body, which has committed the offence. For example, a bribery offence would be committed in the UK if a payer were to make a payment from the UK to an overseas recipient to induce or reward him to improperly perform a relevant function outside the UK because that part of the offence (i.e. the payment) would have been made from the UK.

The Act's extra-territorial reach

The jurisdictional reach of the bribery offences is broader in relation to persons with a 'close connection' with the UK (see s12(2)(c) and s12(4)). The Act deems British citizens and the citizens of British overseas territories and bodies incorporated in the UK to have a 'close connection' with the UK and to be liable for prosecution in the UK even when the entire offence takes place abroad. For example, a bribery offence under the Act would be committed if a UK citizen were to make a payment from outside the UK to an overseas recipient in order to induce or reward the improper performance of a relevant function outside the UK. Whilst no act or omission forming part of the offence would have taken place in the UK, the British citizen would still be at risk of prosecution because his nationality has created a 'close connection' with the UK.

Once it can be established that a commercial organisation 'carries on a business, or part of a business, in any part of the UK' (see s7(5)), regardless of where in the world it is incorporated, it could be liable for prosecution in the UK for failing to prevent bribery if one of its 'associated persons' (an employee, agent or subsidiary) bribes another person or a foreign public official for the benefit of that commercial organisation. It is irrelevant whether the 'associated person' is connected with the UK or whether or not the offence takes place outside the UK.

Lines of defence

A foreign subsidiary of a British company could cause its parent to become liable under s7 of the Act should the foreign subsidiary commit an act of bribery whilst performing services for its UK parent. It is the context of the services which is important for the purposes of the Act. If the UK parent company can demonstrate that the foreign subsidiary was acting on its own account, it would prevent the UK parent being held liable for any failure to prevent bribery.

Any overseas commercial organisation that carries on “a business or part of a business in the UK” for the purposes of the Act could be prosecuted for failure to prevent bribery, even where the bribery takes place wholly outside the UK and even where the benefit or advantage to that overseas company is intended to accrue outside the UK. The overseas company's only statutory UK defence would be to prove the existence of adequate systems and controls (see s7(5)).

Preparing for the avalanche

British authorities are starting to use their powers under the Act. A British citizen has been prosecuted for offences in the UK and now British citizens are to be prosecuted for offences committed abroad. It can only be a matter of time before a foreign private bank is required to face UK charges in connection with its business or part of a business in the UK, even if the offences were committed wholly overseas.

Individuals and any commercial organisation with a British connection ought to consider and review the extent of their exposure to prosecution under the Act. Regardless of its own location, any commercial organisation with a connection to the UK should ensure that it has bribery prevention systems and controls in place that it reviews regularly for effectiveness. It should do this as an integral part of its corporate compliance programme.

Fiona Simpson is a Special Counsel at Withers LLP in London. She can be reached at fiona.simpson@withersworldwide.com and on +44 (0)20 7597 6314.