AmCham Vietnam | American Chamber of Commerce

Bribery and the Gathering Storm over Compliance

Apr 1, 2011. The British Ministry of Justice has announced guidelines for the implementation of the far-reaching Bribery Act of 2010, which goes into effect on July 1. Meanwhile, while the Securities and Exchange Commission is set this month to announce rules required by the Dodd-Frank Act to encourage whistleblowers to disclose information about corporate misconduct, most likely including violations of the U.S. Foreign Corrupt Practices Act.

The Bribery Act is sure to drive up the costs of compliance programs for American companies doing business in Britain, while the Dodd-Frank Act’s whistleblower provisions may well render those programs superfluous, even though they will still be required by the Sarbanes-Oxley Act.

The Foreign Corrupt Practices Act prohibits individuals and companies from paying bribes to foreign officials to obtain or retain business in the country. It also requires corporations that file reports with the S.E.C. to maintain accurate books and records in accordance with the accounting rules. The law, first adopted in 1977, has grown in importance over the past decade as the Justice Department, working with the S.E.C., has brought a number of cases against multinational companies for corrupt payments, resulting in millions of dollars of fines and penalties.

Britain’s Bribery Act is broader in some respects than the Foreign Corrupt Practices Act, most importantly applying to any type of bribery, not just payments to foreign officials. The Bribery Act makes a company liable for the actions of those “associated” with a “commercial organization,” including any employee or agent who acts on its behalf, and the organization is strictly liable for any failure to prevent the bribery.

For American companies, a key facet of the Bribery Act is its application to any organization that “carries on a business” in Britain. The Ministry of Justice’s guidance is not particularly helpful on the scope of the law, noting that it would not apply to foreign company that did not have a “demonstrable business presence” in Britain, and that a company is not necessarily liable if it lists its shares on a British exchange or maintains a subsidiary in the country. Rather than explaining what the law does cover, the guidance simply describes what might fall outside the Bribery Act, while noting that the courts will finally decide the issue. This provides little clarity about the scope of the law.

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