Post on 12-Nov-2014
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Anti Bribery/Corruption and CompetitionJulia Ishak
Interim General CounselISS Advantage May 2013
Anti Bribery and Corruption
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Anti Bribery and Corruption
Penalties
Overview
The offences
Key areas to consider
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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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
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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Anti Bribery and Corruption
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
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 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
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
Anti Bribery and Corruption
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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
Anti Bribery and Corruption
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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
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
Anti Bribery and Corruption
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Anti Bribery and Corruption
Failure of a commercial organisation to prevent bribery
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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Anti Bribery and Corruption
Failure of a commercial organisation to prevent bribery
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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Anti Bribery and Corruption
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
Anti Bribery and Corruption
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Anti Bribery and Corruption
Corporate hospitality, gifts and expenses
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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Corporate hospitality, gifts and expenses
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
Anti Bribery and Corruption
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Anti Bribery and Corruption
Corporate hospitality, gifts and expenses
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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Anti Bribery and Corruption
Corporate hospitality, gifts and expenses
How do ISS do things?
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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Anti Bribery and Corruption
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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Anti Bribery and Corruption
Facilitation Payments
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
How do ISS do things?
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
Anti Bribery and Corruption
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Facilitation Payments
Red Flags
Payment needs to be provided in cash
Official is unable to provide evidence of legitimacy of payment
No receipts can be provided
Anti Bribery and Corruption
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QUESTIONS?
Anti Bribery and Corruption
Competition
Competition
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Penalties
Overview
The offences
Key areas to consider
Penalties
Overview
The offences
Key areas to consider
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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?