However, the recently incorporated Bribery Act threatens to do just that, with the changes brought in on the back of the UK’s Organisation for Economic Co-operation and Development (OECD) treaty obligations.
When the Ministry of Justice delayed the Bribery Act for the third time back in February, the OECD threatened to put the UK alongside nations such as Nigeria, Russia and Israel on an export blacklist. But with the Act coming into force on 1 July, the legislation now forms one of the most comprehensive systems in the world.
Steven Beharrell, partner at law firm Fasken Martineau, says that the UK now has a prosecutor in the shape of the Serious Fraud Office (SFO) that is making some very aggressive noises, but it remains to be seen whether the courts will back it up and take the same line.
He adds, ‘Whereas previously we had only very piecemeal legislation – a mix of common law and very ancient statutes – the Bribery Act is now potentially very wide ranging.’
Beharrell believes that the notion of corruption and bribery has come a long way in recent years, and cites the example of Germany, where little more than ten years ago bribes were tax deductible. The nation is now one of the key champions of anti-corruption initiatives in Europe.
Examining the ramifications for UK businesses, Beharrell says that the first port of call will be to ensure that due diligence is done properly to guarantee that none of the assets being acquired were done so by paying a bribe.
The new Act means that if an acquiring company does not do sufficient homework on a prospective target which knew of a bribe, or was involved with it, then the purchasing company may see the value of the target substantially reduced, both financially and in terms of reputation, as a result of prosecution, he explains.
Initial protests about the Act stemmed from the feeling that the guidelines would disadvantage UK companies, with comparisons made to similar legislation that was implemented by the United States with its Foreign Corrupt Practices Act. The UK version now appears to be even broader, covering bribes made anywhere in the world by any person associated with a UK business.
LOOKING FURTHER BACK
The implications for M&A are not immediately evident. In essence, the changes merely extend the remit of pre-acquisition due diligence, with a greater emphasis placed on looking further back in time than would previously have seemed to be necessary.
Beharrell believes that one of the most important issues to consider is foreign corrupt practices, with an increasing number of arbitrations being heard whereby host countries are arguing that large-scale public works contracts that were obtained through a bribe should be rendered illegal.
The result of this is that companies not only risk being fined, but also risk the loss of underlying assets – ‘It’s now a case of both monetary penalties and reputation knocks,’ says Beharrell.
On a broader scale, the Act should change people’s attitudes a great deal, he says, with even the facilitation payments such as a bung to pay for a passport stamp or issue of a visa being punishable offences.
However, he is quick to point out that prosecution is very much going to be carried out only when a slam-dunk decision can be made.
‘Richard Alderman [director of the SFO] himself has to approve anything that is being undertaken by the SFO because they have to be satisfied that there is good evidence and a good chance of success,’ he explains. ‘So you won’t have low-level prosecutors taking a punt.’
For businesses worried about falling foul of the new regulations, Beharrell says that providing a company is not aware of a bribe being given, has its principles, adequate procedures, clauses in contracts and monitoring in place and has appointed someone to look after it all, there is not all that much risk of prosecution.
He comments, ‘The big difference between the US and UK systems is that the US version is rules-driven, while the UK’s is principles-orientated. This could lead to a lot of discretion at the hands of prosecutors, which ultimately means increases in risk.’
GOING GLOBAL
The relationship with global laws is an issue that Beharrell sees as becoming more complicated over time. ‘Many countries are implementing anti-corruption laws, which makes the area potentially dangerous – you are exposed to the laws of where you are based, where the bribe took place, where the money passed through and possibly where you are listed,’ he says.
It presents a whole range of problems, he believes, with businesses increasingly having to be aware of not just their own local laws but also those on a global scale.
For deals to be done, a company looking to acquire will need to do its investigations into the business and learn as much about it as it can, not only from what is disclosed but also from a research perspective, Beharrell explains.
He adds, ‘It should be looking for representations and warranties on how a business is run, with investigations on two levels: has the target business paid any bribes, and are there any bribes being paid in connection with consents and approvals to the actual transaction?’
In pre-deal proceedings Beharrell says that businesses on both sides of the table are going to be asked some difficult questions when setting up a data room, with a broad degree of disclosure. But he is confident that deals will still be done, just with more awareness and astuteness to the new risks brought in by the Act.
While still at an early stage, the Bribery Act has set out to formalise what has long been a very murky and complicated set of laws.
