A big-name scalp is on the cards

Bribery afflicts the property industry as much as any other, but proposed changes will make corruption easier to prosecute, warns Neill Blundell The new Bribery Bill was published on 25 March and is likely to be enacted later this year. It aims to modernise bribery laws by offering a clear legal framework for dealing with and prosecuting corrupt activity, whether committed in the UK or elsewhere. Current bribery legislation derives from the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption Acts of 1906 and 1916. These are inadequate and ineffective in the modern business world. The UK has been under intense pressure for many years, both from the Office of Economic Cooperation and Development (OECD) and the US authorities, to introduce a modern legislative framework to tackle bribery and corruption. The recommendations made by the Law Commission in Reforming Bribery, published in November 2008, led to the draft bill, which is far more robust than existing law and has attracted widespread support. New approach The bill contains four offences of corruption, with two general offences of “active” and “passive” bribery. Active bribery broadly means offering a bribe or promising to do so. Passive bribery comprises requesting, agreeing to receive or accepting a bribe. A person can be guilty of these offences whether they directly commit the act of bribery or it is achieved through a third party. Although not new, the offences are more straightforward than under the old law, and prosecutions will be easier to bring. The new approach sees an end to the concepts of agent and principal and the requirement to consider breaches of fiduciary duty, certainly as far as criminal prosecutions are concerned. Previous cases of bribery in the property sector, such as Ross River v Cambridge City Football Club Ltd [2007] EWHC 2115 (Ch); [2008] 1 All ER 1004, were analysed by the courts along the “fiduciary” model. The question often raised was whether payments made to agents by third parties were adequately disclosed to the principal. In Ross River, a payment was made to the football club’s director by a representative of the potential purchaser of the site. Although the payment was not conditional on the outcome of the negotiations, the judge held that it did undermine the fiduciary duty of the director. The fact that he had disclosed the payment to one other board member was not considered to be sufficient to constitute disclosure to the club. Although this was a civil case, it would, under the new legislation, be easy for the police to prosecute the payer of the bribe, his company and the director who accepted the payment. The jury is not required to consider questions of an agent’s fiduciary duties. It makes no difference whether the bribe was paid through a third party, and it is irrelevant whether it was paid as an inducement for future conduct or as a reward for past conduct. New corporate offence The most important change under the proposed legislation is the introduction of a new corporate offence. Under this, a business can be found guilty if it negligently fails to prevent an employee or agent from bribing a third party. This is a key issue for the property sector. Last year’s raids by the Office of Fair Trading demonstrated the scale of suspected bid-rigging for certain property and building contracts in the UK. The new offence means that property developers and occupiers could face unlimited fines if they do not put in place steps to prevent bribes from being paid by their employees or by intermediaries acting on their behalf. It is no defence to say that the company was unaware of what was happening. Such an argument would only help to prove the offence. The industry needs to act quickly to ensure compliance. The best line of defence to this new “negligent failure” crime is if the business can show that it had adequate procedures in place to prevent bribery from arising. However, the defence is not available if the negligence is the fault of a senior official – director, company secretary or manager – of the business. This means that there is no “get out of jail free card” (for once to be given a literal interpretation) if senior people in the business turn a blind eye to corruption-related issues. Adequate procedures are required to monitor and control miscellaneous “commission” payments, which, in some quarters, have been seen as a legitimate means to an end, particularly in respect of site acquisition. The Serious Fraud Office (SFO) has already shown an increased willingness to consider corruption issues, even before the new legislation is in place. This was illustrated by its successful use of the Proceeds of Crime Act 2002 where the SFO obtained the first civil recovery order against a major plc. The court’s consent order gave it the power to recover property obtained by unlawful conduct. The police and the SFO have made it clear that they are looking for a big name as the first corporate prosecution under the new legislation. A major property developer could be a target. They are hoping that the publicity from the first big case will lead other businesses to take the threat seriously and to invest in adequate systems and procedures. The bill also introduces personal criminal liability for a director, partner or similar senior manager of an organisation where they “consent or connive” in an offence. Senior management need not personally have paid or accepted a bribe to be given a prison sentence. Businesses must adopt anti-corruption or business ethics programmes. The larger the company and the further its global reach, the higher the risk and the increased need for a fully integrated policy that is actively implemented and monitored. Positive step The proposed changes to the UK’s bribery laws must be viewed as a positive step in the increasingly important fight against corruption. The proposals modernise the law in a way that makes it easier to understand and, more importantly, to enforce. The onus will be on businesses to self-regulate and improve their systems so that corruption becomes harder to hide and easier to prosecute. Neill Blundell is head of the fraud group at Eversheds LLP