New research from Ernest & Young suggests that the UK's
strict new bribery laws, which are due to come into force on 1 July
2011, will hit the oil and gas sector the hardest.
There are four main offences under the Act:-
1) offering, promising or giving a bribe;
2) requesting, agreeing to receive or
accepting a bribe;
3) bribing a foreign public official; and
4) failure by a commercial organisation to
prevent bribery by a person acting on its behalf.
The Act applies not only to companies operating in the UK, but
also to overseas companies with business operations in the UK.
In their press release Ernest & Young explained that their
findings were based on research into bribery convictions by the US
Foreign Corrupt Practises Act (FCPA). At present little is known
about the enforcement strategy that the Serious Fraud Office
(the "SFO") is likely to adopt and, as the SFO and the US
Department of Justice cross share information, it was felt that
this would be an accurate means of looking at the impact that
the Bribery Act may have both in the UK and worldwide.
The FCPA cases that were looked at involved examining 242
companies and around 167 prosecutions (an additional 30 are still
pending). Penalties for committing an offence under the Act include
a maximum of 10 years imprisonment however the study found that the
most likely penalties are criminal fines, plea agreements and civil
penalties. Interestingly the Ernest & Young research found that
only 3% of investigations resulted in no action being taken.
It became apparent that the oil & gas companies would
potentially be the "most at risk" from the new legislation when the
study revealed that energy sector accounted for 18% of all
prosecutions. The second highest number of prosecutions was within
the life sciences sector, accounting for 13%.
The increased risks faced by those employed in the oil and gas
sectors arise from the nature and locations of their businesses
that expose them to additional risk. Additionally the lack of
clarity on facilitation payments does not assist oil companies as
often they work in areas where that style of payment remains common
practice.
It is the offence of 'failing to prevent bribery' which will
inevitably cause the most concern, particularly for international
companies. However, the Act provides a defence if companies can
show that it had "adequate procedures" in place to prevent an act
of bribery being committed. Somewhat unhelpfully the Guidance to
the Bribery Act 2010 does not define what would constitute
'adequate procedures.' Making specific guidance at that level
universally applicable would be very difficult given that the
differences in size, organisational structure, industry sector and
geographical focus of business make the bribery risks faced by
organisations tremendously variable. The advantage of this
approach is that organisations have the opportunity to establish
their own policies and procedures which reflect their particular
business and internal compliance structures. The Guidance does
state that whether a particular organisation's procedures are
adequate will be determined in the context of the prosecution,
taking into account the circumstances in which the act of bribery
took place.
Should you require any further information on this topic, or any
other employment issue, please do not hesitate to contact one of
our team.