Gov't guidance says foreign companies with UK listing exempt from Bribery Act
‘Common sense’, at heart of Bribery guidance, says justice secretary Kenneth Clarke
Foreign companies with only a UK listing or UK subsidiary will not be subject to the Bribery Act if ‘a common sense approach’ prevails, according to coalition government’s guidance which seeks to help businesses understand the UK’s new anti-corruption laws.
The interpretation may contravene the new laws, to be implemented on 1 July, and add to businesses’ confusion over the act. The act states that an offence of failing to prevent bribery applies to all corporate entities carrying on all or part of a business in the UK.
Prosecutors have made it clear that a UK listing which is done to raise capital, among other reasons, constitutes ‘doing business’.
But the guidance, published today, states: “The government would not expect, for example, the mere fact that a company’s securities have been admitted to the UK Listing Authority’s Official List and therefore admitted to trading on the London Stock Exchange, in itself, to qualify that company as carrying on a business or part of a business.
“Likewise, having a UK subsidiary will not, in itself, mean that a parent company is carrying on a business in the UK, since a subsidiary may act independently of its parent or other group companies.”
Brent McDaniel, KPMG’s head of anti-bribery & corruption, said: “On the issue of a listing in the UK and whether that would bring jurisdiction, in the US it has and the SFO has made it clear that it intends to do the same.
“People should wait to see what happens with the SFO and their enforcement before deciding on a position. They should take a look at the risks and address them adequately.”
Instead of offering clarity to businesses, particularly foreign companies, the guidance is proving more confusing, he added.
Alistair Graham, partner at law firm White & Case said: "... although on the face of it some people believe the position for overseas companies listed on the London Stock Exchange has been resolved, the reality is that this remains a complicated and uncertain point, which will be decided on the facts of any individual case because of the discretion of the courts and prosecuting agencies."
However if the government’s interpretation stands up in court British companies will be at a disadvantage in a highly competitive, increasingly global world.
Jim Bligh, principal policy adviser at the CBI, which welcomed the guidance on the act, said: “With this legislation in place, other countries must now follow our lead and make a stand against bribery and corruption to ensure there is a level-playing field. It is critical that other nations enforce robust anti-bribery laws in line with the OECD recommendations.”
Business groups have voiced concerned that if the act were to encompass foreign companies with a UK listing it would deter businesses listing on London stock exchanges and affect UK competitiveness.
The UK’s leading anti-corruption watchdog, Transparency International UK, criticised the government for diluting the act on Wednesday, questioning “the long wait”, and suggesting “it undermines key features of the act as passed into law with all-party support almost a year ago”.
Chandrashekhar Krishnan, executive director of Transparency International UK said: “The Bribery Act, as passed by the last Parliament, is one of the best anti-bribery laws in the world. But the guidance will achieve exactly the opposite of what is claimed for it. Parts of it read more like a guide on how to evade the Act, than how to develop company procedures that will uphold it.’
The UK act is considered to be tougher than US laws which have until now been considered to be the best in the world
Justice secretary Clarke, said: “As I hope this guidance shows, combating the risks of bribery is largely about common sense, not burdensome procedures. The core principle it sets out is proportionality.
“Rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix.”
The guidance is published on the MoJ’s website along with easy-to-understand Quick-start guidance for small business.
Michelle Perry’s blog on the Bribery Act
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