Exterritorial effectiveness of the UK Bribery Act und the US FCPA in Russia
March 2013 | LEGAL & REGULATORY | FRAUD & CORRUPTION
Financier Worldwide Magazine
Russia, notwithstanding its geographical remoteness and the difference between its legal system and those of the UK and the US, is also within the scope of legal rules of the latter two countries.
This conclusion was made on the basis of the FCPA paragraph 78-dd 1(g) Alternative Jurisdiction and Article 12 of the UK Bribery Act (Offences under this Act: territorial application), according to which the rules of these acts are: (i) effective exterritorialy, i.e., they find application in any jurisdiction; (ii) applicable to bodies incorporated under the laws of these countries (or listed at a stock exchange in these countries; or (iii) ‘having commercial operations’ on the territory of these countries. The controlling authorities of the above countries tend to treat this criterion very broadly.
Thus, according to Article 7 (3) of the UK Bribery Act, a commercial organisation is, or would be, guilty of an offence, including a bribe to a foreign public official, even if a bribe is given by a party who is not a UK national or a UK resident, or a body corporate registered or organised in the UK. In addition, Article 12 (5) clarifies that “an offence is committed under section 7 irrespective of whether the acts or omissions which form part of the offence take place in the United Kingdom or elsewhere”. Therefore, the case of this category will be examined by a UK court if the organisation concerned has been registered or organised in the UK or if it operates a business in the UK (irrespective of its country of incorporation). However, the court will be guided by ‘common sense’ while making a final decision in litigation where it should be decided whether the company’s business presence falls within the scope of the discussed laws.
Both the FCPA and the UK Bribery Act practically provide for no exceptions regarding ‘feasible and fair expenses’ in connection with promotion, product demonstrations or contract execution explanations. Both also have no requirements to prove the payer’s ‘inappropriate conduct’ in an offence that takes the form of a bribe given as an unfair advantage or a present. An emphasis is laid on the intent to influence a public official or a counterparty under a contract with the aim to obtain or retain an advantage in the conduct of business. A party found by court to be guilty of bribery is liable to imprisonment of up to 10 years or to a fine that has no statutory maximum. The company encouraging or assisting a bribe is also liable to a fine that has no statutory maximum. Therefore, in technical terms, any form of involvement in a corrupt scheme (including indirect involvement through a third party or an agent), or of assistance to the implementation thereof, may fall within the scope of offences covered by these legal acts.
Any attempt to structure a business in order to withdraw it from the scope of the above acts or of building a Chinese wall between the management and certain types of internal corporate information will inevitably not be beneficial because the above acts cover a vast subjective range of potential offences and make use of flexible tools, such as examples of possible offences, abstaining from rigid wordings.
Many companies are worried by the possibility that the established anti-corruption law compliance system should be guided by legal rules of more than one country, and are apprehensive of possible conflicting rules of law and procedures.
Russian companies should develop a compliance system that covers the US FCPA and the UK Bribery Act. It is actually not difficult because both acts provide for similar bans and prohibitions, notwithstanding certain differences in terminology used (e.g., ‘expediting payment’ or ‘advantage in the conduct of business’). That is why a properly developed and ‘conservative’ compliance system based on the US FCPA will also be adequate for the UK Bribery Act.
There have already been precedents of FCPA application in Russian courts. For example, in 2010 Daimler AG’s Russian subsidiary DaimlerChrysler Automotive Russia SAO (DCAR) and its German subsidiary, Export and Trade Finance GmbH (ETF), each pleaded guilty to charges by the US District of Columbia of one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of violating those provisions. As part of the plea agreements, DCAR and ETF agreed to pay criminal fines of $27.26m and $29.12m, respectively. Notwithstanding the guilty plea and the subsequent punishment administered by the US authorities, no party has as yet been found guilty in this case in Russia.
Guided by the FCPA as an earlier legal act and a milestone in combating corruption, the UK Bribery Act has nevertheless taken into account the new environment and changes in anti-corruption practices in the last few years. In addition, the UK Bribery Act has been developed, to a major extent, on the basis of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. In all probability, OECD documents will be the key guidance for gaining an understanding of the required procedures. Of particular interest among OECD documents are the OECD Guidelines for Multinational Enterprises and the OECD Bribery Awareness Handbook (Corporate Principles for Combating Corruption).
On 1 February 2012 Russia also ratified the above OECD Convention. Therefore it is expected that corruption combating principles introduced in Russia will be similar to those in the UK.
Furthermore, within the framework of the implementation of the OECD Convention on Combating Bribery in the Russian law, in May 2011, the Federal Law ‘On introduction of amendments to the Penal Code of the Russian Federation and to the Administrative Offences Code of the Russian Federation as part of public governance improvements in the sphere of combating corruption’ no. 97- FZ of 4 May 2011, introduced considerable amendments to the Penal Code. The new law provides for greater liability of individuals for bribery in business transactions, aiding and abetting bribery, and for giving and accepting bribes. The law says that foreign officials and officers of public multinational organisations are liable for giving and accepting bribes on the same basis as everyone else under the penal code.
For the purposes of the above, the term ‘foreign official’ is any person appointed or elected to and holding any office in a legislative, executive, administrative or judicial authority of a foreign state, and any person performing any public function for a foreign state, including for a public authority or public enterprise. An ‘officer of a public multinational organisation’ is an international civil servant or any person duly empowered to act on behalf of such organisation.
The new law means that the Russian law has also chosen to follow the steps of the FCPA and the UK Bribery Act – to combat bribery, notwithstanding where the offence was committed, but with due account of the subjective components of the offence, i.e., the offenders.
Such harmonisation of national laws should take place in a modern environment where the business links and interactions of global markets are becoming more intertwined.
Shamil Salavatov is head of Corporate, Commercial Law and Compliance at Rödl & Partner. He can be contacted on +7 (495) 933 51 20 or by email: firstname.lastname@example.org.
© Financier Worldwide
Rödl & Partner