Global businesses have to carefully consider the full extent of their operations when it comes to anticorruption compliance. Most anticorruption laws have a degree of extraterritoriality, making it imperative for companies to have a deep and detailed knowledge of their activities across the globe. Understanding how the different anticorruption laws are applied and enforced abroad is complex, particularly in relation to businesses spanning multiple jurisdictions. In this alert, our lawyers explain what the Foreign Corrupt Practices Act (FCPA), UK Bribery Act, and French, German and Greek criminal codes mean for your dealings abroad.
This is the fifth alert in the From the FCPA to the UK Bribery Act – Your key questions about global anticorruption laws answered series. Over the last few weeks, members of our global regulatory & investigations team have been answering your most important questions about anticorruption laws in the U.S., UK, France, Germany and Greece. Next up, in the final alert in the series, we will consider which other offenses companies should watch out for if they suspect that bribery has taken place somewhere in the organization.
Don’t miss our previous alert which covered the definition of a public official and how that definition varies between the FCPA, UK Bribery Act and French, German and Greek criminal codes and our additional thought leadership on anticorruption.
What does the FCPA mean for my dealings abroad?
- The FCPA prohibits U.S. persons and businesses from making corrupt payments to foreign officials in order to obtain or retain business. The FCPA’s accounting provisions additionally require that companies maintain robust record-keeping procedures and adequate internal compliance programs.
- These provisions apply to conduct within or outside of the United States. Violations of the FCPA may prompt criminal or civil enforcement actions by the Department of Justice (DOJ) and/or Securities and Exchange Commission (SEC).
- U.S. companies conducting business abroad must analyze the risks inherent in dealing with organizations or individuals associated with foreign governments. Certain foreign economies present a unique set of risks, as governments may operate through state-owned enterprises or even exercise control over private companies.
- While the FCPA only applies to payments made to “foreign officials” in their “official capacities”, enforcement authorities interpret these terms broadly. For instance, the DOJ and SEC consider an employee or agent of an enterprise owned or controlled by a foreign government to be a foreign official under the Act.
- Because of this, U.S. companies conducting business abroad must assess the risks and variables present within each foreign environment. Companies must understand exactly who they are transacting with both directly and indirectly, and whether such persons may be considered foreign officials under the FCPA. Businesses should take particular care when engaging in commercial dealings with entities owned or controlled by foreign governments. Additionally, companies should maintain effective training and compliance programs designed to prevent and detect FCPA violations.
What does the UK Bribery Act mean for my dealings abroad?
The UK Bribery Act has significant extraterritorial scope, with the precise parameters of its extraterritorial scope contingent on the offense.
Sections 1, 2 and 6
- In the United Kingdom, there is liability under sections 1, 2 and 6 for acts and omissions forming part of the offense taking place outside the United Kingdom, provided that:
- those acts or omissions would constitute an offense under the relevant section if they occurred in the United Kingdom; and
- the person performing the acts or omissions has a “close connection” with the United Kingdom (according to the UK Bribery Act, persons with a “close connection” include companies incorporated in the United Kingdom and British citizens).
Section 7
- If a commercial organization “carries on a business, or part of a business, in any part of the United Kingdom”, regardless of where the commercial organization is incorporated, the commercial organization may be guilty of failing to prevent bribery in the event that an “associated person”, such as a subsidiary, agent or employee, bribes another person or a foreign public official for the benefit of the commercial organization.
- It does not matter if the associated person is not connected to the United Kingdom or the bribery takes place outside the United Kingdom.
- A commercial organization could be liable under section 7 in the following circumstances:
- The commercial organization is formed or incorporated in the United Kingdom, but the bribery is conducted outside the United Kingdom by an associated person who has no connection to the United Kingdom and who is performing services outside the United Kingdom; and
- The commercial organization is formed or incorporated outside the United Kingdom, but carries on part of its business in the United Kingdom, and the bribery is conducted outside the United Kingdom by an associated person who has no connection to the United Kingdom and who is performing services outside the United Kingdom.
- The courts are yet to determine the precise meaning of “carries on a business, or part of a business, in any part of the United Kingdom.” As such, the only source of guidance comes from the Ministry of Justice, which recommends a “common sense approach” is adopted when determining whether a commercial organization is carrying on business in the United Kingdom, and notes that a “demonstrable business presence” is required. Notably, having shares listed on the London Stock Exchange or having a subsidiary in the United Kingdom does not necessarily mean that a foreign commercial organization will be deemed to be carrying on business for the purposes of section 7.