The new Bribery Act: implications for your business in Asia

Publication | July 2010


The shift in commercial activity from the West to Asia has been hastened by the global financial crisis which originated in the US and the loss of market confidence in the Eurozone exemplified by the debt problems faced by Greece. Asia, with its emerging markets, cheap labour and plentiful natural resources has become both the source and target for growth sought by many multinational corporations.

However, the potential for great returns can bring great risks. Doing business in various parts of Asia can entail bribery and corruption. In some places, corruption is said to be so endemic that deals cannot be done without (sometimes, small) kickbacks and bribes being paid. Whilst some companies routinely factor in such payments as the collateral business costs of a transaction, they will now need to consider the drastic consequences of engaging in any form of corruption imposed by recent legal developments.

The new Bribery Act (Act) was recently passed by the UK Parliament and has received Royal Assent. Various provisions of the Act will come into force over the next few months. This law will create a new global era in the enforcement of bribery and corruption offences. It will substantially raise the bar for the standards of ethical business behaviour.

Offences and defence

The Act provides for the:

  • general bribery offences of bribing another person (section 1) and being bribed (section 2);
  • discrete offence of bribing a foreign public official (FPO) (section 6); and
  • corporate offence of failing to prevent bribery (section 7).

The general bribery offences entail the improper performance (by the recipient of an “advantage”, financial or otherwise) of a relevant function or activity, which can be of a public or private nature as long as it is expected to be performed by the recipient in good faith, impartially or from a position of trust. Performance is considered improper if it is in breach of a relevant expectation or if the failure to perform is itself a breach of the relevant expectation. The “expectation test” or standard of behaviour is judged according to that of a reasonable person in the UK.

The discrete offence of bribing a FPO does not, by contrast, require improper performance. This offence would be committed if an advantage (financial or otherwise) is offered, promised or given to the FPO (or a related person) with the intention of influencing the FPO and obtaining or retaining business or an advantage in the conduct of business, unless the local laws of that country explicitly allow the FPO to be influenced by the offer, promise or gift.

The corporate offence has generated the most interest. It is a strict liability offence targeted at commercial organisations. If a person associated with a commercial organisation commits bribery intending to obtain or retain business or an advantage for that organisation, the organisation becomes guilty of an offence. No intention to bribe by the commercial organisation needs to be shown. The organisation does not even need to know that the bribe took place. The associated person also need not be prosecuted for the offence to be triggered. It is, however, a defence (and the only defence) for the organisation to show that it had in place adequate procedures designed to prevent such bribery.

Extraterritorial impact on Asia and cultural relativism

The extraterritorial reach of the Bribery Act applies to corrupt activity in Asia (and other parts of the world) so long as the offender has a close connection to the UK, which is defined to include British citizenship, ordinary residence in the UK or incorporation under the laws of the UK. More importantly, the corporate offence applies even if the body corporate is not incorporated in the UK as long as it carries on business, or part of a business, in any part of the UK.

To illustrate, a British citizen residing in Asia and working for an Asian company who engages in acts of bribery in Asia will be criminally liable, in England, under its provisions. An international company which has manufacturing operations in Asia, and which carries out marketing activities in the UK, can also be liable under the Act if its employee were to bribe an Asian public official without its knowledge in an attempt to procure certain government approvals for the company.

Further, the Act widens the net by amending the UK Serious Crime Act 2007 making it an offence to encourage or assist the commission of the general and discrete bribery offences. It is possible, for example, for a financial institution to be criminally liable in England if it becomes aware of and facilitates the bribery carried out by its client in Asia. The burden increases when one considers the stringent reporting obligations under various anti-money laundering laws, including the UK Proceeds of Crime Act 2002, to disclose knowledge or suspicion of property which may represent the benefits of corruption.

Another area of concern is determining the appropriate level of corporate hospitality. Is it permissible to take clients out for a business lunch with a view to persuading them to engage your services? What about hosting a banquet in honour of a government official which may be lavish by UK standards but common in China? Or giving a box of mooncakes during the Mid-Autumn Festival in Hong Kong to the police officers who helped you out with security issues during your construction project?

As mentioned above, the general bribery offences are based on the improper performance test. As such, routine and inexpensive hospitality that is justifiable is unlikely to lead to a reasonable expectation (judged by the standards of a reasonable person in the UK) of improper conduct. As regards an FPO, since the improper performance test does not apply, the question whether hospitality is lavish or legitimate will be a matter of prosecutorial discretion, which may be of scant comfort to business development executives caught in a dilemma. Finally, companies operating in various parts of Asia may wish to examine the local laws which allow certain gifts or payments to be made as there is a specific carve-out under the Act for the allowances provided by such laws. Any other assertion of cultural norms or customary business practices will not suffice.

FCPA compliance insufficient

Companies which may already be compliant under the US Foreign Corrupt Practices Act (FCPA) would nevertheless need to consider the impact of the Bribery Act since it is tougher than the FCPA in many aspects.

The FCPA targets bribery in the foreign public sector. The Bribery Act outlaws foreign and domestic corruption in both public and private sectors. There is a carve-out in the FCPA for facilitation payments; there is no such exception in the Act. The FCPA stems corruption by prosecuting the giver of the bribe; the Bribery Act imposes criminal liability on both the giver and the recipient. The FCPA does not have an equivalent of the Act’s corporate offence of failure to prevent bribery.

“Commercial organisations”, “carrying on business” and “associated persons”

Commercial organisations, which are the target of the corporate offence, include UK partnerships, UK-incorporated companies as well as partnerships and companies established or incorporated elsewhere but which carry on a business, or part of a business, in any part of the UK.

It is unclear what constitutes “carrying on business” as it is not defined under the Act. From analogous authorities, it would usually connote, at least, the doing of a succession of acts designed to advance some enterprise of the company pursued for financial gain. Carrying on business also connotes some degree of repetition of acts.

If an international corporation based in Asia were to have a branch office in the UK, it would likely satisfy the “carrying on business” requirement since they are part of the same legal entity. Although having a UK subsidiary, which is a separate legal entity, would not necessarily amount to an Asian parent company “carrying on business” in the UK, much would depend on whether the activities conducted by the subsidiary form part of the parent’s business and the degree of control exerted by the parent.

For the commercial organisation to incur liability for the corporate offence, its associated person would have to bribe another person for the organisation’s benefit. The associated person can be an employee, agent or subsidiary. The test is not the level of control exerted by the organisation over the person, but whether services are performed on its behalf.

Adequate procedures

The only defence available to the corporate offence is having adequate procedures in place. Guidelines on such procedures will be handed down by the UK Secretary of State in the months to come, but they are not expected to be prescriptive or exhaustive. They will have to be sufficiently flexible so as to apply to different types of companies in different jurisdictions. Notwithstanding such guidance, the inherent difficulty when invoking this defence is that the procedures have to be designed to prevent the bribery that actually took place.

To rely on the defence, the defendant would need to show that bribery took place in spite of perfectly adequate procedures in place. This could be due to fraud or negligence, but not the inadequacy of the procedures per se or its implementation.

International corporations with UK connections and Asian operations should start reviewing their business structures and internal procedures to minimise potential exposure to the Bribery Act and maximise their chances of effectively invoking the defence of adequate procedures when necessary. The failure to put in place adequate procedures could render directors and senior management vulnerable to civil claims by the company and its shareholders.


This article was originally published by Complinet,



Wilson Ang

Wilson Ang