Section 8 of the Act defines an “associated person” (which the Act refers to as A) as a person who “performs services” for or on behalf of C. The capacity in which such services are performed does not matter. The definition specifically refers to such categories of associated persons as employees, subsidiaries and agents, but makes it clear that this is not an exhaustive list. There is also a presumption (albeit rebuttable) that an employee of C performs services on behalf of his employer.
There is little guidance currently available on the meaning of “performs services”, but it is clear that whether or not A is a person who performs services for or on behalf of C is to be determined by reference to all the relevant circumstances (which may or may not include the degree of control exercised by C over A depending on the circumstances). Ultimately, it will be a matter for the courts to determine on a case by case basis.
Members of the group performing services
The definition of “associated person” makes it clear that where group companies provide services to their holding company or other companies in the group, they will be considered to be associated persons. It is therefore likely that group companies providing “back office” services, such as internal audit or company secretarial services or hosting an IT server, will be associated persons for the purposes of section 7 of the Act.
However, whether or not an offence has been committed will depend on whether that group company has bribed another in order to obtain or retain business for the group. If , for example, the only service which the group company is providing is the provision of an IT server to the wider group, the circumstances in which that group company might pay a bribe in order to obtain or retain business for its group are, arguably, very limited. If, however, a group entity is acting as the distribution or sales agent for its group in a particular country, the risk of that group entity committing a bribe is probably much greater.
Members of the group not performing services
The Act is uncertain as to whether it would apply to a subsidiary which is on the face of it not providing any services to its parent company, for example, where the only link to the parent is the payment of dividends. Where a subsidiary is a separate business managed on a stand-alone basis, it should not generally be considered to be providing services for and on behalf of the parent simply by virtue of the group relationship.
A view expressed by some is that, as a joint venture vehicle is intended to act on behalf of its owners, the starting position is that any corrupt activity by that joint venture vehicle will be carried out on their behalf.
Ensuring the effective implementation of anti-bribery procedures in a joint venture is key to minimising liability for any corruption offences committed by the joint venture entity. This will inevitably be harder to achieve where C does not exercise a sufficient degree of control over the joint venture or investment entity. For example, in certain jurisdictions foreign investors are not permitted to hold a controlling stake in a local enterprise. The fact that those same jurisdictions are often those characterised by higher risks of corruption presents an obvious risk to a minority foreign investor.
Not having a controlling stake in an entity may not be a defence (although it may be a relevant factor) and whilst it is arguably less likely that liability for a commercial organisation will arise in respect of the actions of its joint venture partners, ultimately the courts will have a wide discretion in determining whether a joint venture vehicle or a joint venture partner is an associated person, taking into account “all relevant circumstances”. These circumstances may include:
- the degree to which A was able to act independently from C; and
- the particular facts of any joint venture or consortium arrangements, both documented and arising by virtue of the parties’ conduct, between A and C.
Amongst the other relevant factors, as mentioned in the parliamentary debates at the time the Act was passing though Parliament, the following could also be taken into account: “whether the loss or harm can be described as minor; whether it was a single incident; whether it was a matter of misjudgement; or whether the offence was committed as a result of a genuine mistake or misunderstanding.”
Agents and third parties
Third parties include a broad range of entities and individuals that act on an enterprise’s behalf, including agents, consultants, representatives, resellers, sub-contractors, franchisees, advisers or similar intermediaries. A commercial organisation may use third parties for marketing or sales or as subcontractors in the supply chain, in the negotiation of contracts, the obtaining of licences, permits or other authorisations, or for any other actions that benefit the commercial organisation.
Often, these third parties may not be subject to effective anti-bribery laws, but C may well be liable for any corrupt practices employed by such third parties on C’s behalf and for C’s benefit, regardless of knowledge, if those parties are not carefully selected or are inappropriately managed.
There may be instances, particularly in high risk jurisdictions, in which the distribution channels employed by C may make these relationships more complex and more difficult to control. For example, a counterparty may only be willing to work with C if a certain agent is involved and in practice this agent may have wide discretion as to how its services are provided, leaving C with little or no control over the agent’s conduct and therefore potentially exposed.
Although the scope of who is an “associated person” is wide and encompasses suppliers, the risk of commercial organisations finding themselves liable under section 7 of the Act because of a supply relationship is comparatively more limited since the risk only materialises if the supplier commits a bribery offence for the benefit of the commercial organisation. For example, if a supplier of goods to a commercial organisation pays bribes in order to speed up a customs process for the advantage of the commercial organisation (rather than the supplier’s own advantage), the commercial organisation would be potentially liable under section 7.
As is the case with subsidiaries and joint venture entities, a lack of control over an agent or a third party will not necessarily extricate C from potential liability for the bribery by agents or other third parties acting for C, although it may be a relevant factor to be taken into account, amongst others.