Legal Responses to Bribery Crimes

Introduction

White collar crime was defined by Edwin Sutherland as the “crime committed by a person of respectability and high social status in the course of his occupation.” The emphasis in this definition is on the social status of the perpetrator of the crime, which may be extended to the occupation of the perpetrator. There are many crimes that come within the scope of white collar crimes. This research is concerned only with bribery as a white collar crime and the responses to bribery in the laws of the US and the UK. As such, the research involves a critical and comparative approach to studying the responses to bribery in the two jurisdictions. To put this dissertation in context, a brief overview of white collar crimes and the need for legal responses to such crimes is called for. First, it may be noted that legal responses to white collar crimes, particularly those that are committed within the corporations are riddled with many complexities and challenges. A brief overview of these challenges provides a background for understanding the nature of the responses that are made out in both the US and the UK for responding to bribery with relation to corporations. To list the challenges that agencies face when investigating and prosecuting white collar crimes within corporations, these challeges include: establishing mens rea; legal personhood of the corporation; and possibility of punishment of corporations. As corporations are not natural persons, intention to commit a crime cannot be established, meaning that corporations do not have mens rea. Moreover, corporations cannot be punished in the same way as natural persons can be punished. The above are two of the reasons why corporations have not been subjected to the full scope of criminal law and instead strict liability doctrine has primarily been used to take action in cases involving corporations. The growing awareness about the ways in which white collar crimes are committed especially within corporate entities, and the impact of these crimes has led to the change in the legal landscape in this area. Some of the legal responses in the US and the UK, that are discussed in this dissertation can be understood in the light of these concerns. Responses to white collar crimes, particularly, those that are related to financial crimes such as bribery, are part of what is broadly called as anti-corruption approach. Anti-corruption approach is a combination of legislation and policy measures that seek to tackle white collar crimes like bribery. Anti-corruption is generally defined as domestic and international law measures that are taken respond to corruption, such as, Bribery Act 2010 that was passed by the British Parliament for the specific purpose of responding to the commission of offence of bribery in the UK or abroad. In the international context, measures taken by the World Bank are also examples of anti-corruption, although this dissertation is not concerned with such measures. Bribery has to be seen as part of the wider spectrum of corruption and white collar crimes. Just like corruption in general, bribery can be of public or private nature. Bribery can be private form of corruption from the perspective of the bribe giver, who may be a private individual or a person associated with a corporation. It can be public form of corruption from the perspective of the bribe taker, who can be a government servant or a person in public office. Therefore, it is important that bribery like corruption is not just seen from the public but also a private angle. It may be mentioned that there has been some criticism of the dominant approach to corruption, which is focussed on the public forms of corruption, on the ground that a focus limited to public corruption alone is not effective because it fails to respond to private sector corruption. The inclusion of giving of bribery by any person associated with corporations in the Bribery Act 2010, is cognisant of private corruption and takes into account transnational corruption, which has become more prominent with the increase in transnational corporate activities.

Due to growing awareness of corruption in corporations, corruption is now defined in a private context as well. Concerns about corruption in the private sector, particularly after the 2008 financial crisis which saw a number of financial and banking corporations implicated in irregular activities, have led to the increase of concerns among academia and policy makers for defining corruption in the private context and including bribery and similar corrupt practices in anti-corruption contexts. The Bribery Act 2010 can be seen as a response to such concerns as it seeks to penalise certain actions of corruption and bribery both in the UK and outside if such actions have the involvement of corporations registered in the UK. Thus, private corruption is recognised in the Bribery Act 2010. It includes corporate bribery, which is a form of corporate corruption, that is private corruption. The research for this dissertation has been conducted with the help of doctrinal legal research method as the research applies comparative and critical methods to study the laws in the US and UK that respond to bribery and corruption as white collar crimes. The doctrinal legal research method was thought to be appropriate for this research because the focus is on the identification and analysis of legal and factual issues related to law. Doctrinal legal research method is a part of the qualitative approach, in which the researcher forms research questions and then locates and analyses the data related to the formulated research questions. As a part of this research method, both primary and secondary sources are part of data collection; which means that primary sources of legislation, case law, treaties and EU law if applicable, as well as secondary sources found in books and journals, were used for the collection of data. Relevant commentaries and government reports have also been included in this research. Therefore, there are both secondary and primary data from US and UK that have led to formulation of findings of the dissertation. As this research involves a critical appraisal of laws in the UK and the US, a comparative legal research method was also applied in this research. A comparative legal research method is used when the researcher studies and compares the laws of two or more jurisdictions. This method allows the researcher to compare and contrast the legal responses on the same legal issue in the different jurisdictions. As part of the comparative method, the researcher identified and tabulated the laws and rules in US and the UK, and then compared the similarities and dissimilarities in the laws in the two jurisdictions. Descriptive comparative law, which describes the variations between the laws of the different jurisdictions, and applied comparative law, which takes a more critical approach to the variations, were both employed as this dissertation critically analysed laws responding to bribery and corruption in the US and the UK.

This dissertation is divided into five chapters. The first chapter has provided the background of the dissertation. The second chapter contains detailed literature review. This chapter defines the key terms and concepts involved in this research as well as details the key theories and identifies the regulatory framework related to anti-bribery and anti-corruption in both US and the UK. The third chapter discusses the American laws responding to bribery and corruption. The fourth chapter discusses the English laws responding to bribery and corruption. The fifth chapter conducts a comparative and critical discussion on the laws in the USA and the UK responding to bribery as a white collar crime.

Literature Review

Two of the prominent themes in the literature related to white collar crimes are that of defining white collar crime and relating the crime to the nature of actor, that is the person who can commit the white collar crime. White collar crime was first defined by Sutherland as the “crime committed by a person of respectability and high social status in the course of his occupation.” The emphasis in this definition was on the social status of the perpetrator of the crime. These were crimes committed by persons of respectability and persons with a certain social standing in the society. However, every crime committed by such as person cannot be defined as a white collar crime as there are other aspects of white collar crime that are to be included. It may be noted that decades after Sutherland’s definition of white collar crime, there is still some definitional confusion as to what the term ‘white collar crime’ means. In general, there is some agreement and consensus amongst the criminologists who study white collar crime only as to the occupational context of the crime, the motivation being that of economic gain or occupational success, and lack of direct and intentional violence. Therefore, coming back to the earlier point, every crime committed by a person of respectability and high social standing cannot be considered to be a white collar crime, there are certain other contexts that are to be present which make a crime a white collar crime. Three of these contexts that see general consensus amongst the scholarship are: the occupational context, where we say that these are crimes committed by persons involved in a specific occupation; the perpetrator’s economic motive; and absence of direct or intentional violence. A definition of white collar crime that meets the afore-mentioned characteristics is as follows:

“White collar crimes are illegal or unethical acts that violate fiduciary responsibility of public trust committed by an individual or organization, usually during the course of legitimate occupational activity, by persons of high or respectable social status for personal or organizational gain.”

In the above definition, white collar crime is defined as an act of a respectable individual or organisation. The act is committed during legitimate occupational activity. The motivation behind the act is personal or organisational gain. The act itself is illegal or unethical in nature. An additional characteristic involved in white collar crime is related to the fiduciary responsibility of public trust. Breach of trust has been considered to be an element in the definition of white collar crime, trust being private or public in nature. Therefore, white collar crime has been defined in the contexts of trust and breach of fiduciary duty as well. In general, it is accepted that it is difficult to define white collar crime completely or with single meaning. Instead, it is better to adopt a more generic definition, such as, the definition provided by Friedrichs, who states:

“More generally, white collar crime is a generic term for the whole range of illegal, prohibited, and demonstrably harmful activities involving a violation of a private or public trust, committed by institutions and individuals occupying a legitimate, respectable status, and directed toward financial advantage or the maintenance and extension of power and privilege. We should give up the illusion that white collar crime can—or even should—have a single meaning or definition.”

From the discussion on the above discussed contexts, the crime of bribery can be defined as a white collar crime. Bribery involves an occupational context, where the person taking or receiving the bribe is involved in some occupation which is linked to the taking or receiving of bribery. In the context of the present dissertation, the occupational context of those giving and receiving bribery is a relevant issue. This can also be seen in the context of corporate bribery, where executives or people associated with corporations may be involved in the giving of bribery. On the other hand, the person taking the bribery may also be doing so in an occupational context, such as, a public official who may be taking bribe in return for doing something for the bribe giver. The economic motive is also a relevant point as it can be the cause for the person giving as well as receiving bribery. The receiver of the bribery has an obvious economic motive because it will lead to enrichment for himself. The person giving bribe may also have economic motives; for example if the person is associated with a corporation and giving bribery will assure certain economic returns for himself or his organisation. Finally, bribery like most white collar crimes, does not involve direct and apparent violence. Therefore, the elements of white collar crime are present in bribery. Although white collar crimes do not involve direct and apparent violence, there are greater social harms involved in such offences, which may be more serious than crimes involving direct and apparent violence. White collar crimes may even be violent in a passive sense, where the crime itself is not violent but has repercussions that are violent. Social harms due to white collar crimes may be serious yet unaddressed because of the non-apparent nature or passive nature of these harms. Nevertheless, the recognition of the fact that white collar crimes can have serious implications has been cited as a reason for justification of strict legal action against white collar criminals. As noted by Friedrichs, “there is overwhelming evidence… that many of the worst forms of harm have not been criminalized. Furthermore, these forms of harm all too often are perpetrated by governments, corporations, small businesses, and professionals.” In criminology literature, two perspectives on white collar crime are used for linking the crime to the actor. The critical criminology perspective emphasises on the status of the actor, where actor is rich and the powerful; coming from this perspective, critical criminology critiques the traditional criminological approach of linking crimes with low income groups. The anomie theory in criminology takes a different perspective and has sought to delink white collar crime from the status of the actor and has emphasised that most white collar crimes are economic offences that can be committed by anyone. There is some support for both of these perspectives. The critique of the traditional approach to crime as done in critical criminology, was based on the need to shift focus away from the conceptualisation of crimes from the context of class. Traditional criminology focussed on crimes that were violent in nature but was largely silent on the crimes that were committed by those who were in influential positions. At this point, Sutherland chose to define white collar crime as a critical approach to criminology by driving focus onto the crimes committed by the rich and powerful. Although, conceptualisation of white collar crime has now moved beyond the crimes of the rich and powerful, the fundamental idea of such crimes being linked to the occupation of the actor is still relevant.

Anomie theory links white collar crime to opportunity and social pressures to make more money. Seen from this angle, it can be said that there are many white collar crimes, such as, income tax fraud, bribery, and embezzlement, that can be done by individuals belonging to any socio-economic class. Corruption is explained in this context as well. Corruption, especially bribery, is not necessarily committed by people in powerful positions. Linking this discussion to bribery, one may note that Anomie theory provides a better explanation of bribery in context of criminology as the focus is on the crime and not the actor alone. This seems to be in accordance with the conceptualisation of bribery in UK (Bribery Act 2010), as well as US (Foreign Corrupt Practices Act). Literature on bribery also focuses on the wider issue of corruption. Defining corruption for contextualising bribery is important because bribery is usually responded to in law and policy through what is called as anti-corruption approaches. Defining corruption is not an easy task because literature itself is abound with the complexities of defining corruption, explained by one author as “exploring a complicated maze replete with dead ends and surprising turns enough to frustrate the hardiest venture.” Literature on corruption generally shows a tendency to define corruption from different perspectives and approaches, which lead to different ways of defining corruption. Even the task of identifying the causes of corruption from a unidimensional perspective or one theory is a difficult task because no one theory can describe all the causes of corruption. Moreover, coming back to the perspective of the anomie theory, even if it is considered that the opportunities of corruption exist everywhere, the degrees of corruption vary, and individuals do not respond to opportunities of corruption in the same way. These are important differences which are reflected in literature on defining corruption which has implications for anti-corruption approaches to bribery. For instance, in some rent paying cultures, especially in the developing nations, gifts to public officials are normalised, which is not the case in western democracies like US and UK. This may mean that while an act may not be seen as bribery in the country where bribery is given, it may be considered to be bribery if the bribe giver is a corporation or an associated person from UK or UK. This discrepancy has implications for law and policy in the US and UK as well as will be discussed later in this dissertation. Corruption is defined from the perspectives of public and private corruption. In the public context, corruption is defined as the “abuse of public office for personal gain.” The defining of corruption in this sense fails to account for corruption that takes place in the private contexts, such as, white collar crimes that take place within private organisations and corporations. Corporate corruption also does not come within the scope of corruption when defined in this public sense. To be sure, the defining of corruption in the public sense is part of a dominant discourse on corruption which has been critiqued for its focus on corruption that happens only in public spheres and therefore limited for greater part to corruption in developing countries. The dominant discourse is also critiqued for its inability to account for corruption that happens in private sense, such as, in multinational companies from western nations. From a legal perspective, the problem with such generalisations about corruption is that it does not lead to a clear language and understanding of corruption so that appropriate responses to corruption in the form of laws can be formulated. This is also appropriate in the light of literature on corruption in the aftermath of the global economic crisis, which started in 2008 and affected both the US and the UK, where the crisis was linked to corrupt practices and high level of white collar crime in the banking and financial sector of these countries. It has also been noted that there is a high level of corruption in the public sector largely dominated by Western multinational companies.

Both in the UK as well as in the US, the argument that corruption is not to be seen just from the public angle but also from the private angle is a valid argument to defining corruption. This is so because in both countries, public corruption is very low, but there is still significant incidence of corruption and bribery, particularly bribes given in foreign countries and related to the multinational corporations and businesses. Therefore, for the purpose of this dissertation, the definition of corruption cannot be taken in the public context, rather it has to be taken in the private context as well. Whether public or private, there is one common element in corruption, which is also relevant to this study. This is the rational choice that is made by individuals to indulge in the taking or giving of bribery. Individuals that indulge in a corrupt act make a choice to further their own interest. For the purpose of this study, the concept of self-interest and the actions of the individuals to further their self interest is an essential aspect. This study is concerned with the laws that are made by the US and the UK to respond to the white collar crime of bribery. Bribery is an act which is usually done for the furtherance of some personal interest. In the US and the UK, this self interest can also be involved in the way the multinational corporations are involved in giving of bribery to foreign public officials. Anti-corruption and anti-bribery laws in these countries need to respond to private sector corruption, particularly corporate corruption. As an important aspect of both the Bribery Act 2010 and the Foreign Corrupt Practices Act is to respond to corporate corruption and bribery as well, it is important to understand the theoretical approaches related to organisational corruption. Literature has noted the difficulty associated with understanding or explaining corruption from the perspective of the organisation because it may be difficult to say why organisations are corrupt; as opposed to individual corruption, which can be attributed to personal greed. Nevertheless, there are some explanations for organisational corruption to be found in theory, particularly in the work of Albert Bandura relating to the concept of moral disengagement.

Bandura argued that moral disengagement plays a role in the commencement of corruption within an organisation by allowing individual unethical decision-making aimed to achieve the interests of the organisation. In such a situation, there is a lessening of awareness of the individuals as to the ethical content of their own decisions, which are part of the unethical decisions within the organisation. Due to this, organisational corruption can be systemic as there is perpetuation of corruption within the organisation and greater decision making powers given to those individuals who have a greater propensity to make organisational decisions advancing organisational interests regardless of the ethical content, thus being morally disengaged. The moral disengagement theory explains the way in which the decision making becomes centralised with those individuals who are more willing to take unethical decisions to promote the objectives of the organisation. The moral disengagement theory therefore encourages responses that are rooted in ethics. In context of the present study, moral disengagement provides a motivation for the making of laws and policies that target the corporation as a whole for the purpose of penalty and not just the individual decision makers. Considering white collar crimes only in the context of corporate entities, it may be noted that corporate white collar crime is particularly challenging in terms of investigation and prosecution because of the nature of the corporation and the difficulties associated with the separation the corporate entity from the actions of its executives at times. As corporate structure is separate from the individuals who are part of the structure, it sometimes becomes difficult to attribute criminal liability to the corporation for the decisions of the individuals. In this context, the responses to bribery can be understood in context of both individual and corporate acts. The principal legislation response in the UK to bribery is in the enactment of the Bribery Act 2010. It defines bribery as the giving or the offering of bribes to foreign public officials as well as the giving or offering of bribes to private individuals. Moreover, the Bribery Act 2010 penalises the soliciting or receiving of bribery by a public official or private citizen. Both active bribery, and passive bribery, are offences under the Act, therefore, both the giving and receiving of bribery is punishable offence.

The United States has responded to bribery and corruption as white collar crimes through a host of measures. One of the prominent measures is in the passing of the Foreign Corrupt Practices Act 1977 which is used for the prosecution of bribery related offences committed by companies in foreign jurisdictions. The Organisation of Economic Co-operation and Development (OECD) has noted that the “United States has investigated and prosecuted the most foreign bribery cases among the Parties to the Anti-Bribery Convention” after the passage of Foreign Corrupt Practices Act 1977. However, this may not be the complete picture as noted in the following observation:

“Approximately 85% of DOJ criminal FCPA enforcement actions business organizations over the past decade were secured through alternative resolution vehicles not subjected to any meaningful judicial scrutiny. Rather than praising the fruits of this dynamic, this dynamic is something to lament.”

Therefore, there are gaps in how the US responds to the issue of bribery prosecution. These gaps are related to the methods that are used by US prosecutors in responding to corporate bribery.

This literature review has sought to reveal the prominent themes in the literature around corruption and bribery for the purpose of creating a background for the research study. The prominent theme is that literature suggests a greater recognition of private corruption, of which bribery is an important part. This can be linked to legal responses in the two jurisdictions which are discussed and compared in the next three chapters of the dissertation.

Responses to Bribery in the US

White collar crimes can be complex in nature, especially if such crimes see the involvement of corporations. At their very core, white collar crimes are economic in nature and involve a range of crimes, such as, money laundering, bribery, embezzlement, to name a few. The nature of financial crimes is often complex; crimes involving corporations are made even more complex because of the transnational nature of their corporate activity. As the major focus of this dissertation is on bribery and corruption in the corporate sector, there is an emphasis on the legal responses taken by US to combat corporate bribery as a part of anti-corruption. The US has responded to bribery as white collar crime through a host of measures. For instance, whistleblowing laws have been developed in the USA to enable individuals to report corrupt practices or individuals in organisations. Bribery has been reported in several studies based in the US to be a common practice of corporations, which are involved in direct bribery of governmental officials, including legislators. It was reported in 2007 that the Justice Department was involved in investigations pertaining to 60 cases under the Foreign Corrupt Practices Act 1977, including investigations of major corporations; these cases all involved possible violation of anti-bribery provisions of the Foreign Corrupt Practices Act 1977. Bribery has also been an issue with regard to political campaigning and lobbying by the corporations during or after elections; this kind of activity is not as apparent or obvious, although there are a number of suspect political campaign contributions and evidence of aggressive lobbying by corporations in the US. The reason why these activities are considered to be serious and worthy of legal responses by the state are that such activities have the potential to erode the control of the state over the harmful activities of corporations and possible changes made in legislations and policies due to such lobbying and corrupt activities of the corporations. In the context of the legal and policy responses made to white collar crimes in the US, it may first be noted that these responses were also been driven by a social movement against white collar crimes in the US. This social movement began in the early 20th century when there was a greater awareness of white collar crime and there were a number of journalists and civil society organisations that were involved in the movement against white collar crime and who campaigned for legislations that would strictly respond to white collar crimes. Katz wrote extensively about this and his argument about the increase of social movement against white collar crime has been explained by Friedrichs as follows:

“social movement against white collar crime in the United States that emerged during this period was the most substantial attack on such crime since the early 20th-century Progressive Movement, which brought together rural populists, muckraking journalists, and organizations of civic-minded businessmen concerned about the excesses and outrages of big business. This “movement” was, in part, one response to disillusionment with and declining confidence in the political and business leadership, arising out of the Vietnam War protests, the Watergate crimes of the Nixon White House, and some high-profile cases of corporate misconduct.”

Therefore, the movement against white collar crimes was due to the increase in white collar crimes, especially in the corporate sector and the excesses reported in this sector. White collar crime was also reported in the context of collusion between big business and government, which also had an impact on the perceptions of civil society organisations and led to the development of the movement against white collar crime and campaigning for the development of legal responses to white collar crimes. As much of the activity in white collar crime has a strong economic context, as seen in the prevalence of white collar crime in business sector, there has been a demand for legal responses in this economic context. Therefore, legal responses to white collar crimes, including bribery, can be seen as being rooted in social control. Social control of white collar crimes is a complex area because in many ways the formal institutions of social control, including the law and the judiciary, failed to prevent white collar crime by failing to deter individuals or organisations from engaging in white collar crime. In other words, there has been a lacking of external controls, in the form of law mostly, which could deter white collar crime. In some ways, social control itself can also lead to white collar crime. This is especially true in the case of corporate and organisational white collar crime, which may be the result of high level of organisational control over individual decision making aimed at making the individuals take decisions that are related to organisational aims. Therefore, in some cases, organisational white collar crimes may be the result of individuals having to conform to organisational unethical norms and aims. With this background of how social control interacts with white collar crime, an understanding of the laws on white collar crimes, in particular, bribery, may be achieved. Historically, legal responses to white collar crime in the US were made under two contradictory forces: first, there was a tendency to give a free hand to entrepreneurs and economic enterprises for adding new wealth and developing economy; second, there was a need to ensure that vulnerable stakeholders like workers, consumers, and investors, were not exploited, defrauded, or harmed by corporations, businesses, and professionals. In the late 19th century, US Congress responded to these conflicting forces by enacting laws regulating business practices and also criminalising some practices. In the contemporary times, legislation on white collar crimes has become more responsive to both business needs as well as the need to respond to white collar crimes that impact the interests of different sections in the society.

In the US, responses to corruption in general are made under many legislations. The Racketeer Influenced and Corrupt Organizations Act 1970, Foreign Corrupt Practices Act 1977, Financial Institutions Reform, Recovery and Enforcement Act 1989 relate to corruption. Even the PATRIOT Act 2001 covers corruption as part of a wider response to the terrorist attacks. The Racketeer Influenced and Corrupt Organizations Act 1970 was enacted by the US Congress to combat organised crime. It provides for prosecution and civil penalties for racketeering activity, which many include illegal gambling, bribery, money laundering, counterfeiting, embezzlement, drug trafficking, and other offences. Bribery is specifically mentioned as an offence under the Act. Racketeering activity is defined as activities that include, inter alia, bribery. Foreign Corrupt Practices Act 1977 is targeted among other things at bribery of foreign officials. The legislation was motivated by a significant number of cases involving bribery of foreign officials by American firms. In the 1970s, there were investigations conducted by the US Securities and Exchange Commission, which revealed payments of bribery to foreign officials by more than 400 American companies to the amount of $300 million. Most of these payments were made to foreign government officials, politicians, and even political parties in exchange for favourable decisions and outcomes to the companies in these countries. These payments were in the nature of facilitating payments made with the intent to make government functionaries discharge their functions in favour of the companies. Infamous scandals relating to facilitating payments include the aerospace giant Lockheed Martin case, wherein the executives of the company paid bribes to the foreign officials in several countries in order to get favourable decisions and orders for the company in those countries. Two important amendments have been made to the Foreign Corrupt Practices Act 1977, both of which relate to the bribery offence. The first amendment was made under the Omnibus Trade and Competitiveness Act of 1988, Title V, which introduced a "knowing" standard as per which a person should have knowingly and with "conscious disregard" committed the offence of bribery. Interestingly, the law does not prescribe penalties for "bona fide", "reasonable" and lawful gifts that are allowed under the laws of the foreign country. This appears to be a pragmatic approach to ensure that American companies are not made uncompetitive in foreign business environments due to domestic laws penalising bribery where such acts are accepted under the laws of the foreign countries. The second amendment was made under the International Anti-Bribery Act of 1998 for the purpose of implementing the OECD Anti-Bribery Convention. The scope of the Act was also extended to foreign firms doing business in the US. There are certain elements of the bribery offence that are clarified in the legislation itself. The elements are provided in the Table 1 below, which is adapted from Bixby:

Therefore, the essence of the bribery offence under the Foreign Corrupt Practices Act 1977 is that payments are made on behalf of a US based issuer or concern to a foreign official for the purpose of eliciting some favours that are to the advantage of the business. It is of importance that such payments should be made ‘corruptly’ as noted in point vi of the Table 1 above. It may also be noted that as per the amendments done to the Foreign Corrupt Practices Act 1977, payments that are made legally in the foreign country or made as per reasonable and bona fide expenditures are not penalised. The Foreign Corrupt Practices Act is not as rigid as might be supposed because the Act also allows the officials to make what are called “grease payments,” to foreign government officials. These grease payments are made to facilitate routine government actions performed by a foreign official in their country. Grease payments are allowed for obtaining permits, licenses, lawful customs clearances, and even obtaining entry or exit visas. There is no upper limit as to how much grease payments can be made by the officials of a company is a foreign country, which is one of the issues of concern or contention because grease payments can be of any amount. The Foreign Corrupt Practices Act 1977 has become the centrepiece of the American anti-corruption policy as noted by one commentator below:

“After decades of obscurity, the FCPA now occupies center stage in the federal government’s war on white-collar crime. The DOJ increased the number of its FCPA investigations sevenfold during the last three years, and that is just the beginning. The DOJ has publicly announced its intention to vigorously enforce the law and is hiring an army of new prosecutors just to handle these cases. No one is immune from FCPA scrutiny. Current cases and subpoenas directed to entire industries are probing every manner of transaction— from a shipment of rice to the design of a space station. Whenever U.S. business crosses a border, an FCPA investigation is now a distinct possibility. It is well-known that the FCPA not only prohibits bribery of foreign officials, but imposes reporting obligations on public companies— somewhat similar to the requirements of the Sarbanes-Oxley Act of 2002. But the anti-bribery provisions of the FCPA also apply to private businesses—both large and small—and to individuals, both in the United States and abroad. Penalties can include stiff prison terms and millions of dollars in fines.”

The Foreign Corrupt Practices Act 1977 has become the foremost legislation applied by the American regulators to control and regulate business practices in foreign locations in the context of corruption and bribery. The legislation is also used by the regulators to investigate and penalise acts of corruption and bribery by foreign firms operating in the US. An example of such action is seen in the Siemens case in 2008, which saw the German engineering giant pay penalties of more than $1.6 billion under the Foreign Corrupt Practices Act 1977. The Act allows the regulators to penalise businesses even where the corrupt acts were carried out by their foreign sales and marketing agents, distributors, and consultants, with or without the knowledge of the illegal payments being made. It has been argued that due to the legislation and the strict penalties under the legislation, there is a discouragement for firms based out of the US to invest in foreign markets, particularly in countries where bribery is endemic in nature. The law, particularly the Foreign Corrupt Practices Act 1977 makes it unlawful for American persons to make payments to foreign officials for the purpose of obtaining business or related opportunities to do business. At the same time, the foreign country itself may have different ideas about bribery and corruption, gift taking may be acceptable, and some forms of bribery may be normalised. Under these circumstances, American firms may be under pressure to make payments in order to get business or they may lose business because firms of other nationalities are in a position to make these payments. This may mean that the American firms stand to lose business because of domestic legislations that do not allow them to make such payments. Therefore, there may be pragmatic reasons for considering some leeway to American firms and their officials for dealing with foreign officials. There is research that indicates that due to the strict regulation of Foreign Corrupt Practices Act 1977 prior to the amendments passed in 1988, there was a distinct competitive disadvantage faced by the American firms operating in foreign countries. Indeed one of the reasons for the 1988 amendment was to address the trade deficits that continued to grow because of the competitive disadvantage faced by the American firms in foreign locations. In order to allow American firms to compete with their international counterparts in countries where gift culture in government sector is normalised, the amendments were made to the law. The amendments have to be seen in the light of the fact that the adoption of the Act had made the US the first country to “adopt a sweeping law prohibiting bribery of foreign officials, and for many years it was alone in having such a law” and the American companies considered that this “law put them at a distinct disadvantage in obtaining international business since bribery and kickbacks were a regular feature of commerce in many nations.” The 1998 amendment to the Foreign Corrupt Practices Act 1977 was made to bring the law of the US in alignment with the OECD convention that itself was spearheaded by the US. The International Anti-Bribery Act of 1998, which made the amendments was a legislation that expanded the scope of persons covered by the Act to include some foreign nationals and also expanded and extended the jurisdiction of the Act beyond American borders, by providing more enforcement powers to the prosecutors in the US. An important change brought about by the 1998 amendment is to bring ‘any person’ related to the organisation or corporation, be it an agent of a corporation or any official even in foreign nations. This broadens the purview of the Act greatly.

Of even more importance is the removal of territorial nexus between the corrupt act and the US because the Act now allows the prosecution foreign company or person if it causes, directly or indirectly an act in furtherance of the corrupt payment to take place within the US. This is one of the areas which have been criticised by the commentators, who believe that there is a very broad power given to the prosecutors in the US. There has been a steady rise in the rate of prosecutions under the Foreign Corrupt Practices Act 1977. In 2004, the Department of Justice prosecuted two cases and the Securities and Exchange Commission prosecuted three cases. In 2008 and 2009, the Securities and Exchange Commission prosecuted thirteen actions and fourteen cases respectively. In the same period, the Department of Justice prosecuted twenty and twenty-six cases respectively. These numbers indicate that there has been an increase in the number of prosecutions undertaken by the prosecutors over a period of time in the US. In some cases, the penalty imposed on the officials is quite significant. For instance, Ingersoll-Rand Co. were made to pay $2.5 million in civil and criminal penalties for payments made towards the travel and entertainment expenses for eight Iraqi officials exceeding $20,000. Similarly, in a case involving Chevron, the company was made to pay $30 million in civil and criminal penalties for giving unlawful payments under the UN Oil for Food Program in Iraq and for failing to maintain proper books and records as per the Foreign Corrupt Practices Act 1977. The high penalties that are imposed in such cases is also due to the insistence of the prosecutors on the disgorgement of profits tied to the illegal actions of the companies, which means that the companies do not only pay the fine or penalty but also includes the disgorgement of profits leading to a significant increase in the level of the total amount of fines, fees, and penalties levied by the Securities and Exchange Commission and the Department of Justice. A notable case that illustrates this point relates to the Titan Corporation, which was made to pay a criminal fine of $13 million, along with a civil penalty and disgorgement to the Securities and Exchange Commission of about $15.5 million, that came to a total payment of $28.5 million. Had the disgorgement not made, the company would have had to pay only $13 million along with some civil penalty. The disgorgement of profits took the penalty amount to a high level of $28.5 million. As mentioned earlier, grease payments are allowed under the law in the US. Grease payments may be defined as “facilitating payments” that are made to low-level foreign officials in return for the latter’s expediting actions or for securing performance of government actions. The area of grease payments presents difficulties for prosecutors because these are smaller in amounts and difficult to trace by investigators, but at the same time, the loose interpretation of the law allows the companies to make such payments as noted by Segal below:

“increasing the difficulty of tracing money is a critically important part of any corrupt enterprise’s operation if it wishes to avoid detection. A review of the cases shows that more than half of those caught bribing could either have avoided detection easily, or made it much more difficult to prosecute them had only simple steps been taken to disguise money flows. As a result, without greatly increased funding for investigation, the FCPA is a flawed model on which to base all expectations of foreign bribery deterrence.”

The area of grease payments has become a grey area in the law because of the difficulties associated with prosecution in such cases, which has led to greater flexibility given to the officials for the purpose of allowing grease payments. This is also an area that presents opportunity for comparison with the law in the UK as grease payments as such may not be allowed in the UK law. Another important feature in the US with respect to legal responses to bribery and corruption is the use of Deferred Prosecution Agreements (DPAs). DPA allows prosecutor and accused individual to enter into an agreement whereby the accused individual agrees to certain conditions in exchange for deferment of prosecution. DPAs can be issued to individuals as well as corporations. A DPA is an agreement that can be entered into between a defendant and the prosecutor, wherein the prosecutor agrees to grant amnesty to the defendant. The amnesty depends on the fulfilment of certain requirements that the prosecutor lays down for the defendant to follow and the amnesty will be allowed finally only if the defendant proves that he has indeed followed these conditions. NPAs (Non-prosecution agreement) are also followed in the American justice system and are similar to DPAs. In the US, DPAs are issued generally in cases that involve corporate fraud, such as, bribery cases under the Foreign Corrupt Practices Act 1977. In such cases, the defendants and the prosecutor enter into agreements that allow them to implement certain reforms in their companies in exchange for them to only pay fines, instead of serving prison time. Defendants can also be asked to cooperate with the investigation and provide any documents and other evidence that the prosecutors may ask for. Corporate criminal offences are allowed to be dealt with as per the DPAs as per the United States Attorneys' Manual 2008, Section 9-16.325. DPAs have proved to be somewhat popular with the prosecutors in the US due to a combination of reasons that have led to the increase in the issuance of DPAs in the US. More than 65 DPAs were issued from 2006 and 2008 itself, which shows how DPAs have become a common route towards tackling corporate offences in the nature of white collar crimes. The Department of Justice has also allowed the use of DPAs and NPAs under the Foreign Corrupt Practices Act 1977 prosecutions for the bribery offences in foreign jurisdictions. As noted earlier, there has been an increase in the prosecution of bribery related offences in the past decades and there are a number of cases in which executives of companies have been prosecuted for commission of bribery offences in foreign jurisdictions; what may also be noted here is that DPAs are also increasingly employed by the prosecutors for responding to such cases. The efforts of the prosecutors in this direction have led to the recognition by the OECD that the “United States has investigated and prosecuted the most foreign bribery cases among the Parties to the Anti-Bribery Convention.” This observation is made on the basis of the actual number of prosecutions and cases where penalties have been imposed by the prosecutors, that is, Department of Justice and the Securities and Exchange Commission. However, it has been argued that this observation of the OECD simply bases itself on the number of enforcement actions and the settlement amounts secured, which is not the clear picture of the situation because nearly “85% of DOJ criminal FCPA enforcement actions business organizations over the past decade were secured through alternative resolution vehicles not subjected to any meaningful judicial scrutiny” which is not something that is deserving of praise rather it is something that is a matter of concern. This criticism is based on the innate lacunae in the DPA and NPA systems. The DPAs are made without judicial scrutiny and this may be the basis for arguing that the actions against the companies may not really be effective. This issue was raised by OECD as well that the impressive record of prosecutions seen in the US is based on the issuance of DPAs and NPAs without the scrutiny of the courts which has led to a greater number of sanctions, but may be open to doubt due to lack of judicial oversight. Kohler noted that “the cheerleaders of increased FCPA enforcement seem to be focused on the quantity of enforcement (regardless of enforcement theory, regardless of resolution vehicle used, and regardless of outcome) rather than the quality of enforcement”. Thus, although there is a great number of prosecutions in the US, there is little judicial involvement in the process for reaching agreement for DPA in the US, which means that there is no judicial oversight and this has become a matter for concern. This is the second area which can provide scope for comparative analysis with the law in the UK because under the British law, there is more judicial oversight on the process of making of DPAs.

Another issue that is raised with respect to DPAs in the context of bribery offences is whether this mechanism is effective for the strengthening of the legal response to bribery offences. DPAs can be said to be effective only if these lead to the reduction of bribery offences or if the sanctions are effective in deterring bribery offences. In such a case, it may be said that DPAs have managed to create effective sanctions under the anti-bribery laws. If individuals within organisations are deterred from giving bribery in foreign jurisdictions, then DPAs are effective. However, if DPAs have become the route to easy getting away with the illegal actions, then DPAs may make the law more ineffective. There has been much focus on the settlement of cases in the USA for charges made out under the Foreign Corrupt Practices Act. In 2019, six cases of bribery prosecutions have already been successfully concluded. Microsoft Corporation has been asked to pay $24 million to settle charges under Foreign Corrupt Practices Act violations in Thailand, Saudi Arabia, Hungary, and Turkey. Walmart has been asked to pay $144 million to settle charges under the Foreign Corrupt Practices Act. Cognizant has been asked to pay $25 million to settle violations of the anti-bribery, internal accounting controls, and recordkeeping provisions of the Foreign Corrupt Practices Act.

Responses to Bribery in the UK

The principal legislation response in the UK to bribery is in the enactment of the Bribery Act 2010. This law defines bribery as the giving or the offering of bribes to foreign public officials as well as the giving or offering of bribes to private individuals. Moreover, the Bribery Act 2010 penalises the soliciting or receiving of bribery by a public official or private citizen. Four core offences are recognised to under the Act. The first is bribing of another person, the second is the offence of taking bribes, the third is bribing foreign public officials, and the fourth is the failure of a commercial organisation to prevent an associated person from committed an offence related to bribery. The fourth offence is significant because it is in the nature of a strict liability offence in context of corporations. As per this, companies that fail to prevent associated persons from committed bribery offences can also be charged under the Bribery Act 2010, whether or not the company was actually aware of the acts of the associated persons. Thus, the failure to create conditions that prevent bribery offences by associated persons is itself an offence under the Bribery Act 2010. The Bribery Act 2010 is generally considered to be the UK government’s implementation of the OECD Anti-Bribery Convention. There was some criticism of the UK government for its failure to implement the provisions of the OECD Anti-Bribery Convention for over 10 years since the Convention was adopted. However, with the adoption of this Act, this criticism has been put to rest. There are two general offences related to bribery under the Act, which are, offering, promising or giving of a bribe (bribery); and the requesting, agreeing to receive or accepting of a bribe (passive bribery). The bribery laws are enforced by the Serious Fraud Office (SFO), which is the only state agency with national jurisdiction over these offences. Investigator agencies assist the SFO with the investigations and prosecution. One of the challenges reported in literature with respect to the legal responses to bribery in the UK is the transnational and expensive nature of the investigations. The responses made by the UK to bribery are a part of the general anti-corruption framework as well as responses to financial crimes, of which bribery is one. The UK has taken a number of steps to respond to corruption and white collar crimes that are relates to economic offences. Bribery Act 2010 is one of these responses while there are other responses including in the Fraud Act 2006, and Money Laundering (Proceeds of Crime) Act 2002 and Money Laundering Regulations 2007. These responses are made to counter the increase in unethical practices in the corporate sector but there is also an acknowledgement of the fact that the “the extent of deliberate and dishonest criminal misconduct is less easy to identify” in the private sector where individuals can commit certain acts behind the corporate structure of companies. Therefore, inherent in the scheme of responses to bribery in the corporate is the paradox of countering such offences but having serious challenges in making such responses effective. This is a point that is essential to remember when considering DPAs and other such civil or hybrid responses to bribery offences later in this chapter. There is indeed a greater awareness of such unethical practices since the 2008 financial crisis, which exposed the practices relating to misconduct by banks. The general impression has been that many of the major banks have been engaged in manipulation of norms and that there has been a lacking of proper standards of honesty and integrity in the banking sector as well as the wider corporate sector. As serious as the issue of corporate corruption is, there are many impediments that come in the way of investigation and prosecution of executives involved in corruption. The most important impediment is the difficulty associated with proof or evidence collection in investigations against corporations because of the very nature of corporations and the nature of decision making in corporations. Corporations, especially multinational corporations, are involved in transnational activities and operations, which makes it difficult for investigators to identify the corrupt practices of the multinational companies or the individuals involved in such practices. Financial crimes of corporations or associated individuals such as bribery offences are also difficult to investigate because of the complexity involved in such investigations, and the high costs of such investigations. Moreover, investigators are required to meet high evidential and procedural requirements. In the UK these impediments have been considered to be the factors responsible for lesser likelihood of prosecutions against corporations. Criminal prosecutions against corporations may be rare in the UK but such prosecutions have been carried out in the UK. The case involving Mabey and Johnson is the first case in the UK where a corporation has been prosecuted for bribery in foreign jurisdictions. In 2009, Mabey and Johnson were convicted of paying bribes in Iraq, Ghana and Jamaica. In 2010, Innospec were convicted for paying bribes in Indonesia. In 2010, BAE Systems were charged with corruption in Tanzania. In all these cases, corporations were made subject to civil and criminal penalties. They were made to pay fines and also subject themselves to the monitoring. Criminal penalties were enforced under the Proceeds of Crime Act 2002, Part 2.

Criminal conviction of a corporation can lead to the debarring of the corporation under the Public Contracts Regulations 2006. The EU Public Procurement Directive 2004/18/EC is applicable in such cases and the Public Contract Regulations are also made under the EU Directive. Corporations can also be subjected to Serious Crime Prevention Orders and Financial Reporting Orders. Moreover, directors of the corporations found guilty of corruption offences under the laws in the UK can also face prison time. Thus, bribery offences can be prosecuted under the Bribery Act 2010 as well as the Proceeds of Crime Act 2002. Under the Bribery Act 2010, natural persons who are found guilty of bribery under Sections 1, 2, or 6 (respectively active bribery, passive bribery, and bribery of a foreign public official) can be given a penalty of imprisonment of up to 12 months and/or fine of £ 5000. A person who is found guilty of failure to prevent the offence of bribery under Section 7 can be subjected to unlimited fine. Specific offences of bribery are also made out under the Proceeds of Crime Act 2002. These are money laundering related offences for which the Serious Fraud Office has been given jurisdiction to prosecute. Section 327 of the Proceeds of Crime Act 2002 mentions these offences as concealing, acquisition, use and possession of unlawful proceeds, for which penalty of up to 14 years imprisonment can be imposed on the convicted persons. Section 330 of the Proceeds of Crime Act 2002 relates to failure to disclose, and tipping off for which penalty of up to six months imprisonment and/or £ 5000 fine can be imposed on the convicted persons. Civil Recovery Orders can also be made as in the 2008 case of Balfour Betty, which was asked to pay £ 2.25 million and costs for civil recovery. In 2011, Kellogg Limited were asked to pay £ 7 million due to sums received through contracts obtained by bribing of foreign officials by the parent company as well as third parties associated with the parent company. Civil Recovery Order is an order made by the High Court for recovery of property, assets, obtained though unlawful acts. Such orders can be made without the establishing of the criminal offence. Corporate criminal liability however remains difficult to establish because of the requirements to establish mens rea. The problem is with the locating of the ‘controlling mind’, and with respect to corporations, guilt of the corporation can only be established for active or passive bribery if the senior management of the organisation or its executives are involved. Therefore, there was a need to introduce measures that can help prosecutors to establish liability of corporations so that corporations can be penalised for their involvement in bribery related offences. With the introduction of the deferred prosecution agreements (DPAs) under the Crime and Courts Act 2013, there is a likelihood of an “increase in fines for fraud, bribery and money laundering offences.” The reason why DPAs are being looked at favourably is because these will help prosecutors avoid difficulties with proof collection against corporations and have more success rate with investigations against corporations. Moreover, DPAs will help the prosecutors in getting more cooperation from the corporations against whom these agreements are made so that they are required to divulge information that can help the prosecutors and investigators with investigation.

DPAs are in the nature of civil solutions for the enforcement of bribery laws. The nature of corporations and foreign bribery being such that is makes it difficult for prosecutors to gather evidence and prosecute responsible parties, civil solutions such as DPAs have been found to be more convenient, cost effective and effective in general as compared to criminal solutions. Cost effectiveness of the DPAs is due to the requirement of companies to cover the costs of investigation under the civil solutions, thereby lessening the burden on the state to investigate the corporations. Convenience of civil solutions like DPA as compared to criminal prosecutions is due to the fact that while criminal prosecutions require a higher standard of evidentiary proof from the prosecutors, DPAs can be made by the court based on lower evidential submissions. Moreover, there is a lower rate of successful prosecutions in criminal prosecutions due to the lack of evidence or the inability of the prosecutors to conduct effective investigations in cases involving foreign bribery incidents. On the other hand, civil solutions like DPAs can be implemented in more cases as the may allow the prosecutorial authorities to conclude a higher number of cases as the burden of proof is lower and the high standard of evidential and procedural requirements are not necessary to meet. The utility of the civil solutions is also noted in an interview with a prosecutor below, who says that civil measures do not mean that the persons being taken action against are any less criminal, “it just means that you are trying to bring them to justice in a way that doesn’t sap all of your resource because obviously we are having our budgets cut quite drastically. So it is an extremely efficient way if they come to you and report and then correct the problem which is part of the solution, isn’t it.” Clearly, there are some practical problems associated with criminal prosecution of bribery cases involving corporations, especially those with international transactions. On the other hand, DPAs offer the benefits of a civil solution, which is more convenient, cost effective and generally effective to deal with persons or corporations that are involved in the commission of offences under the Bribery Act 2010. The Serious Fraud Office, which is the principal authority that is dealing with cases involving fraud and bribery by corporations may find that civil solutions put lesser pressure on its resources and allows it to deal with corporations on a more even level. DPAs may technically not be criminal prosecutions, but the effect may be similar as prosecutors will be able to take action and enforce the bribery law. DPAs are in the nature of ‘negotiated relationships’ between the regulators and commercial organisations; as such the utility of the negotiated relationship is noted in the words of a commentator below:

“This literature places the regulator within a broad governance framework where the enforcement of rules within narrow prescriptive frameworks is eschewed in preference for policy mixes, combining instruments, third-party actors, and enforcement regimes that collectively can both “push” and “pull” regulatees into a reflexive appreciation of the goals the regulator wants to achieve and lead them to act in a diligent manner to bring the goals to fruition”.

DPAs have been supported by the Serious Fraud Office because these allow self-regulation mechanisms, such as, self-investigation. There are certain conditions that are made out in the DPA, and these allow the companies to themselves consider how and in what ways they can implement the provisions of the DPA, including investigations against individuals and setting up of better mechanisms in the company. These mechanisms cost less and are effective in getting some action taken against the company as compared to criminal prosecutions. There is one area of concern with regard to settlements with companies under global settlements, which involve collaboration with other national authorities. Global civil settlements are being negotiated and entered into without involvement of judges and when these settlements reach the court stage, judiciary may be in the dark as to the motivations and reasoning behind such settlements. In the Innospec case, Lord Justice Thomas was critical of the prosecutors’ approach to carving out settlements with the help of American authorities without judicial involvement in the UK and which lead to tensions between the Serious Fraud Office and judges. In this case, a criticism is also made against the global trend of restricting judiciary from trying corporate criminals:

“It is of the greatest public interest that the serious criminality of any, including companies, who engage in corruption of the foreign governments, is made patent for all to see by the imposition of criminal and not civil sanctions. It would be inconsistent with the basic principles of justice for criminality of corporations to be glossed over by a civil as opposed to a criminal sanction.”

Debarment is also an option for dealing with corporations involved in bribery offences. The EU Public Procurement Directive 2004/18/EC, specifically includes debarment and exclusion of corporations under Article 45. The Public Contracts Regulations 2006, Part 4 (23c) provides that contracting authorities can exclude economic operators from public contracts if the directors or other persons having representation for these operators are convicted for offences of bribery. While this may be limited to cases of public procurement in the UK, and not have any impact on overseas bribery offences, there is some scope for the prosecutors in the UK to debar companies that are involved in corrupt practices in the procurement process. Hybrid mechanisms are also being increasingly used for responding to corporate bribery. Hybrid mechanisms involve high level of intervention by the state to make corporations self-regulate their behaviour. One of the methods employed by the Serious Fraud Office is encouraging companies to self-report. After the passage of the Bribery Act 2010, more and more corporations are opting to self-report. Another method is self-cleaning, which involves the corporation itself being responsible for adopting practices that will enable it to counter and mitigate corrupt practices in the companies. Self-cleaning activities are also provided by Section 7 of the Bribery Act under ‘adequate procedures’. Yet another method is monitoring, as per which a monitor appointed by company and approved by the authorities, monitors the practices of the company. In the UK, despite the decision in Innospec, it is expected that there will be rise in the incidence of ‘deal making’ between the prosecutors and the accused of bribery offences, although it is of concern that deal making should not be ‘unconstrained’. This is one of the core areas of difference between US and the UK.

Comparison between the laws in the UK and US

The two previous chapters have detailed legal responses to bribery as a white collar crime. Much of the focus was on corporate bribery because the laws of both countries have emphasised on bribery by corporations or persons associated with corporations. In this chapter, the two areas where the major differences between the US and UK laws: grease payments and DPAs will be discussed. In the US law, facilitation payments or ‘grease’ payments are permitted under the law. The Foreign Corrupt Practices Act 1977allows officials to such facilitation payments to foreign government officials to facilitate routine government actions, such as, obtaining permits, licenses, lawful customs clearances, and even obtaining entry or exit visas. Furthermore, there is no upper limit as to how much grease payments can be made by the officials of a company is a foreign country. Officials of American corporations can make such payments to low-level foreign officials in return for the latter’s expediting actions or for securing performance of government actions. The amendments made to the Foreign Corrupt Act 1977 in 1988 are responsible for the changes in the law which allowed facilitating payments. Prior to the 1988 amendments, facilitation payments were not clearly allowed by the US law. However, due to pragmatic reasons US changed their laws because American firms were losing out due to strict laws in the US. After 1988 payments to a foreign official, political party or party official for "routine governmental action" is no longer prohibited. If it can be shown that the government officials were bound to perform these acts anyway, and the payment was not made to influence the outcome of the official's action, only its timing, then there is no liability under the law. In the UK, there is no scope for grease or facilitation payments and the law in this regard is much stricter as compared to US law. The only exception is where the foreign official is permitted to take such payments under the written law in the foreign country. Even before the application of the Bribery Act 2010, grease payments were not permitted under the legislation and common law. The Bribery Act 2010 specifically prohibits facilitation payments. After the Bribery Act 2010 came into force, the UK Ministry of Justice and the Serious Fraud Office have both put out Guidance documents that clarify the government’s and prosecutors position on facilitation payments. The Ministry of Justice has specifically noted that there is an emphasis on discouragement of facilitation payments by corporations or their associated persons, saying that any exemptions will “create artificial distinctions that are difficult to enforce, undermine corporate anti-bribery procedures, confuse anti-bribery communication with employees and other associated persons, perpetuate an existing ‘culture’ of bribery and have the potential to be abused.” The Serious Fraud Office has also clarified that they will prosecute companies for facilitation payments made in foreign countries, while taking into consideration interest of the public in taking enforcement actions. Companies that are involved in the making of facilitation payments can be subjected to prosecution proceedings unless they can establish mitigating factors under the law, which are that they took a proactive approach involving self-reporting and remedial action, and had established a clear and appropriate policy setting out procedures to be followed if facilitation payments are requested, accompanied by adherence to such policies.

An important feature in the US with respect to legal responses to bribery and corruption is the use of Deferred Prosecution Agreements (DPAs). While DPAs have been used in the US for a long time, in the UK, DPAs were introduced by the Crime and Courts Act 2013, Schedule 17. While DPAs have come under criticism in the UK for their ability to defer prosecutions, there are still crucial areas in which UK offers a better DPA system as compared to the US. First, US DPAs can be issued to individuals as well, which is not the case in the UK. In the US, DPA allows prosecutor and accused individual to enter into an agreement whereby the accused individual agrees to certain conditions in exchange for deferment of prosecution. In the UK, a DPA can only be entered into between the prosecutor and an organisation facing prosecution for bribery or corruption. On the other hand, in the US, DPAs can be entered into between the prosecutors and individuals as well as organisations. This is one difference in how DPAs are applied in the US and the UK. Therefore, the scope of DPAs in the UK is much narrower as compared to the US. The second difference between UK and US in their application of the DPAs is that there is little judicial involvement in the process for reaching agreement for DPA in the US, which means that there is no judicial oversight, which is not the case in the UK. In the context of white collar crimes, particularly corruption, DPAs have been welcomed because these allow prosecuting authorities to pursue complex investigations by getting the organisations to cooperate as part of the agreement. The third sense in which DPAs in the UK are significantly different from the system that is followed in the US is in the fact that in the UK, DPAs are supervised by the judges. Under the supervision of the judges, agreements are made with a host of requirements for the companies to follow. These include the agreement by the company that it shall cooperate with the investigators who are prosecuting the company or its officials under the anti-bribery law. This cooperation is in the nature of providing evidence, testimonies, and other documents that are linked to the involvement of the individuals within the company or associated with the company for the purpose of prosecution. The company can also be made to agree to external monitoring by the investigating agencies under the DPA. In the UK, even after the agreement is made, there is no dropping of prosecution charges by the prosecutors against the organisation or the company under the DPA; the agreement is merely to defer the prosecution for the time period prescribed under the DPA. In the US, there is no judicial supervision of DPAs, which means that the judges do not get to play a role in the making of the DPA. This has been a matter of concern in the US because the majority of the enforcement actions by the Department of Justice under the Foreign Corrupt Practices Act 1977 have been secured through mechanisms that did not involve any meaningful judicial scrutiny. Even the OECD has noted with some concern that the DPAs made without judicial scrutiny may not really be effective and may be open to doubt due to lack of judicial oversight. There is a great number of prosecutions for bribery in the US but there is a question on the quality of enforcement of the prosecutions. Thus, although there is a great number of prosecutions in the US, there is little judicial involvement in the process for reaching agreement for DPA in the US, which means that there is no judicial oversight and this has become a matter for concern. This is in marked contrast to the DPAs process in the UK where oversight of the judges is ensured in the process.

Not only is the DPA in the UK made under judicial oversight, the companies are made to cooperate with the prosecutors under the DPAs and prosecutors are allowed sufficient time to ensure that the companies are implementing the DPA conditions as prosecution is only deferred and not cancelled. This time period in the DPA is provided to the company for the purpose of allowing it sometime within which it can take certain steps and measures to correct the issues that led to the prosecution in the first instance and also convince the prosecutors that it has taken these steps. Thus, the prosecutors get the opportunity to create conditions in which structural changes that are necessary to ensuring anti-corruption can be created within the company or the organisation in the time period of the DPA. As companies can also be made to cooperate with the prosecutors, and provide evidence against individuals, individuals may find that DPAs are deterrents and not easy way to escape prosecution mechanisms under anti-bribery legislation. Moreover, the structural changes that are to be made by the company under the DPAs can lead to conditions that prevent similar corrupt actions in the future. In the UK, the structure of the DPAs is such that it is not only used to impose corporate fines, but also to improve corporate culture so as to prevent corruption in the future. Therefore, in the UK a DPA does not prevent the prosecutors from continuing with the prosecution of the company if there is a problem with the company meeting the requirements and the conditions of the DPAs. In other words, not implementing the structural changes agreed to in the DPAs, and not cooperating with the prosecution can lead to the prosecutor continuing with the prosecution. In the UK, there is some support for the DPAs because these allow the prosecutors to navigate and overcome the difficulties associated with prosecution of companies. At the same time DPAs are made under judicial scrutiny. Moreover, there cannot be agreements between individuals and prosecutors in the UK, which is not the case for the US. Therefore, in important respects the DPA regime in the UK is stronger than the US and is likely to complement the criminal sanctions under the Bribery Act 2010.

Conclusion

Bribery is a form of corruption. It is also a white collar crime, which is punishable under the laws of both the US and the UK. There is a particular emphasis on corporate bribery in the laws of both the countries. The Bribery Act 2010 penalises companies for bribery committed by their officials or persons associated with the companies. The Foreign Corrupt Practices Act 1977 is the principal anti-bribery legislation in the US. It penalises companies for corruption and bribery related offences. In this respect, both UK and US have legislations that respond to bribery as a white collar crime. In the UK, if companies can establish that they have put in place mechanisms to prevent bribery, then they may escape liability under Section 7 of the Bribery Act 2010. However, if the company is not able to establish that they had such mechanisms in place, then it shall be liable. In the US as well, there are strict rules in place to prevent bribery offences by officials of the company. In this respect as well, both the UK and the US can be said to have similar laws in place for the purpose of responding to bribery offences. However, there are significant differences in the laws of the two countries, especially in the area of facilitation payments, and the manner in which DPAs are processed. In the UK, there is no provision for facilitation or ‘grease’ payments. This is not the case in the US where the Foreign Corrupt Practices Act 1977 allows the officials of the companies to make facilitation payments in foreign countries. Such payments can be made to influence the public officials to facilitate outcomes that they are supposed to under the laws of their countries. The UK does not allow the making of the facilitation payments under any conditions and there are no exceptions to the rule that prohibits officials of a company to make facilitation payments. Therefore, in this respect the law in the UK is stricter than that in the US. US has adopted a more pragmatic approach by allowing its companies to make facilitation payments, but it has also been criticised for having a lax regime in this context. Both the US and the UK have included DPAs in their laws. However, there are significant differences in how the DPAs are processed in the two countries. In the US, DPAs are not made under judicial oversight, which means that the judiciary has no role to play in the process for making the DPAs. This has led to criticism of the DPA regime in the US. On the other hand, in the UK there is judicial oversight involved in the making of the DPAs. This means that judiciary is involved in the process of making DPAs. Therefore, one of the reasons why DPA regime is criticised in the US is not applicable in the case of the UK. For this reason, the UK regime of DPA is considered to be better and more effective than the US regime. Moreover, the doubts that are involved in the US DPA regime are not applicable to the UK.

This research demonstrates that while both the US and the UK have responded to the need to regulate and punish bribery, the anti-bribery regime in the UK is better than the one in the US. The UK is stricter in its regime, does not allow facilitation payments; and even where alternatives to criminal sanctions (DPAs) are allowed in both UK and the US, the UK has managed to create a more effective regime by ensuring judicial oversight.

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