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Comments from ACCA
February 2006

ACCA is pleased to comment on the consultation paper on the above. ACCA is the world’s largest international accountancy body and has over 109,000 qualified members, who work in public practice, industry, commerce and the public sector in the UK and in many countries around the world.

As a body which represents accountants, our interest in this particular issue is based on the implications that we believe it has for the efficient conduct of business, both domestic and international, and also for business and professional ethics.

We agree at the outset that it is right that the law in this area should be rationalised: from the initial soundings we have made of our members in the UK SME community we suspect that concerns about bribery and corruption are quite widespread even in that sector.

We believe, though, that any changes to the law in this area must be clear, practical and workable, so that businesses and the public sector know exactly where they stand. While we would encourage the Government to try to make it easier to prosecute corrupt business activity where it exists, and also to make the overseas application of UK law more feasible, at the same time it is vitally important that the law makes a workable distinction between conduct which is ‘corrupt’ and conduct which merely facilitates fair business activity.

ACCA as a body is committed to the causes of transparency in business reporting and in business conduct generally, and in 2005, the annual award scheme which we run and which promotes good reporting practice by UK companies on sustainability issues took as its main theme for the year the reporting by companies on the way they deal with bribery and corruption in their business activities. We would be pleased to discuss the conclusions of this exercise if you wished to do so.

Our comments on individual questions posed in the paper are as follows:

Q1 Do you think that there are any real advantages in describing the crimes of giving and receiving illicit advantages as ‘bribery’ instead of corruption?

The consultation paper itself acknowledges that a major difficulty with the state of the present law is the lack of a clear definition of ‘corruptly’. Annex C of the paper confirms that the courts do not have a single, coherent understanding of the term. The lack of such a clear understanding of what is inferred by this term may contribute in no small measure to the fact that there have been no proceedings in respect of overseas cases since the law was amended in 2001. This suggests that there is a strong argument for articulating further what is being implied in the proposed new clauses.

The answer to the specific question posed will depend to a great extent on how far the Government wishes to go in defining the scope of any new laws, bearing in mind that they are meant to apply in both the private and public sectors and to have application to actions both at home and overseas.

As the consultation paper points out, it is possible for the word ‘corruption’ to be given an interpretation which goes beyond the meaning attributed to it by existing UK criminal law, viz the giving and receiving of undue advantage. Corruption can also cover other means by which position is abused for personal gain.

In its widest sense, corruption need not be restricted to cases which involve purely personal gain – corruption on the part of a perpetrator can encompass any abuse of power which has as its effect the causing of deliberate and substantial detriment to some person or organisation. This interpretation would appear to be envisaged in the first of the two strands discussed by the Law Commission, as reproduced in Annex C of the report.

Such an interpretation is most likely to apply in the public sector. Actions can be considered to be corrupt if they involve the use or abuse of power and/or public funds for ideological or political purposes which can not be justified in terms of serving the public good – such actions might include measures taken to entrench the power base of a ruling elite or the deliberate weakening of the nature and powers of democratic institutions.

In the private sector, such a wide interpretation of the term ‘corruption’ is less likely to be applicable, since the rationale of business entities will usually be primarily commercial. But whether or not they would be caught under other legal provisions, a private sector entity’s actions may still be considered to be corrupt, under this wide interpretation of the term, where they amount to, e.g., a conscious abuse or manipulation of market privilege, or where a company structure is used as a front for some ulterior non-commercial purpose.

The first two of the proposed new offences set out in paragraph 11 of the paper clearly envisage the offer or receipt of some tangible advantage as consideration for the taking of some sort of action. But all commercial activity involves the offer and receipt of financial advantage, and the acts of public sector bodies are undertaken with a view to securing social advantage for the general public, so the scope of the proposed clauses must be refined so as not to criminalise legitimate actions.

With regard to the third proposed new clause – ‘performing functions corruptly’ - , as drafted this could conceivably have a very wide potential application, beyond the boundaries of the offer or receipt of inducements, based on the wider interpretation of corruption discussed above. This may be a good thing, but given that the potential scope of this provision is much wider than that of the first two, we suggest that, if the Government’s intention is indeed for it to have that wider scope, it should be dealt with separately from the clauses which are more focussed on the conferring and acceptance of illicit inducements.

Our view, therefore, would be that it should be possible to retain the wording of the three clauses but to further define the meaning of the term ‘corruptly’ in relation to the first two of them so as to make clearer that they are envisaging acts of ‘bribery’ specifically. The definition needs to encompass the offering to and receiving by agents of inducements over and above legitimate contractual consideration between or on behalf of the two principals. Crucially, the offering of an inducement should have as its express intention the securing of the agreement of the other party (agent or principal) to perform actions required to be undertaken by the offeror (where it is understood that the said actions would not have been agreed to by the agent but for the offer of the inducement).
These aspects should be covered in an elaboration of the term ‘corruptly’.

Further, and more problematically, there would need to be an understanding that, to be outlawed, inducements would need to be of a level and nature which are not considered to be a routine and legitimate feature of business conduct in the sphere concerned. This, we admit, is a difficult concept for legislation to address but we suspect there may be scope for a code of business practice to be developed to expand upon the sort of circumstances which may and may not be encompassed by any such clause. On a general level, it is essential that any new clauses make possible a practical commercial distinction between bribery as such and the offering and acceptance of material favours, e.g. corporate hospitality, both in respect of existing clients and customers and prospective clients and customers.

This is not usually considered to amount to bribery in legal terms, and would not be caught by our suggested outline definition above, although there is admittedly some degree of cynicism about its nature. It needs to be made clear, for the benefit of both private and public sectors alike, that business-related expenditure for the benefit of agents or principals will not constitute bribery unless it has as its express purpose the securing of the other parties’ agreement to the offeror’s business proposals (where acceptance would not be forthcoming without the advantage). Expenditure which merely facilitates the free agreement of two or more parties to a course of action should not be considered to be bribery.

Q2 Do you consider that the Bill should be radically simplified by leaving the central concept (whether ‘corruptly’, ‘undue’ or ‘improper’) undefined?

We consider that there must be some inference in the legislation that, to be outlawed, payments or advantages offered and received must offend against some fixed, judgmental criteria.

Agents in private sector entities - directors of companies, partners in LLPs, trustees of trusts and members of LLPs – will invariably have fiduciary and/or statutory obligations to their principals or fellow fiduciaries to act in their best interests. Members and officers of public sector entities will likewise be aware of their responsibilities to their employers or principals. All employees have duties to their employers. In some cases, the law will specifically allow individuals to profit. Most obviously, all concerned are entitled to remuneration. Company directors are in some cases allowed to make additional personal profit from their office, but only where such profit has been declared and expressly approved.

But all concerned can be expected to understand that they should not abuse the trust placed in them by seeking to make illicit personal advantage. It is this idea which should be reflected in a new definition of corruptly in the context of bribery.

In the context of a Bill on Corruption, it would be amiss in our view if there were no attempt to define that term.

We suggested above that, for advantages to constitute bribery, they need to i) amount to inducements over and above legitimate contractual consideration between or on behalf of the two principals; and ii) have as their express intention the securing of the agreement of the receiving party (agent or principal) to perform actions required to be undertaken by the offeror (in circumstances where they would not be agreed to by the agent or the principal but for the offer of the advantage). In the case of a receiver of the bribe, he would be considered corrupt if he accepted the advantage offered in these circumstances and where the act of acceptance was inconsistent with the agent’s obligations to his principal. Further, the act would constitute bribery regardless of whether he subsequently committed his principal to the course of action ‘paid for’. We consider that it should be possible to base a definition of ‘corruptly’ in the context of bribery in such terms. (As also previously discussed, the Government needs to decide whether it wishes to incorporate a wider interpretation of ‘corruption’ to address matters beyond bribery proper).

Q8 Do you think that in defining ‘corruptly’ we should replace ‘primarily’ with ‘substantially’?

The question is whether, to constitute corruption, the advantage being offered should be the primary factor, or only a substantial factor, in motivating the decision which the briber seeks to influence.

As we view the situation, there should not be any qualitative distinction between actions which are largely corrupt and those which are only partly corrupt, or whether the corrupt intention was primarily or substantially present in any offer made. In deciding whether actions constitute bribery, what should surely matter is whether the offeror makes any conscious attempt to secure favours by the provision of illicit advantage to another party, regardless of the weight which is subsequently given to the favour by the agent. Expenditure which is incurred for the benefit of agents but in which there is no express intention on the part of the spender of effectively buying the agreement of an agents or their principal for a particular course or courses of action should not be criminalised – if necessary this exemption should be made explicit.

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