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17 March 2008

REFORMING BRIBERY

Thank you for sending us a copy of your consultation paper on the above. I write to convey the comments of ACCA on its contents.

You will understand that, as a professional accountancy body, we are interested in this issue primarily because of its current and likely future impact on the work of our members. Those of our members who act as external auditors or otherwise as accountants in public practice need to have an awareness of illegal acts in general both for auditing purposes and for AML/CTF purposes. Those of our members who work in business or the public sector need to be aware of what the law allows and disallows in relation to incentives for doing business. As with all other areas of the law, we and our members are keen to ensure that, above all, any changes to the law on bribery are fair, clear to understand and to work with, and do not unreasonably restrict or criminalise legitimate business behaviour. Our comments in this response are therefore presented from this perspective.

We would add that ACCA is strongly supportive of effective legislation and regulatory action to combat bribery at home and abroad. ACCA has a strong institutional commitment to ethical business conduct and believes that bribery and corruption in their various forms need to be challenged on the grounds that they distort fair competition, encourage other forms of criminal activity and are contrary to the general public interest. We have worked recently with Transparency International to produce the latter's new set of principles for combating bribery in the SME sector. We also carried out our own research in 2006 into the experience of bribery among UK SMEs. ACCA welcomes the Commission's further work on this matter and looks forward to progress being made on it.

We would like to say that the document provides a characteristically lucid and thorough study of the issue at hand, and draws on a commendably wide range of legislative experience and hypotheses. The sheer size of the document, and the recent history of attempts to reform the law in the UK , underlines the difficulties of framing a law on bribery which is neither too loose nor too rigid and which is at the same time workable and enforceable.

Our reactions to the Commission's document are as follows:

1. We fully agree that a rationalisation of the existing law is badly needed, and that new legislation should reflect to the full the UK 's obligations under international agreements to which we are a signatory. We also agree that the current fragmented and confusing laws should be repealed.

2. One of the great problems of tackling bribery and corruption in the business world is that there is a lack of certainty as to whether particular acts actually amount to bribery and corruption: this leads inevitably to difficulties in establishing criminal intent and enforcement generally. Any new legislation needs to be sufficiently clear and precise to ensure that those in business and the public sector know exactly how the law applies to them and to ensure that 'gatekeepers' such as accountants and auditors are able to interpret it and apply it for their own purposes.

3. We understand the argument in favour of not making specific provision for bribery offences in the public sector and accept that the continuing process of out-sourcing of government functions causes problems in this area. But, as with the changes that are currently being proposed to the Freedom of Information Act, it is possible to extend the scope of public sector law to areas of the private sector that carry out public functions.

   We agree that, in principle, the general act of offering illicit payment for the conferment of unfair advantage should be a criminal matter regardless of whether the bribe is offered to persons in the private sector or the public sector. The law on bribery should certainly be applied to both sectors. But notwithstanding the increasing emphasis on ethical and responsible conduct in the private sector – we refer here, for example, to the reforms on directors' duties and the business review disclosures in the Companies Act 2006 - we think that there remains a special character to the exercise of responsibilities by officials in the public sector. In the private sector, the duties that directors and staff owe to their companies are ultimately related to the defence and promotion of the interests of the shareholder body: while directors, in particular, are encouraged to act in a responsible manner towards other elements of society, they do so primarily with a view to furthering the interests of their company by, for example, establishing corporate reputations for social responsibility. While data protection law applies generally, and while professional advisers have their own professional duties of confidentiality, there is no real equivalent in the private sector to the commitments that all public sector officials have to make to respect the confidentiality of information that they come across in the course of their work: the existence of this requirement in itself acknowledges, arguably, the privileged position of those working in the sector. Public sector bodies are likely to be in a position to acquire and hold a wider range of information on individuals and companies than are private sector bodies, and to require information to be submitted to them on a compulsory basis. Further, the public sector exists precisely in order to carry out activities which are designed to serve the interests of society generally, as opposed to the generally narrower goals of private sector enterprises.

   We would therefore argue that society should be entitled to expect a special degree of responsibility from those in positions of power in the public sector (and others exercising statutory functions) and that this should be reflected in the framing of new provisions on bribery. We do not suggest, necessarily, that a separate offence should be created for application to the public sector but that any new offence should acknowledge that the involvement in bribery on the part of a public sector official should be identified as something more serious than an 'ordinary' breach of duty.

4. The Commission's proposal is to base its new definition of bribery on the breach of trust by a person who owes some duty, whether to an identified principal or not. On the basis of our foregoing comments we suggest that the definition of 'impropriety' in the Commission's formulation of the new offence (page 9) could usefully be expanded to encompass the public interest.

5. We agree with the proposal, summarised in para 1.33, to create a single, comprehensive bribery offence rather than a series of specific offences. But if there is to be just the single offence, it should be capable of being applied to a range of circumstances, and it should be capable of applying to providers and receivers separately, so as to ensure that the provider of a bribe is caught even where the recipient refuses to accept it or to act upon it. The offence needs to take into account the motivations and conduct of both the provider of the bribe and the recipient of it. It should not be sufficient simply to provide that the person conferring an advantage becomes the provider of a bribe if the recipient does something in return to the provider's advantage: there must be some form of active incitement on the part of the provider to generate an illicit response.

6. We believe that it is right that a test of impropriety should be applied to the actions of both the provider and the recipient of a bribe. This is to ensure that innocent gratuitous payments (such as tips in the example referred to on page 35) and actions that are taken following legitimate approaches are not covered. While a 'breach of duty' test could be applied to the circumstances of the recipient of a bribe, this would not be appropriate, in all cases at least, to the provider. Impropriety may not be capable of being defined exhaustively but would, in our view, encompass payments to which the recipient would not ordinarily be entitled under prevailing contractual conditions, which are not transparently recorded or disclosed by either party and are made with a view to conferring unfair commercial advantage. In the case of a recipient of a bribe, the element of impropriety would also encompass, as well as the acceptance of an advantage in those circumstances, the performance of an action which indicates that he has given unfair commercial advantage to the provider. A general test of impropriety would, in our view, be capable of being interpreted effectively by the courts.

7. The boundary between bribery and 'acceptable' forms of corporate hospitality can be a fine one. But the framing of the new law should be careful not to criminalise or threaten with criminalisation the provision of client networking activities generally, since such activities are in their pure form a simple exercise in business marketing, which are widely used to cement relationships with existing clients and to attract new ones (and, more generally, to promote the brand of the business concerned). These activities are essentially innocent and help to stimulate business and business relationships. We suggest that the matter of hospitality should be considered carefully in the formulation of the definition so as to ensure that the boundary between acceptable and unacceptable conduct can be clearly identified in it. In our view, corporate hospitality activities should remain 'acceptable' where:

   • They are provided wholly gratuitously;
   • They are proportionate;
   • The recipient remains free to make up his own mind as to whether to accept the hospitality and about all aspects of his future dealings with the provider; and
   • There is no undue pressure exerted by the provider of the hospitality on the recipient to do any thing, specific or general, in return for the hospitality, directly or indirectly. Pressure should be distinguished from the exertion of influence to do or to continue doing honest business with the provider.

   On the other hand, actions where the provider provides the hospitality (or some other gift) with the express or implicit purpose of causing the provider to do some improper thing which he would not otherwise have chosen to do should be capable of being encompassed by the definition of bribery. We consider that a provision to the effect that, for a bribery offence to be committed by a recipient it should be motivated 'primarily' by the advantage conferred would help to take legitimate business dealings out of the ambit of bribery.

   Issues of detail surrounding corporate hospitality are probably best dealt with in codes of conduct. It is highly desirable, in our view, for all business entities and public sector bodies to maintain their own internal rules which address the circumstances in which their officials should and should not accept third party hospitality or other gifts. But it is important that the legal definition is framed in a way which enables a clear and reasonable boundary between the acceptable and unacceptable.

8. Lastly, the framing of new legislation on bribery needs to bear in mind, as well as the nature of the UK 's international commitments, the UK 's international reputation with respect to corruption issues generally. In this context, it should be considered whether it should be possible for decisions as to whether or not to prosecute cases under the new legislation to be made by Government Ministers.

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