A E fter much deliberation, the United Kingdoms (UK) -discovery - - PDF document

A

fter much deliberation, the United Kingdom’s (UK) Bribery Bill received Royal Assent on April 8, 2010, and became the Bribery Act. Now set to become effective in April 2011, the Bribery Act is the UK’s effort to modernize its anti-corruption laws and potentially take a lead role along- side, if not an outright attempt to step ahead of, enforcement efforts of the United States.1 The Bribery Act is far reaching and signals a signifjcant shift in the criminalization of corrup- tion as another major economic power seeks to police graft around the world.

Background

The previous statutory criminal law of bribery was “functional,” but “old and anachronistic” with “inconsistencies of language and concepts” resulting in a bribery law, which was “diffjcult to understand for the public and diffjcult to apply for prosecutors and the courts.” The foreword to the Bribery Bill noted the UK’s reputation as “one of the least corrupt countries in the world” as well as the perils of bribery: “Bribery is by its nature insidi-

• us; if it is not kept in check it will have potentially devastating

consequences.”2 The UK has long been a party to international treaties that combat corruption and emphasize the seriousness

• f the problems that corruption poses, such as the United Nations

Convention Against Corruption, the Organization of Economic

The UK’s Bribery Act and the FCPA Compared

By Richard C. Rosalez, Weston C. Loegering, and Harriet Territt

Pricing Processing in E-Discovery: Keep the Invoice from Being a Surprise

By Seth Eichenholtz, Esq.

E

• discovery continues to confound law fjrms and clients

with a lack of consistency in pricing. This lack of con- sistency may have many reasons, likely due to various vendors having very different internal costs owing to the wide range of core competencies and services that vendors in the e-discovery space purport to offer. But perhaps the most criti- cal reason for the lack of consistency in pricing is that vendors have been able to take advantage of the fact that both law fjrms and clients are all over the map in defjning specifjcally what “processing” means in the e-discovery lexicon. Processing data in e-discovery means different things to different people and pricing for processing has followed suit. Of all the major hurdles in any e-discovery engagement, perhaps the biggest challenge is being able to foresee the costs

• f processing the data. Processing can also become the most

expensive component of litigation, short of a long and drawn-

• ut document review. The reason for this is that there has been

no uniformity amongst e-discovery vendors regarding how to categorize the various elements and issues inherent in process- ing data in e-discovery nor what those costs should be. And it is very easy to envision a case with current market processing costs where the processing costs alone can quickly reach six- fjgure sums. So to the extent that one can police, lower, and perhaps best of all, predict that pricing, this is a critical issue (Continued on page 18)

Highlights

(Continued on page 13)

• VOL. 25 NO. 1

FALL 2010

Third-Party Financing of Commercial Litigation, Part Two By Holly E. Loiseau, Eric C. Lyttle, and Brianna N. Benfjeld .......................................................................................................................................3 Jurors’ Perceptions of Ethnic Minority Attorneys: Are We in a Post-Racial Era? By Mark R. Phillips Ph.D. .............................................................................................................................................................................................8 Practice Tip Jean Walker Tucker ....................................................................................................................................................................................................19 The In-House Litigator Spotlight: Cathy Lamboley’s Five Keys to Success By Haley Maple and Jacqueline Taylor ........................................................................................................................................................................22

Published by the American Bar Association Section of Litigation • 321 N. Clark Street • Chicago, IL 60654

13 FALL 2010 SECTION OF LITIGATION

Requesting, Agreeing to Receive, or Accepting a Bribe

Section 2 of the Bribery Act criminalizes the acceptance of a bribe. Specifjcally, it is a violation where a person “requests, agrees to receive or accepts a fjnancial or other advantage . . .”

• “intending that . . . a relevant func-

tion or activity should be performed improperly”

• “the request, agreement or acceptance

itself constitutes the improper perfor- mance . . . of a relevant function or activity”

• “as a reward for the improper perfor-

mance . . . of a relevant function or activity”

• “in anticipation of” the person

“requesting, agreeing to receive or accepting a fjnancial or other advan- tage, a relevant function or activity is performed improperly”6 Section 2 also covers scenarios where the person “requests, agrees to receive

• r accepts . . . the advantage directly or

through a third party” and where the advan- tage benefjts the person or another.

Bribing a Foreign Public Offjcial

Under Section 6 of the Act, a person who bribes a foreign public offjcial commits conduct in the UK or relatively strong ties to the UK. Specifjcally, the three general offenses apply (a) if any parts of the acts or omissions take place in the UK, or (b) if any person committing the act or omission has a “close connection” with the UK. The Act generally defjnes those with a “close connection” as British citizens, residents of the UK, and companies incorporated in the UK.4

Offering, Promising or Giving a Bribe

Section 1 of the Bribery Act pro- hibits commercial bribery. The Act proscribes conduct where a person “offers, promises or gives a fjnancial

• r other advantage to another” (includ-

ing through a third party) and

• the person “intends the advan-

tage to induce a person to perform improperly a relevant function or activity, or to reward a person for the improper per- formance of such a function or activity”

• the person “knows or believes

that the acceptance of the advan- tage would itself constitute the improper performance of a rel- evant function or activity”5 Cooperation and Development (the OECD) Anti-Bribery Convention, and the Council

• f Europe Criminal Law Convention on
• Corruption. However, the UK’s patchwork
• f antiquated legislation simply did not

refmect the modern commercial world. This, together with a number of failed prosecu- tions and the high-profjle discontinuance of an investigation into a British corporation’s dealings in the Middle East, led the OECD to openly criticize the UK for its failure to bring its anti-bribery laws into line with its international obligations. Clearly, there was need for reform. According to the UK’s Ministry of Justice, “[t]he Bribery Act reforms the criminal law to provide a new, modern and comprehensive scheme of bribery offenses to equip prosecutors and courts to deal effectively with bribery at home or abroad.”3 Further, the Bribery Act will “provide a more effective legal framework to combat bribery in the public or private sectors,” “replace the fragmented and complex offences at com- mon law and in the Prevention of Corruption Act 1889–1916,” and “help tackle the threat that bribery poses to economic progress and development around the world.” The British government’s goals for the impact of the new law are admirable, but surely, government offjcials also recognized the growing trend of American authorities extracting signifjcant fjnes from corpora- tions for corruption around the globe. Many

• f these corporations also do business in

the UK, and penalties have been levied against British corporations and executives. It is not diffjcult to imagine offjcials in the UK government appreciating that they could continue to cooperate with American enforcement efforts or engage in the pro- cess more fully by modernizing the UK’s anti-bribery laws and advancing the goals

• f such laws through promotion of an anti-

corruption agenda, all while collecting hefty sums through fjnes and confjscation orders against those guilty of bribery in the public and private sector.

Key Provisions of the Bribery Act

There are three general offenses and one corporate offense in the Bribery Act. The three general offenses require either

THE UK’S BRIBERY ACT AND THE FCPA COMPARED

(Continued from page 1)

The Bribery Act is noteworthy and even groundbreaking in a number of respects. First, the Bribery Act crimianalizes private, commercial bribery. Second, it states that it is a crime to accept a bribe—extending beyond the traditional anti-bribery paradigm—by targeting the bribed in addition to the briber. Third, it prohibits brib- ery of foreign public offjcials, akin to the United States Foreign Corrupt Practices Act (FCPA). For commercial bribery, paying or receiving bribes is illegal when there is an intention that it induces or rewards for “improper performance.” There is no intent requirement for bribery of foreign offjcials; any attempt to infmuence the offj- cial is prohibited. As a result, the Bribery Act covers an extensive amount of exist- ing business practices as any payment, gift, or benefjt that may be categorized as a bribe. The Act also establishes strict liability for corporations for failing to prevent acts of bribery unless a corporation can demonstrate that it had “adequate procedures [to prevent bribery]” in place. Effective implementation and regular review of corpo- rate compliance programs is essential as a result. Equally important, counsel should understand the scope of the Bribery Act’s territorial reach. The provisions vary as to how they apply to conduct in the UK or those doing business in the UK.

Bribery Act Basics

14 IN-HOUSE LITIGATOR AMERICAN BAR ASSOCIATION

an offense if the person’s “intention is to infmuence” the ofjcial in their “capacity as a foreign public offjcial.” The person “must also intend to obtain or retain business, or an advantage in the conduct of business.”7 There is no requirement of intending an improper, illegal, or corrupt infmuence. Further, a person bribes an offjcial “if, and only if, directly, or through a third party, [the person] offers, promises or gives any fjnancial or other advantage”

• to an offjcial
• to another “at [the offjcial’s] request
• r with [the offjcial’s] assent or

acquiescence”

• the offjcial “is neither permitted nor

required by the written law applicable to [the offjcial] to be infmuenced in [the

• ffjcial’s] capacity as a foreign public
• ffjcial by the offer, promise or gift.”

Infmuencing an offjcial in his or her capacity as a foreign public offjcial means “infmuenc- ing [the offjcial] in the performance of [his or her] functions as such an offjcial,” including

• “any omissions to exercise those

functions”

• “any use of [the offjcial’s] position

as such an offjcial, even if not within [the offjcial’s] authority” A “foreign public offjcial” is an individual who

• “holds a legislative, administrative or

judicial position of any kind, whether appointed or elected, of a country or territory outside the United Kingdom” (or any subdivision)

• “exercises a public function” (a) “for
• r on behalf of a country or territory
• utside the United Kingdom” (or any

subdivision), or (b) “for any public agency or public enterprise of that country or territory (or subdivision)”

• “is an offjcial or agent of a public

international organisation”8

Liability of Corporate Offjcers

The Act also establishes liability for senior corporate offjcers who are involved in bribery schemes. Pursuant to Section 14, a “senior offjcer” with a “close connection” to the UK can be liable for any violation

• f Sections 1, 2, or 6 by a corporation

(bribing, accepting a bribe, or bribing a foreign offjcial) committed with their “consent or connivance.”9 A senior offjcer means “a director, manager, secretary or

• ther similar offjcer” of the corporation.

Section 7 of the Act imposes strict liability on corporations for failing to prevent bribery. Under this section, a “Commercial Organization” is guilty of an offense if a person “associated with the [Commercial Organization] bribes another person intending

• “to obtain or retain business for [the

Commercial Organization]”

• “to obtain or retain an advantage

in the conduct of business for [the Commercial Organization]”10 It is a defense for the commercial orga- nization to “prove that [it] had in place adequate procedures designed to prevent persons associated with [it] from under- taking such conduct.” Under the Act, the Secretary of State must publish guidance about procedures that commercial organizations can put in place to prevent bribery. The UK govern- ment is scheduled to consult the public regarding guidance in September 2010 and publish detailed guidance in early 2011. Establishing procedures according to the guidance, however, will not be prescrip- tive, as the intention is to allow organiza- tions to develop procedures appropriate to their own circumstances and business sectors.11 In the interim, the UK’s Serious Fraud Offjce (SFO), which is responsible for investigating and prosecuting allega- tions of corruption offences by UK nation- als or corporations overseas, has given its

• wn basic guidance on what would con-

stitute “adequate procedures” in its more general guidance for corporations on self- reporting foreign corruption.12 A commercial organization is defjned as a UK corporation or partnership or any

• ther corporation or partnership that “car-

ries on a business, or part of a business, in any part of the United Kingdom.”13 Associated persons include any person who performs services for or on behalf of the commercial organization, including, but not limited to, employees, agents, and subsidiaries. The scope of the corporate offense is

• considerable. Under the Act, the corporate
• ffense applies regardless of where the

acts or omissions take place. To be clear, the corporate offense of the Bribery Act has no jurisdictional limitation—failure to prevent bribery anywhere in the world may result in corporate criminal liability for companies doing business in the UK.

Penalties

A conviction carries penalties of impris-

• nment for a maximum term of 10 years,

a fjne, or both for individuals, and a potentially unlimited fjne and/or confjs- cation orders (of proceeds or profjt) for

• corporations. As well as the obvious repu-

tational impact, convicted organizations may face other serious consequences. For example, under the UK Public Contracts Regulations 2006, organizations will be permanently debarred from competing for UK public contracts where convicted of bribery.14

The Bribery Act Compared with the FCPA

Generally speaking, the anti-bribery pro- vision of the FCPA states that a covered person may not corruptly pay, promise to pay, or offer anything of value to a foreign offjcial to obtain or retain busi- ness.15 Covered persons include U.S. issuers, including foreign subsidiaries; private U.S. corporate entities; employees, agents, offjcers, and directors of either of the above; U.S. nationals, citizens, and residents; third-party consultants, agents, and joint venture partners. The FCPA also requires that issuers maintain accurate books and records and adequate internal controls to prevent an improper accounting of corrupt payments and ensure the accuracy of fjnancial state- ments.16 The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) are responsible for enforcement of the FCPA.

Jurisdiction

U.S. jurisdiction is expansive, cover- ing individuals and U.S. companies, and virtually all persons affjliated with U.S. companies for illegal conduct that

15 FALL 2010 SECTION OF LITIGATION

happens anywhere. Illegal conduct may be entirely outside of the U.S., but regula- tors may seek any connection to the U.S. to assert U.S. jurisdiction. Jurisdiction of British authorities under the Bribery Act is more limited for individuals under the general anti-bribery

• ffenses, where liability is limited to acts
• r omissions within the UK or for conduct

anywhere for individuals who are closely connected to the UK. The jurisdictional reach of the corporate offense is much broader, as it covers conduct anywhere if the company is incorporated in the UK

• r does any business in the UK. Because

bribery that happens anywhere may put corporations at risk, corporations must ensure that those acting on its behalf and its business partners are FCPA and Bribery Act compliant, especially in regions and industries with reputations for corruption.

Books and Records and Internal Controls

Books and records and internal controls provisions apply only to U.S. issuers, their offjcers, and employees, though con- duct anywhere is covered. The Bribery Act does not include books and records or internal controls violations. At the same time, the “adequate procedures” defense may be absolute, and strong internal con- trols and a commitment to anti-corruption may be mitigating factors to avoid or limit liability.

Scope of Corporate Liability

Under the Bribery Act, commercial orga- nizations are strictly liable for failing to prevent bribery by associated persons. As noted above, corporations with “adequate procedures” may be entitled to a complete

• defense. The FCPA has no “adequate pro-

cedures” defense, but authorities consider the adequacy of internal controls, corpo- rate culture, and policies in various con-

• texts. The SEC and DOJ have policies to

consider corporate culture, remediation, cooperation, and effectiveness of controls and compliance programs when determin- ing whether to give credit for self-policing

• r self-reporting or to charge a business
• rganization.17 Similarly, courts may con-

sider the effectiveness of a corporation’s compliance and ethics program as well as self-reporting and cooperation when cal- culating a culpability score to determine a fjne or sentence.18

Commercial Bribery

The Bribery Act prohibits offering, prom- ising, or giving a bribe to private citizens in addition to bribery of a foreign offjcial. The FCPA does not cover foreign com- mercial bribery, though prosecutors have pursued such conduct through the Travel Act and state laws where defendants bribed both foreign public offjcials and private individuals.19

Accepting a Bribe

The Bribery Act makes it unlawful to make or take a bribe. It is a crime to request, agree to receive, or accept a bribe. The FCPA is more limited, as the statute does not extend to acceptance of a bribe.

Foreign Offjcials

The Bribery Act defjnes a foreign public

• ffjcial as an elected or appointed offj-

cial who exercises a public function in a legislative, administrative, or judicial position of any kind. The FCPA is simi- lar in scope, broadly defjning a foreign

• ffjcial as any offjcer or employee of a

foreign government or any subdivision. The FCPA also applies to foreign political parties, party offjcials, and candidates for foreign political offjces, while the Bribery Act does not address such persons.

Intended Benefjt

The Bribery Act follows the OECD Convention as it prohibits bribes to for- eign public offjcials where the person intends to obtain or retain business or an advantage in the conduct of business. The FCPA’s prohibition is slightly more limited, as it proscribes bribes to obtain

• r retain business or direct business to

any person; however, recent enforcement trends suggest authorities may consider a broader standard, including bribery where the intention is to gain any commercial advantage.

Intent

For commercial bribery, the Bribery Act prohibits paying or receiving bribes with the intention that it induce or reward for “improper performance.” For bribery of foreign offjcials, the Bribery Act covers any attempt to infmuence the offjcial. It is not limited to “improper” performance

• r infmuence. The FCPA requires corrupt

intent in offering, promising, or paying a bribe to a foreign offjcial. Specifjcally, the FCPA prohibits “corruptly” giving,

• ffering, or promising anything of value

for the purposes of “(i) infmuencing any act or decision of that person, (ii) induc- ing such person to do or omit any action in violation of his lawful duty, or (iii) securing an improper advantage.”20

Conduct of Third Parties

It is illegal under the Bribery Act to make payments through third parties to the offjcial or to make payments to another person at the offjcial’s request

• r with the offjcial’s assent or acqui-
• escence. Similarly, the FCPA makes it

unlawful to know that the bribe will be

• ffered, given, or promised—directly
• r indirectly—to any foreign offjcial.

Knowledge also includes conscious avoidance.

Facilitating Payments

Following the OECD Convention, the Bribery Act provides no facilitating pay- ments exception. The FCPA does not apply to facilitating payments to offj- cials to expedite or secure performance

• f a routine governmental action.21 In

November 2009, the OECD, instrumental in the international effort to combat cor- ruption, issued recommendations that its members eliminate facilitating payment exceptions due to their “corrosive effect”

• n “sustainable development and the rule
• f law.”22 The infmuential OECD went fur-

ther, encouraging companies to prohibit

• r discourage the use of facilitation pay-

ments in internal controls and ethics and compliance programs. The recommendations are commend- able and their implementation would essentially establish a zero tolerance policy for bribery, creating consistency for how corporations account for and prosecutors regard such payments, and eliminating the mixed message that some corrupt payments are permissible. Until Congress acts, however, the exception is in place and at odds with the OECD Recommendations.

16 IN-HOUSE LITIGATOR AMERICAN BAR ASSOCIATION

No Amount Too Small

There is no de minimis exception; a bribe

• f any value may be a violation under the

Bribery Act and the FCPA.

Local Law

Under the Bribery Act, one bribes a for- eign offjcial only if the offjcial is neither permitted nor required by the written law applicable to the offjcial to be infmuenced by the offer, promise, or gift. The FCPA provides an affjrmative defense where the payment or promise was lawful under the written laws and regulations of the rel- evant country.23 This defense is essentially nonexistent, because even countries with widespread corruption typically enact anti- bribery laws. Bribery remains pervasive because governments choose not to enforce the law.

Bona Fide Business Expenses

The Bribery Act provides no exception

• r affjrmative defense for legitimate busi-

ness expenses on the basis that legitimate business expenses will not be paid with the necessary corrupt intent to fall within the Act. An affjrmative defense under the FCPA includes reasonable and bona fjde expenditures, such as travel and lodg- ing expenses, incurred by offjcials when directly related to promotion, demonstra- tion or explanation of products or services,

• r execution or performance of a contract

with a foreign government.24

Government Review Procedures

The Bribery Act does not set forth a formal process by which corporations can seek the SFO’s opinion on proposed activities. The SFO’s Self Reporting Overseas Corruption Guidance states that companies and the SFO may have a dialogue about conduct, compliance, and enforcement, so infor- mal consultation is available, but there is no possibility of a guaranteed outcome.25 The FCPA established a DOJ opinion pro- cedure to respond to corporate inquiries about prospective conduct.26

Recent Developments

The Bribery Act is the result of lengthy and careful deliberation. The announced delay to the implementation of the Act and production of the guidance so that another consultation with the public can take place is well advised. The further consultation appears to be a response to some of the concerns expressed by businesses regard- ing the wide-ranging impact of the Act and the uncertainty it introduces to a range of normal business activities, such as corpo- rate hospitality, and previously exempted practices, such as facilitating payments. It may well signal that the UK government recognizes that more detailed guidance is required than originally envisaged, which is likely to be welcomed by those who will be affected when the Act comes into force.

Conclusion

As global anti-corruption enforcement increases, U.S. corporations must have strong compliance programs in place if they operate in foreign markets or con- template entering them. If these foreign markets include the UK, or if key person- nel include British nationals, counsel must consider whether company policies and programs satisfy the Bribery Act where it is more stringent than the FCPA or where it covers conduct outside the scope of the

• FCPA. Counsel must further consider

what other anti-corruption laws the com- pany’s operations are subject to and care- fully develop, implement, and monitor robust ethics and compliance programs to minimize risk and promote a culture of compliance.

Richard C. Rosalez and Weston C. Loegering are with Jones Day in Dallas, Texas. Harriet Territt is with Jones Day in London.

Endnotes

• 1. Ministry of Justice, News Releases,

Bribery Act implementation, available at www. justice.gov.uk/news/newsrelease200710a.htm.

• 2. Jack Straw, Foreword to Bribery Draft

Legislation Presented to Parliament by the Lord Chancellor and Secretary of State for Justice (Mar. 2009).

• 3. Ministry of Justice, Bribery Act 2010,

www.justice.gov.uk/publications/bribery-act. htm.

• 4. Bribery Act 2010, c. 23, § 12 (Eng.).
• 5. Id. at § 1.
• 6. Id. at § 2.
• 7. Id. at § 6.
• 8. Id.
• 9. Id. at § 14.
• 10. Id. at § 7.
• 11. Letter from Lord Bach, Parliamentary

Under Secretary of State, to Lord Henley, entitled Bribery Bill—Adequate Procedures Guidance, December 2009, www.justice.gov.uk/publica- tions/docs/bach-letter-adequate-procedures-guid- ance.pdf; Government Response to the conclusions and recommendations of the Joint Committee Report on the Draft Bribery Bill, November 2009, www.justice.gov.uk/publications/docs/draft- bribery-joint-cttee-govt-response.pdf.

• 12. Approach of the Serious Fraud Offjce

to Dealing With Overseas Corruption, July 21, 2009, http://www.sfo.gov.uk/media/112491/ approach%20of%20the%20serious%20fraud%20

• ffjce%20v5.pdf.
• 13. Bribery Act, § 9.
• 14. Public Contracts Regulations 2006, 2006
• No. 5 § 23(1)(c) (Eng.).

15.15 U.S.C. § 78dd-1 et seq.

• 16. 15 U.S.C. § 78m(b).
• 17. See Principles of Federal Prosecution
• f Business Organizations—Title 9, Chapter

9-28.000 (August 28, 2008); Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions,

• Exch. Act Rel. No. 34-44969; Accounting and

Auditing Enforcement Rel. No. 1470 (October 23, 2001).

• 18. U.S. Sentencing Guidelines Manual § 8B2.1

(2007).

• 19. The Travel Act prohibits travel in or use of

the mail or any facility in interstate or foreign com- merce to further or facilitate any unlawful activity. 18 U.S.C. § 1952.

• 20. 15 U.S.C. § 78dd-1 et seq.
• 21. 15 U.S.C. §§ 78dd-1(b), 78dd-2(b),

78dd-3(b).

• 22. Organisation of Economic Co-operation and

Development, Recommendation of the Council for Further Combating Bribery of Foreign Public Offjcials in International Business Transactions (November 26, 2009) (with amendments adopted by Council February 18, 2010 to refmect the inclu- sion of Annex II, Good Practice Guidance on Internal Controls, Ethics and Compliance).

• 23. 15 U.S.C. §§ 78dd-1(c)(1), 78dd-2(c)(1),

78dd-3(c)(1).

• 24. 15 U.S.C. §§ 78dd-1(c)(2), 78dd-2(c)(2),

78dd-3(c)(2).

• 25. Approach of the Serious Fraud Offjce

to Dealing With Overseas Corruption, July 21, 2009, http://www.sfo.gov.uk/media/112491/ approach%20of%20the%20serious%20fraud%20

• ffjce%20v5.pdf.
• 26. 15 U.S.C. §§ 78dd-1(e), 78dd-2(f).

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