In the Isle of Man, the Bribery Act (the "Act") was enacted in 2013 and is primarily based upon the UK's Bribery Act 2010 (the "UK Act").
Part 2 of the Act lists the different offences that can be committed, which includes a) bribing another person b) being bribed c) bribery a foreign public official and d) a failure of an organisation to prevent bribery.
Focusing on the failure of an organisation to prevent bribery offence, this occurs when a person associated with a relevant commercial organisation bribes another person with the intention of obtaining or retaining business for that commercial organisation or with the intention of obtaining or retaining an advantage in the conduct of business for that commercial organisation.
A relevant commercial organisation is defined as a body or partnership incorporated in the Isle of Man doing business anywhere else, or a body or partnership incorporated anywhere, but doing business on the Isle of Man. An associated person means a person who performs a service for or on behalf of the commercial organisation and could include an employee, agent or subsidiary.
Prosecution for committing this offence can only be brought by, or with the consent of, the Attorney General and the penalties can be severe.
This offence is also the same in the UK's Act.
SFO v Airbus SEO
The recent case of SFO v Airbus SE is an example of a relevant organisation having failed to prevent bribery and being liable under that offence.
On 31 January 2020, a simultaneous decision was made by the UK, France and the USA in respect of their joint investigation into Airbus SE ("Airbus"), one of the largest manufacturers of commercial aircraft in the world, relating to bribery offences. Airbus entered into agreements with each country and agreed to pay a total financial payment of €3.6 billion with nearly €1 billion of that amount being paid to the UK. This marks the highest ever penalty imposed upon a company for settling bribery offences.
The UK aspect of the case involved the Serious Fraud Office ("SFO") investigating Airbus and associated persons with Airbus, who had offered significant sums of money to third parties in order to secure the purchase of aircraft. The offences were committed in Malaysia, Sri Lanka, Indonesia, Taiwan and Ghana and specific details include payments being made to relatives of Government officials and payments being made to the purchasing company's directors as 'sponsorship for a sports team'. All bribes were intended to obtain or retain business for Airbus.
Airbus admitted five counts of failing to prevent bribery in contravention of the UK's Act and agreed to enter into a deferred prosecution agreement with the SFO agreeing to pay the heavy fines.
Under the Act (and the UK Act), the relevant commercial organisation has a defence if they can provide that they had adequate procedures in place which aimed to prevent associated persons from bribery conduct.
The Isle of Man'sDepartment of Home Affairs has provided guidance (based on the UK's guidance published by the Ministry of Justice) as to what amounts to 'adequate procedures'. The procedures should be:
- Proportionate - Organisations should adopt procedures and policies which are proportionate to the risks of bribery that it faces. This will be different for each organisation and a policy for one organisation may not be appropriate for another. This will require an initial assessment of risk of bribery which would depend on the scale, nature and complexity of the organisation's activities.
In the Airbus case, there was a high risk of bribery as the company used third parties in numerous countries to negotiate aircraft sales.
- Top-level commitment - a compliance culture within an organisation comes from the top, meaning that if directors and senior managers of an organisation want their staff to comply with anti-bribery procedures, they should be involved in designing and implementing the procedures, as well as understanding the importance of them and why they should be followed. This will make it clear throughout the business that bribery will not be tolerated.
The Airbus case demonstrates that without this top level commitment, there is a higher risk of bribery occurring. Airbus had set up committees and sub-committees which were responsible for, inter alia, reviewing the use of agents and payments made to agents and to third parties, as well as conducting compliance risk assessments and ensuring compliance with Airbus' written policies. It transpired that some committee members (which included very senior officers of the company), were aware of the bribery which was taking place. There was no 'compliance culture' embedded within Airbus, but instead there was a culture which permitted bribery.
- Risk assessment - an organisation should carry out a risk assessment to determine the potential exposure to bribery risks, internal and external. Internal risks can include a lack of training or a bonus culture. External risks can be categorised into country, sectoral, transaction, business opportunity and business partnership. Once an organisation knows the risks, these can be mitigated.
In the Airbus case, there were clearly high external risks as the associated persons were dealing in some countries with high levels of corruption and the market they were dealing in was large scale infrastructure which carries high risks. Further, when an aircraft was sold, Airbus would pay the agent a commission based on a percentage of the value of the sale of the aircraft which encouraged risk taking.
- Due diligence - if an organisation is likely to use third parties / representatives, it will be necessary to carry out checks on such persons, such as on their background and experience. If there are red flags, then it is better for the organisation to be aware of them at the start of the employment / engagement so they can be mitigated.
- Communication - it is vital that staff know and understand the procedures which are in place within the organisation. This also communicating the policies to associated persons, ie. agents, representatives, not just staff within the office. The training should be proportionate to the risks of bribery.
- Monitoring and review - bribery risks may change time to time, so an organisation should review their procedures to to ensure they remain appropriate and up-to-date. An organisation with a high risk of bribery may require a system set up to detect bribery. Another example to monitor effectiveness could be to provide a staff survey to obtain feedback on the policies. It may be appropriate for an outside organisation to verify whether the procedures are effective in meeting their aims.
The Airbus case is a sharp reminder that it is essential for all organisations to have appropriate and effective anti-bribery procedures in place to prevent bribery. This is of upmost importance as it acts as the organisation's defence. If an organisation does not have such procedures, then under the corporate offence of failing to prevent bribery, an employer will be liable to criminal prosecution for the action of employees, agents, subsidiaries etc which have been involved in bribery, whether or not they were aware of it.
Although Airbus avoided prosecution by entering into deferred prosecution agreements, it is undoubtedly a huge financial loss for the company, as well as a huge dent to their reputation. Therefore, organisations are encouraged to ensure their policies are and remain adequate in order to avoid these serious consequences.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
ISLE OF MAN
© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing