Britain's new Bribery Act will have a significant impact on doing business in Latin America.
BY LATIN AMERICA ADVISOR
Britain's Bribery Act -- what some legal analysts have called "the most drastic and far-reaching anti-bribery measure in the world" -- went into effect in July, aiming to provide a modern legal framework to combat bribery in Britain and internationally. The law stiffens penalties and significantly broadens the scope of its jurisdictions worldwide, including individuals and companies in Latin America. What are the implications of the Bribery Act for business in Latin America and the Caribbean? Will the law prove to be a "workable" solution to corruption in a globalized economy, and what are its shortcomings? How are countries of the region changing their own bribery laws in order to work better with the British legislation?
Regina Kuchle, legal affairs and intellectual property director at AstraZeneca Mexico & Latin America: Bribery thrives on lack of integrity and corporate greed, and it is believed that extraterritorial control over the actions of foreign actors can play a significant role in reducing corruption that local laws seem hardly to dent. While the U.K. Bribery Act regulates the conduct British nationals have on American soil, it may also hold local anti-corruption practices to a new international model advocating for stricter prevention. Whether Latin American governments succeed in improving anti-corruption policies, multinational corporations with links to the United Kingdom no longer have the luxury of time. The Act's jurisdictional authority, with discretionary powers to investigate and indict corporations whose actions take place thousands of miles away, turns bribery control into an immediate business concern in Latin America. Of greatest significance is Section 7, which introduces an offense: failure of corporations to prevent bribery on its behalf. Corporations may face competitive disadvantages as they are now required to establish procedures to prevent corruption, conduct bribery risk assessments and monitor business practices, including those of their independent contractors. Corporations must also be vigilant in extending hospitality, business courtesies, interacting with public officials and facilitating payments -- all practices that could become investigated and penalized, unbeknownst to corporate directors. Corporations must take precautions where these practices are legally permissible in other jurisdictions. The Act is a promising instrument that should prove successful in the fight against corruption. Corporations are today considering measures to discontinue practices that ethically and/or legally could be deemed an offense. Ultimately, whereas previous reforms failed to change attitudes often tolerant of corruption, the Act seeks an equally lofty but more reasonable goal: to create an airtight legal system immune to cultural proclivities for skirting corruption laws. Whether it achieves this goal by creating competitive disadvantages for U.K.-based corporations is a different question.
Luis A. Viada, executive vice president of MicroRate, Inc.: The fact that the Act extends well beyond the scope and reach of the already strict rules of the U.S. FCPA raises concerns about its potential impact on businesses anywhere. If we consider just three of the provisions of the Act, the problems of compliance and enforcement will become evident. The Act broadens the scope of liability to include failure to prevent inducements provided by third parties with whom the company might be associated. It extends to any company doing business in the United Kingdom and covers an alleged act of bribery in another country even if it is no way connected to the company's business in the United Kingdom, and regardless if that kind of inducement is legal in that country. It expands the definition of a bribable person to practically any public official at any level. Now take the case of a U.S. company having one line of business in the United Kingdom that is outsourcing certain activities of an entirely different unit to an independent service provider in Guatemala. If individuals in the Guatemalan company decide to offer soccer tickets to a low-level bureaucrat to help speed up a routine approval, technically that act can create a vicarious liability for the executives of the U.S. company. While this seems an extreme application of the Act, companies will still have to expand their compliance procedures to cover this much broader range of possible infractions-at considerable cost of implementation and ongoing administration. On the enforcement side, one has to wonder if the Act will only succeed in dissipating scarce resources across a multitude of otherwise trivial business activities rather than improving the odds of snaring the truly egregious cases of bribery and corrupt practices.
Jeffrey Lehtman, partner at Richards Kibbe & Orbe LLP in Washington: The U.K. Bribery Act is likely to change the face of anti-corruption enforcement. While the legislation includes stiffer penalties for violations and expands the scope of individuals and entities covered by the Act, the real impact of the law is that it signals a new era of enhanced enforcement by authorities in the United Kingdom. Financial institutions that operate in Latin America and the Caribbean must realize that their actions and the actions of their employees and agents will be subject to intense scrutiny by local authorities, by aggressive regulators in the United Kingdom seeking to bring new cases under the Act and by U.S. authorities who continue to enforce the FCPA with great vigor. Now is the time for companies to implement or enhance their anti-corruption compliance programs that include procedures tailored to their businesses and risk profile, training for employees and a process by which their compliance program can be audited. Compliance programs are particularly critical because under the Act a company is guilty of failing to prevent bribery by a person associated with the company unless it can show that it had 'adequate procedures' in place to prevent bribes from being paid. It is too early to judge the extent to which the Act will be effective at reducing corruption, but if recent experience with the FCPA is any indication, Latin America and the Caribbean will be a focal point for enforcement efforts by regulators in the United Kingdom.
Keith Korenchuk, partner, and Sam Witten, counsel, at Arnold & Porter LLP in Washington: The recent effectiveness of the U.K. Bribery Act, combined with the increase in U.S. enforcement of the Foreign Corrupt Practices Act (FCPA), which prohibits bribery of foreign officials by persons subject to U.S. jurisdiction, heightens the need for effective anti-corruption compliance programs by companies doing business in Latin America and the Caribbean. The Bribery Act prohibits bribery of non-U.K. officials by persons subject to U.K. jurisdiction. It applies to persons ordinarily resident in the United Kingdom and companies carrying on a business there. It thus gives U.K. courts new jurisdiction for bribes of Latin American, Caribbean and even U.S. officials by entities subject to U.K. jurisdiction. Notably, the Bribery Act, unlike the FCPA, also covers commercial bribery. Vigorous enforcement of anti-corruption laws in the region is inconsistent, even though most countries are parties to the Inter-American Convention Against Corruption. Some, like Brazil, are actively seeking to strengthen their corruption laws. The concurrent requirements of the FCPA and the Bribery Act should lead companies subject to their jurisdiction to review and, where necessary, strengthen their anti-corruption programs. Just as importantly, companies in Latin America and the Caribbean that wish to do business with multi-national companies subject to the FCPA and the Bribery Act will likely be required to demonstrate the efforts they have made to implement compliance programs even though they would not be subject to those laws. In this way, these new laws are likely to have far reaching effects all across the region.
Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter.