Ireland: Bribery and Anti-Corruption Legislation in Ireland and the Bribery Act 2010 (United Kingdom), December 2011

Bribery and Anti-Corruption Legislation in Ireland

Irish anti-bribery legislation is encompassed in the Prevention of Corruption Acts 1889 to 2010. It is a complex code of interrelated statutes and amendments often containing a variety of overlapping offences with the result that prosecutions rarely occur. In the 105 years (since the 1906 Act was enacted) very little has occurred by way of enforcement of this legislation.

With the passing of the Bribery Act 2010 in the UK (1 July 2011) and with the first UK person being convicted and sentenced to a six-year prison term for fixing a speeding charge in November 2011 a renewal of interest has developed in our own anti-bribery legislation. It is unfortunate that the Irish legislature did not take the opportunity to extend the territorial reach of its 2010 Act to corrupt acts of non-Irish commercial organisations that carry on business in Ireland such as is provided for in the UK Act. One would hope, however, that given the backdrop of the UK bribery legislation and a clear shift in Irish attitudes to punishing bribery there may be a more active utilisation of the anti-bribery/corruption legislation by the public and Gardaí (Irish police force) alike in the future.

Within these above Acts are the Prevention of Corruption Act 1906 ("the 1906 Act") which has been amended by the Prevention of Corruption (Amendment) Act 2001 ("the 2001 Act") and the Prevention of Corruption (Amendment) Act 2010 ("the 2010 Act"). In addition the 2001 Act ratified three international agreements, namely:

1. the Convention drawn up on the basis of Article K3(2)(c) of the Treaty of the European Union on the Fight against Corruption involving Officials of the European Communities or Officials of Member States of the European Union, done at Brussels May 26, 1997;

2. the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, drawn up under the auspices of the OECD and adopted at Paris on November 21, 1997; and

3. the Criminal Law Convention on Corruption, drawn up under the auspices of the Council of Europe and done at Strasbourg on January 27, 1999.

Section 2 of the 2001 Act, which is the main provision in the Act, completely replaces Section 1 of the 1906 Act. Section 1(2) as inserted by Section 2 states that:

The offence under Section 1 of the 1906 Act (as amended) can be committed by persons in their capacity as private individuals, bodies corporate² or by senior officers of a company who are deemed to be vicariously liable for the acts of that company (see further below).

Section 2 of the 2010 Act defines acting "corruptly" as including "acting with an improper purpose, personally or by influencing another person, whether by means of making a false or misleading statement, by means of withholding, concealing, altering or destroying a document or other information, or by any other means".

Section 1(4)(b) provides that persons found guilty of an offence under Section 1(2) of the 1906 Act shall be liable on conviction on indictment to a fine or to imprisonment for a term not exceeding ten years or to both.

Offences under Section 1(2) of the 1906 Act are punishable on summary conviction by a fine not exceeding €3,000 or to imprisonment for a term not exceeding 12 months or both, or on conviction on indictment by a fine or to imprisonment for a term not exceeding ten years or both.

Section 7 of the 2001 Act amends the legislation to cover corruption occurring outside the State. Section 7(1) states:

Section 7 therefore extends the jurisdiction of the Irish Courts extra-territorially to corruption abroad but this is qualified by Section 7(2) so that it only applies where the person concerned is:

• an Irish citizen;
• an individual who is ordinarily resident in the State;
• a company registered under the Companies Acts;
• any other body corporate established under a law of the State; or
• a relevant agent in any case where the relevant agent does not fall within any of paragraphs (a) to (d).

A "relevant agent" is defined as a person referred to in Section 1(5)(b) of the 2001 Act (as amended). In Section 1(5) the definition of "agent" has been extended to apply to officeholders and officials, both national and foreign, not already covered by the Prevention of Corruption Act 1906. Section 1(5)(b)(i) includes domestic public office holders, persons occupying positions of employment in a public body, special advisers, members of local authorities and other public bodies. It also includes:

The legislation now provides for nationality-based jurisdiction which criminalises acts committed outside the State by public officials or individuals provided the acts would constitute an offence had they been committed within the State. However, unlike the approach recently adopted in the UK under the Bribery Act 2010, the 2010 Act does not extend its territorial reach to the corrupt acts of non-Irish commercial organisations which carry on part of their business in Ireland.

Section 4 of the 2001 Act introduced a presumption of corruption. In the case of criminal proceedings against public officials, Section 4 provides that:

Section 8 of the 2001 Act states that a public official who does any act in relation to his or her office or position for the purpose of corruptly obtaining a gift, consideration or advantage for himself, herself or any other person, shall be guilty of an offence. Offences under Section 8 of the 2001 Act are punishable by a fine not exceeding €3,000 or a term of imprisonment not exceeding 12 months or both on summary conviction, or an unlimited fine or a term of imprisonment not exceeding ten years or both on conviction on indictment.

A new Section 8A is inserted into the 2001 Act by Section 4 of the 2010 Act in which special protection for whistleblowers is introduced. Employers are also prevented from penalising employees who have reported, or intend to report, corruption offences. The new legislation sets out a redress procedure for such employees.

Section 9 of the 2001 Act (as amended by the 2010 Act) extends liability for an offence by a body corporate to individuals where the offence is proved to have been committed:

• with the consent, connivance or approval of; or
• attributable to the neglect on the part of,
• a person being a director, manager, secretary or other similar officer of the body corporate, or a person who was purporting to act in that capacity. In these circumstances the person as well as the body corporate can be held liable for the offence.

The Criminal Justice Act 2011 ("the 2011 Act") also imposes reporting obligations and sanctions on all persons who are aware of information which they believe may be of material assistance to the Gardaí in preventing the commission of a relevant offence or apprehending the person responsible for the relevant offence and fail to disclose this information to the Gardaí³. The offences in Section 1 of the 1906 Act (bribery) and Section 7 of the 2001 Act (corruption outside the State) are relevant offences for the purposes of the 2011 Act and as such there is a further obligation on all persons and all employees of a company to report any suspicions they may have⁴.

Ethics in Public Office Act 1995

Section 38(c)(ii) of the Ethics in Public Office Act 1995 amends the Prevention of Corruption Act 1916 and provides that in any proceedings against a person for an offence under the 1906 Act (as amended) or the Public Bodies Corrupt Practices Act 1889 (as amended) where it is proved that any money, gift or other consideration has been paid or given to or received by an office holder or occupier of a position of employment in, a public body by or from a person or agent of a person holding or seeking to obtain a contract from a Minister of the Government or a public body, the money, gift or consideration shall be deemed to have been paid or given and received corruptly unless the contrary is proved.

Section 38 of the 1995 Act provides for a fine not exceeding €1,270 or a term of imprisonment not exceeding 12 months or both on summary conviction, or a fine not exceeding €63,487 or a term of imprisonment not exceeding seven years or both on conviction on indictment.

Proceeds of Crime (Amendment) Act 2005

The Proceeds of Crime (Amendment) Act 2005 ("the 2005 Act") introduces new sections 2A and 2B of the 2001 Act for the seizure and/or forfeiture of a gift or consideration which is suspected to be a bribe (a gift or consideration within the meaning of Section 1 of the 1906 Act). Any property seized by the Gardaí may not be detained for more than 48 hours unless its detention for a further period is authorised by order of a judge of the Circuit Court.

A judge of the Circuit Court may order any gift or consideration which is detained under Section 2A of the 2001 Act (as amended by the 2005 Act) to be forfeited if satisfied, on application made by or on behalf of the Director of Public Prosecutions, that it is a gift or consideration referred to in Section 1 of the Prevention of Corruption Act 1906, as amended by Section 2 of the 2005 Act.

In the case of McK. v D.⁵ the Supreme Court held that the Proceeds of Crime Act 1996 did not apply to proceeds of crimes committed against the laws of another jurisdiction. To remedy this, the Proceeds of Crime (Amendment) Act 2005 defines "criminal conduct" and "property" to include criminal conduct occurring and property situated outside the jurisdiction.

"Criminal conduct" is defined in the 2005 Act⁶ and extends to include any conduct which occurs outside the State and which would constitute an offence if it occurred within the State, if it constituted an offence under the law of the state

or territory concerned, and if at the time an application for an order is being made to the court, the property received in connection with the conduct is situate within the State⁷

The definition of "property" in Section 3(a)(i) of the 2005 Act⁸ now includes a reference to property which is situated outside the State. However, there must be specific links to this jurisdiction for the property to come within the definition, namely that the respondent is domiciled, resident or present in the State and all or any part of the criminal conduct takes place within the State.

The definition of "proceeds of crime" is also contained in Section 3(a)(i) of the 2005 Act as being any property obtained or received at any time by or as a result of or in connection with criminal conduct.

According to the Explanatory and Financial Memorandum on the Proceeds of Crime (Amendment) Act 2005:

The definition of "criminal conduct" would encompass the giving or receiving of bribes and the broad definition of "proceeds of crime" means that any money received or generated from a bribe (the proceeds of crime) may be subject to the seizure and forfeiture provisions in the Criminal Justice Act 1994 (as amended by the 2005 Act).

Section 16B of the Proceeds of Crime Act 1996 (as amended) provides for the making of a Corrupt Enrichment Order by the Court. It states:

1. a person is corruptly enriched if he or she derives a

Subsection (2) provides that where, on application, it appears to the Court on evidence tendered by the applicant, that a person has been corruptly enriched, the Court may make a Corrupt Enrichment Order the effect of which is to direct the person concerned to pay to the Minister for Finance or other specified person an amount equivalent to the amount by which the Court has determined that the person has been unjustly enriched.

Corrupt conduct is defined by reference to the Prevention of Corruption Acts 1889 – 2005. The net result of this legislation in the context of bribery is that all bribes which fall foul of the Prevention of Corruption Legislation can be forfeited and that any person who has benefited from such bribery can be ordered to repay an amount equivalent to the amount by which they have been unjustly enriched.

Bribery Act 2010

(United Kingdom)

The Bribery Act 2010 came into force in the United Kingdom on 1 July 2011. It extends the crime of bribery to cover all acts or omissions committed in the private or public sector on or after that date. It creates four main offences, which may be committed in either the private or public sector:

• the offence of offering or promising a bribe (Section 1);
• the offence of requesting or receiving a bribe (Section 2);
• the specific offence of bribing a foreign public official (Section 6); and
• the failure of a commercial organisation to prevent bribery (Section 7).

All functions and activities of a public nature, connected with a business, performed in the course of a person's employment and any activity performed by or on behalf of a body of persons (whether corporate or non-corporate/ unincorporated) come within the scope of the Act, provided the person performing the function or activity is expected to perform it in good faith, impartially or is in a position of trust by virtue of performing this act (Section 3(2) and 3(3)). It does not matter whether the person to whom the advantage is offered, promised or given is the same person as the person who is to perform, or has performed the function or activity concerned. The advantage can be offered, promised or given to someone else.

The concept of a "bribe" is not consistently defined in the legislation but it is clear that it encompasses active and passive bribery and focuses on bringing about the improper performance of a function or activity by offering a reward and situations where the offeror knows or believes that the acceptance of such a reward constitutes "improper performance" in itself. In the Ministry of Justice Guide to the Bribery Act 2010 ("the Guide"), a "bribe" is defined as:

When deciding what is expected of a person for these purposes, the test is what a reasonable person in the United Kingdom would expect in relation to the performance of the relevant function or activity (Section 5).

The penalties for commercial organisations under the Bribery Act 2010 include criminal conviction, unlimited fines and potentially, permanent exclusion from government contracts across the EU. Individuals guilty of one of the principal offences of active bribery (Section 1), passive bribery (Section 2) or bribing a foreign public official (Section 6), as well as senior officers with whose "consent or connivance" the bribery was committed, may also be liable on conviction to imprisonment for up to ten years, or to a fine, or both.

Section 14 provides for the liability of a senior officer of a body corporate, or a person purporting to act in that capacity, where the act of bribery under Section 1, 2 or 6 is proved to have been committed in the UK with the consent or connivance of that person. The Courts will also have jurisdiction under Section 1, 2 or 6 where any of these offences are committed outside of the UK provided the person committing the offence has a "close connection" with the UK (Section 12(3)) and senior officers or those purporting to act in that capacity will be directly liable where the acts constituting the offence are committed with their consent or connivance (Section 14(3)). Section 12 provides an exhaustive list of circumstances where a "close connection" will be found to exist, including a person who, at the time of committing the offence, was a British citizen, a British national, or an individual ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership. Thus if an Irish-incorporated company has a British director, such a director could potentially be prosecuted under the Bribery Act 2010 if they had committed one of these offences.

The Director of the Serious Fraud Office and the Director of Public Prosecution published Prosecutorial Guidelines in relation to the Bribery Act 2010 on 30 March 2011. The guidelines note that there is no exemption for facilitation payments in the Act and that any such payment will fall foul of Section 6. The term "facilitation payments" refers to payments to a foreign official, political party, party official or any other public official for "routine governmental action," such as processing papers, issuing permits, and other actions of an official, in order to expedite performance of duties of non-discretionary nature, i.e., which they are already bound to perform.

Failure to prevent bribery under Section 7 of the Bribery Act 2010

The offence of failing to prevent bribery in Section 7 imposes vicarious criminal liability on commercial organisations where a person associated with it bribes another person with the intention of obtaining or retaining business or an advantage in the conduct of business for the organisation and the organisation fails to prevent this conduct. The requirement of a "close connection" to the UK does not apply in Section 7. Section 12(5) provides that an offence will be committed under Section 7 irrespective of whether the acts or omissions resulting in the failure to prevent bribery take place in the UK. The offence in Section 7 is a strict liability offence and there is no requirement that the business presence in the UK be even aware of the bribe. This offence, wherever committed, applies to all "relevant commercial organisations" and this includes any body incorporated or partnership formed under UK law carrying on business in the UK, or any partnership or body incorporated or formed outside of the UK which carries on business in any part of the UK. There is no requirement that the conduct constituting the offence (or any part of it) be committed in the UK. This particular offence has no direct equivalent under Irish legislation and should therefore be fully considered by Irish companies and businesses carrying on business in the UK.

The threshold of what amounts to carrying on business in the UK and triggering foreign businesses' liability under the Bribery Act 2010 will need to be decided by the UK Courts. The UK guide provides that the courts will be the final arbiters as to whether an organisation is carrying on business in the UK but it advises that a "common sense approach" will be adopted. In respect of bodies or partnerships formed in the UK the Guide notes that pursuing primarily charitable or educational aims will not preclude liability. Insofar as organisations formed outside of the UK and the question as to whether they are carrying on business in "any part of the UK" are concerned, it is advised that:

• that an organisation will only be brought within the remit of Section 7 where they have a demonstrable business presence in the UK;
• the mere fact that a company's securities have been listed and traded on the London Stock Exchange would not of itself qualify that Company as carrying on business in the UK; and
• having a UK subsidiary will not of itself mean that the parent company is carrying on business in the UK (as a subsidiary may act independently of its parent or other group companies).

Section 5 provides that in deciding what would be expected of a person acting outside the UK, local practices or customs will be disregarded and the standards of the Bribery Act 2010 may be applied, unless there is written law to the contrary in the country where the activity occurs.

The offence in Section 7 arises where a person associated with the commercial organisation commits the act of bribery. Section 8 defines the concept of an "associated person" as being a person who performs services on behalf of the organisation, irrespective of the capacity in which they perform this service. Section 8(3) specifically refers to agents, employees and subsidiaries of commercial organisations as persons who may be deemed to be associated persons. The status of such a person will be determined by the circumstances of the case and not the nature of the relationship between the parties. However, there is a rebuttable presumption that employees will be deemed to be performing services for their employers unless and until the contrary is proven. One issue that should be recognised here is that it is possible that a company's suppliers would fall within the definition of persons performing services on its behalf and as a result it would be prudent for companies who engage suppliers that are not based in the UK to formally insert as part of the terms and conditions of business that the supplier has to comply with the provisions of the Bribery Act 2010.

Section 7(2) provides a defence to any potential liability under Section 7 where a commercial organisation can show that it had in place adequate procedures designed to prevent persons associated with it from undertaking conduct that amounts to bribery. If such procedures are in place, this acts as a complete defence for the commercial organisation to such a charge.

The Bribery Act 2010 makes provision for the publication of guidelines by the Secretary of State as to the appropriate procedures that can be put in place to prevent corporate vicarious liability for bribery prohibited under Section 7. The Guidelines were published in March 2011 as part of the Guide and provide six non-prescriptive risk centred principles that will vary in accordance with the size of the organisation in question. These are set out below in brief.

• Proportionate Procedures

A commercial organisation's procedure to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation's activities. They are also to be clear, practical, accessible, effectively implemented and enforced.

• Top Level Commitment

The top level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or persons) are committed to preventing bribery or persons associated with it. They foster a culture within the organisation where bribery is never acceptable.

• Risk Assessment

The commercial organisation assesses the nature and extent of its exposure to potential internal and external risks of bribery committed on its behalf by persons associated with it. The assessment should be periodic, informed and documented.

• Due Diligence

The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.

• Communication

The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded in and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.

• Monitoring and Review

The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.

These UK Guidelines provide little concrete advice beyond the above general principles. The position of hospitality and promotional business expenditures is somewhat unclear and while it is clear that they can be employed as bribes it has not been clarified when exactly any such hospitality will be considered a bribe. However, reassurance has been given that "reasonable and proportionate" hospitality and promotional activities that fall within the recognised practices of an industry will not be considered to constitute bribes. To be considered a bribe, the hospitality or promotional business expenditure in question must fall within the parameters of the offences as set out above. It must be shown that the hospitality is:

• intended to bring about the improper performance of a relevant activity or function; or
• offered with the knowledge that acceptance of itself would constitute improper performance of a relevant function.

It is unlikely that taking a client to a sporting event, hosting a client event to forge better relations or celebrating the successful completion of a transaction would constitute bribery provided it is clearly within the limits of the anti-bribery policy and there is no suggestion that the intention behind the hospitality is to bring about any improper performance of a function or activity.

Further guidance on the internal processes that will be required to meet the threshold of having "adequate procedures" to avail of the defence in Section 7(2) is available from the Transparency International UK website, http://www.transparency.org.uk/working-with-companies/ adequate-procedures

The key to avoiding corporate liability under the Bribery Act 2010 for international companies "carrying on business" in the UK is to ensure they have a robust approach to ensure compliance across their business, irrespective of where operations are conducted.

International companies contracting with third parties will have to conduct due diligence to ensure the third parties are compliant with the Bribery Act 2010 as otherwise the international company could be exposed to liability for the shortfall in their trading partner/supplier/agent's bribery policies. The extent to which these procedures are required will vary according to the size of the undertaking involved.

However, some of the procedures that may be appropriate for mid-large organisations are set out below:

• there is a public policy of zero tolerance to bribery;
• the policy of zero tolerance has been formally approved by the board of directors or equivalent body;
• the company has a definition of what it means by bribery that is comprehensive and is consistent with the Bribery Act 2010 and other relevant legislation;
• anti-bribery is a standing item on the board agenda;
• a project manager has responsibility for the detailed implementation of the programme;
• there are procedures that make clear that an employee will not suffer demotion, penalty or other adverse consequences for refusing to pay bribes even if such refusal may result in the company losing business;
• there are procedures to apply appropriate sanctions to employees in the event that they breach the anti-bribery policy up to and including termination in appropriate circumstances;
• the company reports publically on its risk assessment programme and on risks identified;
• there is a written policy that defines and prohibits the payment of facilitation payments;
• there is a written policy covering gifts, hospitality and expenses that prohibits the payment or receipt of any such benefits whenever they could affect or be perceived to affect the outcome of business transactions and are not reasonable and bona fide expenditures;
• there is a procedure to ensure such gifts or hospitality conform to the law of the countries where they are made or received;
• tailored training should be given to employees with regard to the rules that apply to hospitality, gifts and expenses;
• there are written policies covering:

• political contributions whenever made directly or indirectly;
• charitable contributions; and
• sponsorships,

• to ensure that they are not used as a subterfuge for bribery;

• there are procedures to ensure appropriate induction or training is given to the company's directors, managers, employees and new recruits to ensure they understand the company's anti-bribery programme and the sanction procedure in the event of a violation;
• there is a policy to implement the company's programme in all business entities over which it has effective control; and
• the company benchmarks its anti-bribery programme internally between business units and externally.

Conclusions on the similarities between Irish and UK law

A key similarity between the Irish and UK legislative regimes is that both penalise bribery and corruption offences committed anywhere in the world. There are however, different triggers for the imposition of liability and penalties. Irish companies that "carry on business" in the UK come within the worldwide remit of the UK Bribery Act 2010 whereas companies only come within the extra-territorial reach of the Irish prevention of corruption legislation where they are incorporated in the State or the acts of the company are committed by Irish citizens or residents.

It must now be considered of paramount importance for all Irish companies that have a demonstrable business premises (or a subsidiary it controls that has such a business presence in the UK) to take action to ensure an anti-bribery policy (as envisaged by Section 7(2) above) is developed, of a scale that is proportionate to the size of the company. This action is essential to avoid liability for the actions of persons associated with it should they be involved in bribery.

The law in Ireland on the prevention of corruption and bribery consists of a web of interrelated legislation that has not been utilised or enforced to any great extent since its introduction. There is no requirement in Ireland to produce or maintain adequate procedures to prevent bribery. However, it is likely that should the trend that is developing internationally of increasing prosecution for such white collar crimes also happens in Ireland the existence of an anti-bribery policy and the efforts of Irish business to prevent bribery would most likely be taken into consideration when a decision to prosecute or assessment of appropriate sentences for corporate liability is being made.

Footnotes

1 The concept of an "advantage" was added to the offence of bribery by Section 2(a) of the 2010 Act.

2 A "person" is defined in Section 7 of the Public Bodies Corrupt

Practices Act 1889 as including a body corporate, an unincorporated body of persons, as well as an individual. This definition is reproduced in the Interpretation Act 2005

3 For further information on the reporting obligations and other obligations that arise under the 2011 Act please see the Arthur Cox bulletin on the topic available at http://www.arthurcox.com/whats-new/ publications/the_criminal_justice_act_2011_september2011.html .

4 [2004] 2 I.L.R.M. 419

5 Section 3(a)(ii)

6 This was enacted as a consequence of the Supreme Court decision in Mc K v. D [2004] 2 I.L.R.M. 419 (S.C.)

7 "Property" is defined, as including:

(B) all or any part of the criminal conduct concerned occurs therein."

8 Under Section 23(1)(c) of the Public Contracts Regulations

2006, conviction of an offence of bribery will render an economic operator ineligible for selection by a contracting authority for public works or public services contracts where the contracting authority has actual knowledge of the conviction. The Irish equivalent legislation, the European Communities (Award of Public Authorities' Contracts) Regulations 2006 provides for exclusion for "corruption" offences (as defined in the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union promulgated by Council Act of 26 May 1997) and this would appear to encompass bribery under the Prevention of Corruption Act 1906.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.