The is a guest blog post by Nick Johnson, Q.C., from Exchange Chambers & Bright Line Law, London.
Southwark Crown Court is a designated centre for many of the UK’s serious fraud and white-collar crime jury trials. It is a drab building in a stunning location. There’s a spectacular view of Tower Bridge and the Tower of London over the river, obscured only by HMS Belfast, a WWII cruiser permanently moored as a museum and which, last Christmas, flew the Canadian flag in tribute to the participation of the Royal Canadian Navy in the Battle of North Cape. Hundreds of Canadian sailors served on British ships in the north, including eighty on the Belfast.
As the Maple Leaf flew, I acted for the MD of Skansen Interiors Ltd, a London based fit-out and refurbishment contractor, in a bribery case which concluded last April. The company itself and two of its directors faced charges under the Bribery Act 2010 (“UKBA”), relating to making improper payments in order to secure contracts for two City of London office refurbishments worth about £6m.
The case was a legal first in the UK in that the company, despite having carried out an internal investigation and self-reported to the UK National Crime Agency, then faced a Section 7 UKBA prosecution before a jury in the Crown Court. Section 7 has an unusually wide reach. A company itself is guilty of a criminal offence where a person associated with it bribed another, even where management might be completely unaware of the bribe. It is a rare form of corporate criminal strict liability, subject to a defence where the company can prove, on a balance of probabilities, that it had in place adequate procedures to prevent such conduct. Of course, the legislation is aimed at compelling a change in corporate culture when it comes to effective anti-bribery measures. Quite apart from the interesting questions the case posed as to what may amount to “adequate procedures” and why it was that an entirely co-operative company was not offered a UK Deferred Prosecution Agreement, the focus upon the Section 7 requirements was a clear reminder of how even a non-UK corporate could well end up in a UK criminal dock.
UK Jurisdictional Reach
The UKBA created offences of both the giving and receiving of bribes to and from any person, in addition to bribery of foreign public officials (sections 1, 2 and 6 of the UKBA), for which both a territorial jurisdiction test (which currently does not include British Overseas Territories) and a nationality jurisdiction test, not unlike the position in Canada after June 2013, apply. A frequent question for UK prosecutors in many cases of bribery occurring outside the UK will therefore be whether the alleged offence or perpetrator has a “close connection” to the UK, which includes those with formal national status under UK law, including residents, companies and partnerships (and including British Overseas Territories citizens).
However, the UKBA Section 7 corporate offence of failure to prevent bribery has an even wider jurisdictional reach. There is no need for the events giving rise to the s. 7 offence to take place in the UK at all. Nor does the “associated person”, the person who performs services for or on behalf of the company, need to have a close connection to the UK, as is required for those accused of other offences under the UKBA. What is required is that the commercial organisation must be involved in business and either be constituted in or carry on business or part of a business in the UK.
The inclusion of non-domiciled enterprises which have only part of their operation in the UK expands the category of those subject to the UKBA far beyond traditional boundaries. It is likely to apply to Canadian businesses with a relatively small presence in the UK, such as those with a UK sales, marketing or management office carrying out ancillary activities. Even if the Canadian corporate regularly interacts with others in the UK, for example purchasing goods or services there, that may well fall within the definition of “part” of its business. And the UK part of the business need not even be involved in the bribery for, as mentioned, the “associated person” could be in another part of the world or of a different nationality. On the other hand, the fact that a non-UK parent company wholly owns a UK subsidiary will not, of itself, render the parent company guilty of a s. 7 offence, unless of course it carries out part of its own business activities in the UK. It can be a fine line and one which is best avoided by implementing effective anti-bribery measures which would satisfy the UK statute and case law.
Comparison to Canadian Jurisdiction
In R v. Karigar 2017 ONCA 576, the Ontario Court of Appeal considered the statutory construction of the offence of agreeing to offer a bribe to a foreign public official, contrary to s. 3(1)(b) of the Corruption of Foreign Public Officials Act, SC 1998. The court held that agreeing to pay a bribe, as distinct from actually executing payment, was sufficient to establish the offence. Karigar paid no bribes and had not himself reached agreement with any person agreeing to receive bribes. Rather, he was part of an agreement with others to bribe Indian officials to secure a multi-million-dollar contract with Air India. This is consistent with s. 6 of the UKBA, where it does not matter whether the offer, promise or gift is made directly to the official or through a third party. There is no limiting language under either statute as to who must “agree”. There is the requirement that some public official stands to receive the loan, reward, advantage or benefit.
The Court also reaffirmed the territorial jurisdiction test in R v Libman – a “real and substantial connection” between the activity giving rise to the offence and Canada. So, the fact that New York based individuals controlled the finances and made the decision to pay the bribes and the fact that many of the dealings occurred in India did not prevent the Canadian court from exercising jurisdiction. Karigar was Canadian and had approached Cryptometrics Canada Inc (who stood to gain from the corruption) with a business proposal which ultimately involved a bribery scheme, then negotiated with Air India officials as an agent.
Of course, jurisdiction is also now extended, from June 2013, by Bill S-14, which broadens jurisdiction based on the Canadian nationality or the permanent residency of the person committing the offence. Prosecution of Canadian citizens, permanent residents and companies regardless of where the activity took place can occur by virtue of this nationality jurisdiction test. However, as with the UK, the Canadian bribery offence is not subject to a limitation period and so Karigar will still be of relevance to conduct prior to June 2013. Further, the real and substantial test will continue to apply to non-Canadian individuals and companies.
The Ontario Court of Appeal therefore underlined a commitment to try corrupt activity which substantially involves or benefits Canadians. However, Canadian jurisdictional reach is still not as wide as that of the UK. The Skansen case is a clear signal that UK prosecutors are keen to take s.7 UKBA cases to trial. That attitude, combined with the nature of the offence itself and the wider reach of UK courts to corporates beyond its shores, is like a warning shot from one the Belfast’s 6-inch guns, to all non-domiciled companies who carry on part of their business activities there.