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Q&A: Former UK attorney general Lord Goldsmith on the UK Bribery Act

Source: Thomson Reuters Foundation - Fri, 18 Feb 2011 16:29 GMT
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LONDON (TrustLaw) – Lord Goldsmith is the European chairman of litigation at the US-based law firm, Debevoise & Plimpton LLP. Between 2001 and 2007 he was the UK’s attorney general – the country’s chief legal adviser and also responsible for overseeing prosecutors such as the Serious Fraud Office (SFO).

TrustLaw spoke to Goldsmith about the UK Bribery Act, long-awaited guidance on it and cost-cutting at the SFO.

The U.S anti-corruption law, the Foreign Corrupt Practices Act (FCPA), famously contains a narrow exception for facilitation payments (a small payment made to a government official to ensure prompt performance).  The UK Bribery Act does not have this exception. Would you have liked to have seen the same exception?

We may be about to see something coming out. The piece that we are waiting for is guidance from the Ministry of Justice and one of the pieces of guidance they’re going to develop is going to be how to deal with facilitation payments. We have to wait and see what they’re going to say about it but I suspect we will find that there will be a little bit of a relaxation of the very tough position that was taken by ministers when the legislation was first introduced, that we were not going to have facilitation payments, full stop; so they may be recognising certain circumstances in which something is possible.

How would you advise a UK company to deal with the issue of facilitation payments? Should they mandate that no employee ever make  them? And if the company does do that, surely payments will continue to be made, but will just be swept under the carpet?

The key advice for UK companies - and indeed for non-UK companies but who have some business in the UK - is to build up a set of procedures which will satisfy the statute, which requires “adequate procedures” and that doesn’t just cover facilitation payments; it will cover the whole gamut of issues including standard problems like hospitality, but also how you create a culture in which people do business on a basis which doesn’t have to involve the making of corrupt payments and it will have to say something about facilitation payments. At the moment, you can’t say that they are permissible and therefore they must be avoided. When the new guidance comes out, we may find that there’s a bit of relaxation.

Given that unlike the FCPA, the Bribery Act isn’t supported by a voluntary disclosure regime and that Lord Justice Thomas, in his sentencing remarks in the case against Innospec, (a chemical firm whose British arm was fined over bribing officials in Indonesia), made it clear that he doesn’t believe that the SFO should be agreeing settlements, could you, as a lawyer, in good faith, recommend voluntary disclosure to a UK company that has come to you and told you that they’ve found a major incident of corruption within one of their businesses?

Absolutely! It remains very important for companies, when they discover something has gone wrong, to consider all the options and one of the options is to self-report. Even if it’s not possible to do a deal with the authority in quite the way that the Serious Fraud Office wanted, it’s still going to pay dividends. First of all, there might not be a prosecution at all. If the authority sees that the company has spotted a problem, it’s dealt with it, it’s put in place a procedure which will mean that in the future these things won’t happen, it might say, actually that’s enough. It might charge them with a lesser offence, which is entirely within their jurisdiction, they don’t have to ask the court for that.

They may also at least say to the court, we think you should take into account the fact that this is a company which didn’t have to be pursued, it found this out and voluntarily disclosed it, it’s talked to us about what it’s going to do in the future, we’re very happy with the plan that it’s got in place and we think that you should take that into account. Now, they can’t go as far as I would like them to be able to go and say and actually we think that the right result should be this penalty, please judge will you approve it. I’d like them to go that far but even without that they can still say all these things and the courts will also take that into account.

Do you sympathise with companies that say that the corporate offence within the Bribery Act is so broad and the definition of ‘adequate procedures’ so open to interpretation that the Act will leave them open to prosecution at the whim of an SFO prosecutor?

I do understand that point of view and one would take exception perhaps to words like ‘whim’ because it’s still going to be based on some rational approach but, having said that, that’s why the guidance is so important. I welcome the fact that the Ministry of Justice is now saying that it’s going to produce more detail on that (guidance) but I would also advise companies who are doing business in the UK, whether they’re UK companies or not, to look hard at their procedures and to take expert advice as well.

That will help them always to say ‘we’ve been through this, we took appropriate advice, these procedures were what our advisers told us would be acceptable’ and that will be taken into account even if it subsequently turns out the advisers got it wrong, but there’s every chance that they will have got it right.

Is this promised guidance to the Bribery Act a red herring? Can it possibly meet the expectations of companies that either are UK companies or companies that do business in the UK?

It can meet their expectations. Obviously the devil’s in the detail. Guidance which is no more than “mum and apple pie” is not going to help anybody at all. Good, honest businesses still find themselves faced with difficulties in a number of countries where they’re told you need to hire these people to assist you in your technical programmes and the company may say, we don’t actually need these people to help us, we know what the product is but this is the way of doing business, can we do it or not? Is this just a way of giving them a bit of extra income to a state official? So these are tricky issues that honest businesses have to navigate and I think the guidance, if it comes out with sufficient detail, is sufficiently practical, will help.

On top of that will be the attitude of the prosecutor. The current director of the SFO, Richard Alderman, has been really very open in saying he wants to work with companies, he’s prepared even to talk to companies about their plans and their programmes. Guidance and responsible prosecutorial approach is going to be what will give companies greater protection.

Given that the SFO has had its budget cut so severely in the last couple of years, do you think that it will be able to prosecute a FTSE 100 company that has the resources to throw hundreds of lawyers at a case and bury the SFO in paperwork?

I hope that it will always have the resources it needs to do its job because it is very difficult otherwise to put a price on justice. When I was in charge as attorney general and the SFO was one of my departments, we had an arrangement that we had an annual budget but we also had an arrangement with the Treasury that if we had a big case - we used to call them ‘blockbusters’- we’d get a special budget for that. We would say look, we’re not going to try and get into our annual budget the extra millions of pounds we will need to run a case like that, but we will do that on a specific basis. I hope that still exists.

Many companies are concerned that they will have to work in a way that is different from their foreign competitors and this will put them at a disadvantage. The response from the director of the SFO has been ‘actually, we’re going to prosecute the foreign companies; as long as they do some business in the UK we can do that and we can prosecute them for things they’ve done which have got nothing to do with England, except for the fact that this company happens to do some bit of its business in England.’ Now if they can do that, of course that will help to deal with the problem of not having a level playing field.

But they will need even more money to do that because investigating things in a foreign country is even more difficult and time-consuming and expensive. My question, looking at it from the point of view of British business, is not going to be, will they have enough money to prosecute a FTSE 100 company? The question may be, will they have enough money to prosecute a Fortune 500 company or a leading company on the French or German stock exchanges? 

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