Whilst bribery has been illegal in most countries for hundreds of years, governments in developed countries have historically found it difficult to enforce such laws due to a lack of evidence and a business culture that traditionally turned a blind eye to what was often regarded as an acceptable part of doing business, both at home and abroad. However, in recent years there has been a backlash in many countries against bribery and corruption, as it becomes increasingly clear what a damaging impact it has upon the economies and political systems in the countries where it is prevalent. Tough new laws have been brought into force to prevent multinational companies from engaging in corrupt acts and a string of high profile cases has demonstrated governments’ willingness to prosecute multinational companies that flout the regulations.

Whereas in the past companies could plead ignorance of the actions of their employees, a proposed new law in the United Kingdom will introduce, for the first time, a specific corporate offence of failing to prevent bribery. The Bribery Bill was published in draft on 25 March 2009 for pre-legislative scrutiny by a Joint Committee of both Houses of Parliament and introduced in the House of Lords on 19 November 2009. It is currently being reviewed in the House of Commons. Anticipating the wide-ranging implications the bill will have, many UK companies are now scrambling to review their internal procedures and ensure that their staff are fully aware of their obligations when the bill becomes law. However, recent media reports have revealed that a worrying number of UK companies are still unaware of the tough penalties they face if they do not comply with the new regulations.

The introduction of the new bill comes at a time when the UK authorities are already cracking down on companies that are found guilty of bribery. In September last year, following an investigation by the UK’s Serious Fraud Office, British bridge-building firm Mabey & Johnson was convicted of bribery of foreign officials in Ghana and fined over GBP 6 million. Under the new bribery law, employees can face up to ten years in prison if they are found guilty of such offences, meaning that in the case of Mabey & Johnson, the company was lucky to escape with a fine. When the new laws come into force, there are likely to be a number of high profile cases in which both companies and employees are made an example of using both custodial sentences and huge fines.

In the United States, the Foreign Corrupt Practices Act of 1977 (FCPA) has already lead to a number of high profile cases in which multinational companies such as Siemens and Kellogg, Brown and Root were fined hundreds of millions of dollars for bribery of foreign officials. The FCPA is enforced so effectively that many US companies now automatically assess every new foreign business partner to ensure that there is no history of corruption or improper acts and to determine whether the company is wholly or partially state-owned. It has also led to greater transparency in foreign business dealings and the widespread adoption of strict internal compliance procedures.

UK companies now need to ensure that they are equally well-prepared, both in terms of their internal procedures and with regard to the way in which they conduct business abroad. Conducting effective due diligence is an integral part of any company’s strategy when dealing with overseas business partners, especially in Africa, Central and Eastern Europe and Russia and the Former Soviet Union, where local customs and laws can lull companies into a false sense of security and thereby expose them to heavy penalties at home. However, conducting due diligence in emerging markets can be both difficult and time consuming without the proper expertise. There is often a lack of information in the public domain and the records that do exist are often incomplete or misleading. In many jurisdictions the media is closely monitored by the government and, as a result, published information can be inaccurate, leading to decisions based on false assumptions.

Pasco offers a range of services to assist companies to overcome these obstacles and ensure that they are complaint with all relevant laws governing foreign business dealings, thereby ensuring good corporate governance. Using our extensive and exclusive network throughout the world, we are able to obtain information and intelligence from even the most opaque countries, enabling our clients to make informed judgements about key strategic decisions.