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Beware dodgy overseas agents seeking bribes

The Bribery Act 2010 received Royal Assent in April. It is, however, clear that companies and their in-house legal teams still have work to do before they are ready to comply.

In particular, maverick agents overseas pose a major hazard and companies need to check who is acting for them abroad.

Real-estate activities have traditionally been among the most regulated by government. The process of negotiation for planning or other land-use permissions is complex and costly.

Real estate development can give rise to situations where improper payments or inducements facilitate the process. In some countries, this has become part of the culture and there appear to be almost informal “tariffs” for obtaining occupation permits from authorities.

The new legislation is aimed at improving enforcement and preventing UK-based operators from becoming part of this culture.

Local difficulties

To succeed and ensure profitability, new real estate ventures overseas often depend on the local person on the ground with the contacts and experience to get a development under way.

The industry works by using agents, and the activities of such local partners and agents give rise to particular risks.

The new legislation signals a significant move forward in the reach of UK criminal law to provide a new, modern and comprehensive scheme of bribery offences that will enable courts and prosecutors to respond more effectively to bribery at home and abroad.

The Act creates a number of new offences including:

  • Two general offences covering the offering and receiving of a bribe;
  • A separate offence of bribing a foreign public official;
  • A new corporate offence of failing to prevent bribery.

Organisations should look carefully at the due diligence they carry out on people who act on their behalf.

Relationships in the construction sector cross a host of boundaries, ranging from deals with third parties such as consultants, agents and suppliers to local joint venture partners. All of these can create exposures which can be difficult to assess, but are the areas where the risk can be greatest.

The government’s objective in passing the Act is to elevate the profile of bribery and corruption so that companies and individuals are forced to reassess their current business practices and procedures as well as perhaps their supply chains.

It is more important than ever that companies review their business practices, compliance programmes and staff training to check whether any issues need to be addressed.

How serious is it?

When evidence of corruption is discovered, companies now have to consider whether this should be reported to the Serious Fraud Office (SFO).

Since July last year, the SFO has encouraged companies to come forward and make admissions when they uncover corruption within their business. As part of the incentive, the SFO has indicated that it will use civil penalties “wherever possible”, instead of criminal sanctions. However, a civil settlement is not guaranteed and all possible consequences are to be taken into consideration before a self-report is made.

It is essential that those companies that are considering self-reporting take specialist legal advice before doing so.

Graeme Bradley is a partner and head of the Engineering & Construction Group at law firm DLA Piper UK LLP