In the course of just a few weeks, the UK has brought two separate foreign bribery cases to conclusion – the first such cases brought by UK authorities.

First, in late September, the Overseas Anti-Corruption Unit (“OACU”) of the City of London Police announced[1]  that both an employee of CBRN Team Ltd (“CBRN”), a UK security consulting firm, and an official of Uganda pled guilty to bribery charges stemming from a scheme in which CBRN paid the Ugandan official in order to receive a contract to advise the Ugandan Presidential Guard. While the CBRN employee received a suspended sentence, the Ugandan official was sentenced to twelve months' incarceration.

Second, on October 6, 2008, the UK's Serious Fraud Office ("SFO"), in a case the SFO was investigating for evidence of foreign bribery, announced[2] that it had reached a £2.25m (US$3.9m) settlement with major construction firm Balfour Beatty plc for alleged unlawful accounting in connection with certain 'payment irregularities' which it self-reported. While the SFO acknowledged that there were no grounds for criminal prosecution of either the company or any individual, this marks the first time a company has reached this type of civil settlement as part of a foreign bribery investigation. This is a significant event in the UK's enforcement of anti-corruption laws and comes only 6 months after the SFO was given the powers to make a civil recovery of the proceeds of crime.

This article examines the import of these cases and considers whether they signal an increase in enforcement, and a change in the methods of enforcement, by UK authorities.

The SFO's Powers
The SFO is a UK investigation and enforcement authority established to deal with serious financial crime and has the power to investigate any suspected offence appearing on reasonable grounds to involve serious or complex fraud.[3] In the course of an investigation, the SFO may give notice to the subjects of the investigation, or to anyone else that the SFO thinks may have relevant information, to answer questions or to provide information or specified documentation, and in appropriate circumstances may issue warrants to compel production.[4] The SFO may also commence and conduct criminal proceedings relating to that fraud.[5] The SFO's powers to obtain civil recoveries in relation to the proceeds of crime are relatively new. In April 2008, the Serious Crime Act 2007 transferred the civil recovery powers formerly vested in the Assets Recovery Agency to a number of agencies including the SFO.[6]

The CBRN Team Case
The prosecution of the managing director of CBRN and the Ugandan official who received the bribe is noteworthy in many respects. First and foremost, it represents the first convictions for foreign bribery in UK history. Second, having been investigated by the City of London Police’s OACU, it also marks the first successful foreign bribery investigation by that recently-formed unit. Third, the prosecution was handled by the Crown Prosecution Service and not the SFO, which usually investigates foreign bribery with the OACU.

Additionally, the UK’s ability to prosecute the foreign official who took the bribe sets the UK’s legislation apart from the United States’ foreign bribery law, the Foreign Corrupt Practice Act (“FCPA”). Under the FCPA, only the giver of a bribe, and not the foreign official who received the bribe, may be prosecuted. For all the criticism that the UK’s foreign bribery legislation has received in recent years (discussed below), those laws are, in this respect, stronger than the FCPA.

The Balfour Beatty Case
Balfour Beatty plc, a UK-listed engineering, construction, services and investment business, conducted an internal investigation into the accounting treatment of certain 'payment irregularities' within a subsidiary involved in a joint venture with an Egyptian company. The payments related to certain contracts in which the subsidiary was involved as part of a US$130m UNESCO project to rebuild the Alexandria Library in Egypt between 1998 and 2000. In April 2005, Balfour Beatty "self-reported" the payment irregularities to the SFO, following which the SFO launched an official investigation.[7] The UK press reported that the SFO was investigating alleged foreign bribery in connection with the payment irregularities,[8] though Balfour Beatty has denied the bribery allegations.[9]

The SFO found that inaccurate accounting records relating to the payment irregularities amounted to unlawful conduct in that the subsidiary failed to complete accurate business records as required by the Companies Act 1985.[10] However, the SFO concluded that there was nothing to justify the formal prosecution of the company or any individual as the company did not obtain a commercial advantage and no individual employee benefitted financially from the conduct. Additionally, the SFO acknowledged Balfour Beatty's cooperation and the company’s review of its internal controls and procedures.[11]

Traditionally, the SFO may have pursued a long and costly criminal prosecution. In this case, however, the SFO took unprecedented action in obtaining (with the consent of Balfour Beatty) a Civil Recovery Order ("CRO"). By application to the High Court, the SFO may obtain a CRO to claw back the proceedings of any 'unlawful conduct' through the recovery of property (or forfeiture of cash) which is, or represents, property obtained through unlawful conduct. It is interesting to note that the SFO may use these powers in relation to any property (including cash) whether or not any criminal proceedings have been brought for an offense in connection with the property.[12]

Under the terms of the CRO, Balfour Beatty agreed to pay £2.25m and contribute to the costs of the proceedings. The company is also to put in place compliance processes to ensure against a repeat of the irregularities, and to submit these processes to supervision by the regulator for a defined period.[13]

Criticism Of The UK Bribery and Corruption Record
The Director of the SFO, Richard Alderman, described the Balfour settlement as "a highly significant development in our efforts to reform British corporate behaviour. We now have a range of enforcement tools at our disposal, and a major factor in determining which of those tools is deployed will be the responsibility demonstrated by the company concerned." Interestingly, three days after the settlement, the SFO announced a new Head of Anti-Corruption.

This activity is consistent with the UK’s approach in recent years to change the perception that it is not interested in pursuing foreign bribery cases. In 2006, the government established a new dedicated team for investigating international corruption – the OACU of the City of London Police. The head of the OACU was quoted earlier this year by the UK’s Independent newspaper that "it is only a matter of time before we achieve a successful prosecution. There is no question of a lack of commitment on our part.[14]  The OACU claims to have 26 matters currently under investigation.[15]  The UK government has also reputedly handed the SFO £22.8m to investigate UK companies' involvement in the UN's oil-for-food programme for Iraq.[16]  In June 2007, the influential Organisation for Economic Co-operation and Development ("OECD") acknowledged positive changes in the UK's bribery and corruption regime: the UK had made efforts to raise awareness about the need to combat foreign bribery; had improved its anti-foreign bribery guidance including as to the potential liability of parent companies; and had substantially increased the police resources for foreign bribery and money laundering.[17]

However, the UK remains subject to stern international criticism for its prosecution record. The Financial Times reported in August 2008 that the OECD had written to the UK government criticising its failure to prosecute a single overseas bribery case. The OECD also raised concerns over the SFO's commitment to fighting corporate foreign bribery.[18] The OECD's major criticism is reserved for the UK government's decision to discontinue a foreign bribery investigation into alleged large-scale payments made in connection with the award to UK firm BAE Systems plc of the Al Yamamah defence contracts with the government of Saudi Arabia. While the OECD "welcomed the openness of the UK delegation and the additional explanations from the UK authorities," (the UK government stated that the Saudi authorities had threatened to withdraw assistance in anti-terrorism measures had the investigation continued), the OECD still considered that "a number of questions remain unanswered" and held "serious concerns as to whether the decision was consistent with the OECD Anti-Bribery Convention." [19] The recent decision of the House of Lords[20] that the SFO was justified in dropping the probe is sure to derive further OECD comment. Interestingly, the OECD is scheduled to meet again with UK representatives this week in Paris.

The SFO Looks to the U.S. for Alterative Enforcement Methods
In strengthening its foreign bribery enforcement efforts, the SFO has clearly looked across the Atlantic for inspiration. In an interview with The Times in July 2008, the Director of the SFO recognised that "under the American system, where you have a number of different ways of dealing with fraud, this is regarded as a very effective way of doing justice."[21]  The Director was referring to the use, by the U.S. Department of Justice (“DoJ”), of Deferred Prosecution Agreements ("DPAs") and Non-Prosecution Agreements ("NPAs"), pursuant to which the DoJ removes criminal charges once certain conditions are met (a DPA) or agrees not to file charges at all (an NPA). In exchange, the subject company agrees to enhance its compliance regime, often agrees to be overseen by a government-approved monitor, and agrees to pay a monetary penalty. The company benefits by avoiding the potentially catastrophic impact of criminal proceedings and conviction. The DoJ, meanwhile, obtains an admission of unlawful conduct (allowing relatively straightforward prosecution in the event that the company is in breach of the conditions of the agreement) without going through the rigors of obtaining an indictment and bringing the case to court.
The SFO’s settlement with Balfour Beatty has clear roots in DoJ’s, DPAs and NPAs. In fashioning a settlement that requires Balfour Beatty to pay a monetary penalty, but does not require a criminal conviction, the SFO has achieved its first settlement against a company in a foreign bribery case and has done so without subjecting itself to the risk of a long, drawn-out trial.

Comment
This fall’s efforts by UK authorities are modest by U.S. standards, but may well represent a significant shift in the UK’s enforcement of its foreign bribery laws. By bringing charges against both the giver and receiver of a bribe and by entering into a settlement with a major corporation, all within a matter of weeks, the UK has given anti-corruption groups reason to hope that the UK is finally serious about enforcement and has given companies reason to fear that the U.S. enforcement authorities may not be their only concern. 

This article was prepared by William Jacobson, Partner in the Washington D.C. office of Fulbright & Jaworski L.L.P. (and a former Assistant Chief for FCPA Enforcement at the Fraud Section, Criminal Division, U.S. Department of Justice); Alex Rene, Partner in the Washington D.C. office of Fulbright & Jaworski L.L.P. and currently practising in the London office of the firm (and a former trial attorney in the Department of Justice’s Criminal Division, Fraud Section); and Lista Cannon, Partner-in-Charge of the London office of Fulbright & Jaworski L.L.P. (and former acting Head of Enforcement at the UK Securities Investment Board, now Financial Services Authority).

For further information on this topic please contact William Jacobson, Alex Rene (+44 20 7832 3663 or arene@fulbright.com) or Lista M Cannon (+44 20 7832 3601 or lcannon@fulbright.com) from Fulbright's White Collar Crime Practice Group and Government Investigations and Enforcement Practice Group.

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[1] City of London Police press release dated 22 September 2008: http://www.cityoflondon.police.uk/CityPolice/Media/News/govermentofficialguiltyofcorruption.htm
[2] SFO press release, 6 October 2008: http://www.sfo.gov.uk/news/prout/pr_582.asp?id=582
[3] Section 1(3), Criminal Justice Act 1987
[4] Section 2, Criminal Justice Act 1987
[5] [1] Section 1 (5), Criminal Justice Act 1987
[6] Section 240 Proceeds of Crime Act 2002 (applicable to the SFO by virtue of Schedule 8, Part 6, para. 124 of the Serious Crime Act 2007)
[7] SFO press release, 6 October 2008: http://www.sfo.gov.uk/news/prout/pr_582.asp?id=582
[8] "Balfour Beatty agrees to pay £2.25m over allegations of bribery in Egypt", The Guardian, 7 October 2008: http://www.guardian.co.uk/business/2008/oct/07/balfourbeatty.egypt
[9] "Balfour Beatty reaches full settlement of issues relating to Bibliotheca Alexandrina project," Balfour Beatty plc press release, 6 October 2008: http://www.balfourbeatty.com/bby/media/press/2008/2008-10-06/
[10] Section 221 Companies Act 1985
[11] SFO press release, 6 October 2007: http://www.sfo.gov.uk/news/prout/pr_582.asp?id=582
[12] Section 240 Proceeds of Crime Act 2002.
[13] SFO press release, 6 October 2008: http://www.sfo.gov.uk/news/prout/pr_582.asp?id=582
[14] "The pressure mounts on Britain to stamp out the brown-envelope culture," Independent, 6 April 2008: http://www.independent.co.uk/news/business/news/the-pressure-mounts-on-britain-to-stamp-out-the-brownenvelope-culture-805110.html
[15] "The pressure mounts on Britain to stamp out the brown-envelope culture," Independent, 6 April 2008: http://www.independent.co.uk/news/business/news/the-pressure-mounts-on-britain-to-stamp-out-the-brownenvelope-culture-805110.html
[16] "The pressure mounts on Britain to stamp out the brown-envelope culture," Independent, 6 April 2008: http://www.independent.co.uk/news/business/news/the-pressure-mounts-on-britain-to-stamp-out-the-brownenvelope-culture-805110.html
[17] OECD: UK Phase 2, Follow Up Report on the Implementation of the Phase 2 recommendations: http://www.oecd.org/dataoecd/43/13/38962457.pdf
[18] OECD attacks UK failure on corruption: http://www.ft.com/cms/s/0/89c2ba46-6c71-11dd-96dc-0000779fd18c.html
[19] OECD: UK Phase 2, Follow Up Report on the Implementation of the Phase 2 recommendations http://www.oecd.org/dataoecd/43/13/38962457.pdf
[20] R (On The Application of Corner House Research and Others) V Director of The Serious Fraud Office [2008] UKHL 60: http://www.publications.parliament.uk/pa/ld200708/ldjudgmt/jd080730/corner-1.htm
[21] "SFO to allow company plea-bargains over fraud," The Times, 17 July 2008: http://business.timesonline.co.uk/tol/business/law/corporate_law/article4353716.ece