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Law Essay Example

UK Bribery Law

“If it is a profit which arises out of the transaction, it belongs to his master, and he has no right to take it, or keep it, or bargain for it, or to receive it without bargain, unless his master knows of it”

Bowen LJ, commenting on the nature of a bribe for the purposes of the law of agency in Boston Deep Sea Fishing and Ice Co v Ansell (1883) 39 ChD 339.

Critically examine the suitability of the law relating to the receipt of bribes by agents for the modern business world.

Introduction

The issue of bribery in the modern business world is analysed through scrutiny of the current UK domestic law on the prohibition of corruption and the duty of the agent to the principal. The current law will be assessed in terms of its suitability to the modern business world and inadequacies will be addressed. Lastly analysis of recent proposals for reform will show whether these inadequacies are set to become a thing of the past.

A. Current UK bribery law

1. Overview of sources of law for bribery - corruption [1]

The common law definition of bribery is described as:

“….the receiving or offering [of] any undue reward by or to any person whatsoever, in a public office, in order to influence his behaviour in office, and incline him to act contrary to the known rules of honesty and integrity… [2] ”

There is a varied collection of common law offences for bribery, which are allocated on the basis of the target of the bribe. These include embracing [3] as well as bribery of the police, [4] a privy councillor [5] and a coroner. [6]

The current law relating to bribery is however also entrenched in a myriad of different acts under the more widespread concept of corruption. This multiplicity of acts [7] vary in their scope of applicability due to, curiously, whether the offence relates to public or private bodies. [8] In addition, the importance of the distinction was once enhanced by the difference in available offences. [9] It is necessary to note that this paper will place an emphasis of focus on the private sector of the modern business world. 

2. The private sector

(i) Definition of Bribe

The anatomy of corruption is such that the crime is committed by mere virtue of the act that creates a breach of duty and there need not be a loss incurred. [10] In addition, the 1906 Act describe a bribe as a type of “corruptly” conducted inducement or consideration that creates favouritism [11] as opposed to the definition under the 1889 Act, which requires the bribe to take place within a particular transaction. [12] It will be shown that this inappropriate distinction requires complete consolidation.

(ii) Definition of Corruptly

Further to this, the adverb “corruptly” is given ordinary meaning and preferably defined under case law as “Arialpurposely doing an act which the law forbids as tending to corrupt [13] ” as opposed to an act that is carried out “dishonestly. [14] ” This approach is sensible for the reason that “dishonesty” requires a victim [15] which, in addition to the aforementioned superfluous ness of loss, is too confining for the concept of corruption and bribery. The result is however a broad definition that remains in contention. [16]

(iii) Scope of the 1906 Act

Bribery is outlawed under s 1(1) of the Prevention of Corruption Act 1906. This Act defines [17] in which the type of body is irrelevant and there is express application to both agents and “persons” acting for and on behalf of a Principal [18] . This provision is extended in its application by two further acts. The first is a curious anomaly under the Prevention of Corruption Act 1916, which creates a presumption of bribery in cases involving public or government bodies. [19] The second is the more recent Anti-terrorism, crime and security (ATCS) Act 2001, which extends application to bribes committed by UK nationals in overseas territories. [20] The former will be discussed further under heading C2. The latter is essential from the point of view of the increased international dimension of corporate activity as, not only is there regulation of very common overseas dealing, there is the added benefit of perpetuating the UK’s strict anti-corruption stance that has a significant, positive effect on foreign investment and trade with UK businesses [21] .

B. The Law of agency in relation to bribery

1. Definition of the Agency

Agency is defined under the 1906 Act as “any person employed by or acting for another. [22] ” This does seem to be an appropriately broad definition that aims to catch all types of representation. It also carries the added simplicity of being able to encompass future advancement of business practice in a rapidly evolving commercial environment. This broad definition is however not without flaw and is discussed below under heading C3. 

2. Duties of the Agent to the principal

The duties of the Commercial Agent fall under a statutory instrument as set out in regulation 3 [23] and carry the same impact as the general law principles. The general law of agency [24] stipulates, there are five key duties owed by an agent to the principal. Firstly there are fiduciary [25] duties of trust and confidence that are owed to the principal by virtue of the strict, status [26] relationship of the principal to the agent. The Commercial Agent is required to ’look after the interests of his principal and act dutifully and in good faith.’ [27] In addition to the fiduciary duties, there are also duties of obedience [28] , due care [29] , notification and accountability [30] . All of these would be breached by the conduct of bribery on the part of the agent.

C. Critical Feedback - suitability of the current law

1. Complexity of multiple sources

Bribery, as a constituent part of the concept of corruption, is derived from a multiplicity of statutes that creates the vast problem of lack of comprehensiveness and consistency. Further to this, the multitude of separate common law offences adds confusion to the network of sources of corruption law, which goes against the principle of a comprehensible criminal code, [31] that is essential to a stable infrastructure like the modern UK economy.

2. The unnecessary distinction between public and private bodies

There are three reasons why this distinction is unnecessary for the purposes of legislating against corruption. The first is that bribery is a crime consisting of the requisite mens rea [32] and actus reus. Therefore the incident of involvement of either a public or private body as the target of the bribe or the perpetrator should be wholly irrelevant to the consideration of the offence. Secondly, the distinction creates unfair discrepancies between the two types of body. This is true for the rebuttable presumption of bribery per the 1916 Act, which hinges on the notion of public body and is defunct of purpose in this modern age. In addition, the bribery offence extends to third parties, such as the wives of officials, in the 1916 Act but not in the 1906 Act. Thirdly, the modern economy of the United Kingdom is devoted to the privatisation of former state-run organisations, with the result that there is now confusion over the status of certain infrastructures. A complete uniformity of treatment between public and private bodies is therefore wholly necessary and should, in particular, motivate a complete removal of the 1916 Act’s rebuttable presumption by virtue of the rather obvious doctrine of “innocent until proven guilty.” [33]

3. Confusion as to scope of applicability

(i) Defining the agent-principal relationship

The scope of the 1906 Act is uncertain due to the poor wording of the definition of agent as “any person employed by or acting for another.” [34] The notion that this may not refer to officials such as judges, police officers or local councillors is an absolute nonsense but there is merit in the notion that it would encompass independent contractors who are not normally agents in the strict common-law sense of the term as set out in Halsbury [35]

However, as stated above, the concept of corruption is defined in terms of a breach of a duty. The result is that, for the sake of the criminal law of bribery, the definition of agency requires to be extended to all scenarios where there is a clear presence of “acting on behalf of another” and a breach-able duty in relation to that other. This should be the ultimate test that would solve the problem of 1889 and 1906 discrepancies surrounding applicability to purported agents, and persons who are no longer or are about to become agents.

(ii) Definition of “corruptly”

In addition, it also solves the problem of identifying “corruptly” as this would be satisfied by the definition of “intention of self action or inducement of another to act in a way that constitutes a breach of duty“. This would also catch third parties who are aware of the motive of the “gift (etc)” since, by virtue of acceptance, they would induce another to breach their duty.

This may seem somewhat draconian but the radical effects would be counter-acted by a special definition of “duties” that encompasses specific or generic duties that are integral to the scope of the responsibilities that are typical of a particular company secretary, director, non-executive director and public official [36] . As regards the directors, this would focus on their duties to the company and to a proportionately lesser degree, the shareholders. With regard to “classic” agents, “duties” would fall under the pre-established list under the general law [37] of agency and the SI on Commercial Agents [38] . Further detail is beyond the scope of this paper.

D. Proposals for reform - satisfactory?

1. Prior Law Reform Proposals

There have been three prior proposals for law reform of the crime of bribery [39] but all were in relation to the law surrounding corruption and bribery in the public sector. However it is necessary to note that the Salmon committee recommended a consolidation [40] of the law of corruption. The later Nolan Committee then recommended that the Law Commission undertake the task of reforming the law of corruption as, although the government had accepted the recommendation for consolidation, they had as of yet taken no action.

The need for consolidation is absolutely essential although the best possible strategy would be to completely amalgamate the law of bribery in both the public and private sectors to create a single body of legislation.

2. The Current proposals 

The proposal for a new Corruption Bill [41] immediately solves the problem of consolidation of the various sources of law relating to corruption and, in addition eradicates distinctions of sources of law for public and private bodies.

Further to this there are additional solutions to the issues of scope of applicability in relation to the continued retention of the agency-principal relationship as the exclusive scope of the bill and the meaning of “corruptly”

(i) Exclusive application of the agency-principal relationship.

At first glance this may seem to be an overly narrow application of the law but as shown above [42] it is clear that this depends wholly on the broad nature of the definition applied to the concept of agent and principal. The broad meaning of the relationship is given under clause 11(1)(a) [43] of the Bill. There is however the additional requirement of an agreement or understanding that may result in a narrow application of the Bill that would exclude such agent-principal relationships that arise out of necessity. There are however two main reasons why this is not so worrisome. Firstly, the concept of agency through necessity is fast becoming a thing of the past in a commercial planet that harbours an ever increasing variation in modes of communication. Secondly, the agreement may be either express or implied and this compensates for any narrowing of scope. The provision is therefore satisfactory.

(ii) The meaning of “corruptly”

“Corruptly” is defined in clause 5 of the Bill as the conferment of an “advantage” which is corrupt if there is an intention for another to perform an act or omission within the capacity of their function as an agent for another. [44] The provision has merit in that is catches persons associated with agents who are the recipients of the “advantage.” [45] Unfortunately the provision is flawed by virtue of overly complex wording and, more importantly, there is no mention of breach of duty, which is as explained above, is essential to the consideration of corruption. [46]

Conclusion
The main inadequacies of the current law of bribery in the agent-principal relationship are complexity of multiple sources, a ludicrous distinction of sources of law for public and private bodies and confusion over applicability by virtue of inadequate definitions of the agent-principal relationship and “corruptly”. It has been shown that the modern business world requires that the law governing the receipt of bribes by agents requires satisfaction of three components of consolidation, uniformity of application to all public and private bodies and clarity of crucial terms. While it has been shown that the former two components, as well as clarity of the definition of the agent-principal relationship, are satisfactorily dealt with in the new proposals, there remains a deep flaw in the proposed definition of “corruptly” due to omission of consideration of “breach of duty” as an integral part of the definition.

Bibliography

  • Legislation
  • The Sale of Offices Act 1809
  • Public Bodies Corrupt Practices Act 1889
  • Prevention of Corruption Act 1906, Prevention of Corruption Act 1916
  • The Honours (Prevention of Abuses) Act 1925
  • Representation of the People Act 1948
  • Criminal Justice Act 1988
  • Security Service Act 1989
  • Intelligence Services Act 1994
  • London Local Authorities Act 1995
  • Anti-terrorism, Crime and Security (ATCS) Act 2001
  • Commercial Agents (Council Directive) Regulations 1993, SI 1993/3053.
  • Human Rights Act 1998
  • Case Law
  • S v Deal Enterprises (Pty) Ltd 1978 (3) SA 302
  • Pomfriet v Brownsal (1600) Cro Eliz 736
  • Vaughan (1769) 4 Burr 2495
  • Harrison (1800) 1 East PC 383
  • Cooper v Slade (1858)10 ALL ER 1488
  • Smith [1960] 2 QB 423
  • Wellburn (1979) 69 Cr App R 254
  • Lindley [1957] Crim LR 321
  • Calland [1967] Crim LR 236
  • Barrett [1976] 1 WLR 946
  • Gilmour v Clark (1853) 15 D 478
  • Alexander Graham & Co v United Turkey Red Co Ltd 1922 SC 533
  • Balsamo v Medici [1984] 2 All ER 304
  • Hastie v Campbell (1857) 19 D 557
  • Tyler v Logan (1904) SC 111
  • Reference Books
  • Oxford English Dictionary 2004
  • Russell on Crime, 12th edn 1964
  • Halsburys Laws of England (4th ed 1990) vol 1(2)
  • Articles
  • D Lanham, "Bribery and Corruption" in Criminal Law: Essays in Honour of J C Smith (1987) 92
  • P Fennell and P A Thomas, "Corruption in England and Wales; An Historical Analysis" (1983) 11 Int J Soc L 167
  • D W Elliott, "Directors Thefts and Dishonesty" [1991] Crim LR 732
  • Robert Flanagan, “The Fiduciary Obligation.” (1989) 9 OJLS 285
  • Government Publications
  • The Law Commission, Legislating the Criminal Code: Corruption, Report No. 48 (also HC524 1997-98)
  • Richardson111 Cent Crim Ct Sess Pap 612
  • Department of Trade and Industry, UK Trade and Investment, Working Paper, UK bribery and corruption law, May 2004, available at www.uktradeinvest.gov.uk
  • Consultation Paper No 124, Fiduciary Duties and Regulatory Rules (1992)
  • Codification of the Criminal Law (1985) Law Com No 143
  • Redcliffe-Maud Committee 1974
  • Salmon Commission 1976
  • Nolan Committee 1994
  • Draft Corruption Bill, available at: http://www.officialdocuments.co.uk/document/cm60/6086/6086.pdf (edit - link no longer available online 12/02/08)
  • Joint Committee Report on the Draft Corruption Bill, Session 2002-2003 HL Paper 157, HC 705
  • Law Commission, Legislating the Criminal Code: Corruption, Report No. 48
  • Home Office, Raising Standards and Upholding Integrity Cm 4759, June 2000
  1. [1] See the Oxford English Dictionary for the definition of corruption: “To destroy or pervert the integrity or fidelity of (a person) in his discharge of duty; to induce to act dishonestly or unfaithfully; to make venal; to bribe.” 
  2. [2] Russell on Crime, 12th edn 1964, p381 See also D Lanham, "Bribery and Corruption" in Criminal Law: Essays in Honour of J C Smith (1987) 92, at 92. For a distinction between bribe and treat, see S v Deal Enterprises (Pty) Ltd 1978 (3) SA 302, which is also cited by D Lanham.
  3. [3] The bribery of jurors, Pomfriet v Brownsal (1600) Cro Eliz 736, referenced in The Law Commission, Legislating the Criminal Code: Corruption, Report No. 48 (also HC524 1997-98) chapter VII
  4. [4] Richardson111 Cent Crim Ct Sess Pap 612
  5. [5] Vaughan (1769) 4 Burr 2495; 98 ER 308
  6. [6] Harrison (1800) 1 East PC 383
  7. [7] The Sale of Offices Acts 1551 and 1809, Public Bodies Corrupt Practices Act 1889, Prevention of Corruption Act 1906, Prevention of Corruption Act 1916, The Honours (Prevention of Abuses) Act 1925, Representation of the People Act 1948, Criminal Justice Act 1988, Security Service Act 1989, Intelligence Services Act 1994, London Local Authorities Act 1995
  8. [8] In the case of bribery, only the Prevention of Corruption Act 1906 relates to the private, as well as the public sector. This act was implemented as a result of a need to extend the offence of bribery to the private sector, see P Fennell and P A Thomas, "Corruption in England and Wales; An Historical Analysis" (1983) 11 Int J Soc L 167 at p 174
  9. [9] The difference of sentencing between 1889 and 1906 Acts was removed by s 47 of the Criminal Justice Act 1988.
  10. [10] This is clearly shown under s 1(1) of the Prevention of Corruption Act 1906, which refers to a corrupt act as an ‘inducement’ or a ‘reward’.
  11. [11] ss 1(1)-(2)
  12. [12] s 1(1) of the 1889 Act
  13. [13] Cooper v Slade (1858)10 ALL ER 1488, per Willes J at p 1499. This was followed in Smith [1960] 2 QB 423 per Lord Parker CJ at 429 and Wellburn 1979) 69 Cr App R 254 per Lawton LJ at p 265
  14. [14] See Lindley [1957] Crim LR 321 per Pierce J at p 326, followed in Calland [1967] Crim LR 236 per Veale J at p 241
  15. [15] See D W Elliott, "Directors Thefts and Dishonesty" [1991] Crim LR 732 at p 734
  16. [16] See below under heading C3
  17. [17] s 1(1) of the 1906 Act
  18. [18] ibid 8
  19. [19] s 2
  20. [20] s 4 of the Prevention of Corruption Act 1906, as inserted by ss 108(2)-(4) of the Anti-terrorism, Crime and Security (ATCS) Act 2001
  21. [21] See, the Department of Trade and Industry, UK Trade and Investment, Working Paper, UK bribery and corruption law, May 2004, available at www.uktradeinvest.gov.uk (edit - link no longer online 12/02/08)
  22. [22] 1906 Act, s 1(2) The definition extends to “persons serving under the Crown,” but is unnecessary to mention further for the purposes of this paper. For further details, see Barrett [1976] 1 WLR 946
  23. [23] Commercial Agents (Council Directive) Regulations 1993, SI 1993/3053.
  24. [24] Agency is defined in Halsburys Laws of England (4th ed 1990) vol 1(2), p 4, at para 1 as “the relation which exists where one person has an authority or capacity to create legal relations between a person occupying the position of principal and third parties”
  25. [25] Consultation Paper No 124, Fiduciary Duties and Regulatory Rules (1992), para 2.4.3. See also Robert Flanagan, “The Fiduciary Obligation.” (1989) 9 OJLS 285.
  26. [26] ibid 14
  27. [27] ibid 14 Reg 3(1)
  28. [28] Gilmour v Clark (1853) 15 D 478, Alexander Graham & Co v United Turkey Red Co Ltd 1922 SC 533, Balsamo v Medici [1984] 2 All ER 304. For Commercial Agents, the requirement is to carry out instructions under reg 3(2)(c) to comply with reasonable instructions
  29. [29] Hastie v Campbell (1857) 19 D 557
  30. [30] Tyler v Logan (1904) SC 111
  31. [31] Codification of the Criminal Law (1985) Law Com No 143, paras 1.3 1.9. See also the Salmon Report, para 87, which recommended a rationalization of the criminal law of corruption
  32. [32] There requires to be intention to influence the behaviour of a public officer so that he may "act contrary to the known rules of honesty and integrity" See Russell, ibid 2 para 2.2
  33. [33] A fundamental right entrenched in Article 6(2) of the European Convention on Human Rights, which forms part of UK domestic law by virtue of s 1(1)(a) of the Human Rights Act 1998
  34. [34] s 1(2)
  35. [35] ibid 24
  36. [36] The former are agents to the company and the latter, agents to the public sector that they represent
  37. [37] See above under heading B2
  38. [38] ibid 23
  39. [39] The Redcliffe-Maud Committee 1974, The Salmon Commission 1976 and the Nolan Committee 1994
  40. [40] para 1.4
  41. [41] See the Draft Corruption Bill, available at: http://www.official-documents.co.uk/document/cm60/6086/6086.pdf See also the report from the Joint Committee on the Draft Corruption Bill, Session 2002-2003 HL Paper 157, HC 705, Law Commission, Legislating the Criminal Code: Corruption, Report No. 48 (also HC524 1997-98)3 Home Office, Raising Standards and Upholding Integrity Cm 4759, June 2000
  42. [42] See above under heading C3
  43. [43] “A person is an agent, and another is his principal for whom he performs functions, if (a) there is an agreement or understanding between them (express or implied) that the first is to perform functions for the other” 
  44. [44] Corruption Bill clause 5(1)-(2)
  45. [45] ibid 47 cl 5(1)(b) and (2)(b) “Who ever obtains it”
  46. [46] ibid 45