01 July 2011

The UK Bribery Act and how it Affects Businesses in Guernsey and Jersey

The United Kingdom Bribery Act came into force on 1 July 2011. The Act has implications for additional jurisdictions including the Channel Islands. This briefing note explores how the new offence of failing to prevent bribery might impact on Guernsey and Jersey.

The UK Bribery Act and how it Affects Businesses in Guernsey and Jersey

The UK Bribery Act imposes a positive obligation on organisations to take steps to prevent bribery. In addition to the offences of offering and accepting bribes, the act creates a new offence of failing to prevent bribery. That offence applies to any relevant commercial organisation which fails to prevent associated persons from committing bribery. An associated person is someone who performs services for that organisation whether as employee, agent or subsidiary – a wide definition indeed. 

In a similar vein to the anti-money laundering legislation in Guernsey and Jersey, it is a defence for the organisation to show that it had in place adequate procedures designed to prevent such conduct – even if in the particular case in question those procedures failed to do so. Consequently, commercial organisations in the UK have been busy implementing anti-bribery policies and procedures. According to the Ministry of Justice guidance those procedures should:

  • be proportionate to the risks faced by the business;
  • involve top level commitment from the business and be the responsibility of a senior officer of the firm;
  • be risk assessed regularly;
  • ensure that appropriate due diligence is applied to third party intermediaries;
  • be communicated clearly to all staff and business partners; and
  • be monitored and reviewed regularly.

Guernsey and Jersey have had anti-corruption legislation in place for many years in the form of the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003 and the Corruption (Jersey) Law 2006. Like the UK Bribery Act, those Laws create the statutory offences of accepting or offering bribes.

Notably under the UK Act, bribery offences which are committed outside the UK may be prosecuted in the UK if the person offering or accepting the bribe has a “close connection” to the United Kingdom. A close connection includes being a British citizen, British Overseas Territories Citizen or a British National which means many individuals resident in Guernsey or Jersey are subject to the UK Act as well as the equivalent Laws in each island.

Guernsey and Jersey have no equivalent of the UK offence of failing to prevent bribery. However, under the Guernsey and Jersey Laws where an offence is committed by a body corporate with the consent, connivance or neglect of any director or officer, those individuals are also guilty of an offence. Similarly, under Guernsey and Jersey law generally, where an offence is committed by an individual it may be possible to attribute liability to an associated company.

The UK Bribery Act does not by its terms extend to organisations in the Channel Islands. However, they are capable of being caught by it. The definition of a relevant commercial organisation includes, as one would expect, companies and partnerships registered in the UK. However, it also includes non-UK (i.e. Guernsey and Jersey) companies and partnerships which carry on a business, or part of a business, in any part of the UK.

The phrase, “part of a business”, is not defined in the Act. However, guidance issued by the Ministry of Justice recommends a common sense approach and indicates that organisations that do not have a demonstrable business presence in the UK will not be caught. In light of that guidance, we set out below examples of how structures involving businesses in the Channel Islands may be impacted by the new regime.

UK subsidiary

According to the Ministry of Justice guidance, a Guernsey or Jersey company with a UK subsidiary will not necessarily be deemed to be carrying on a business or part of a business in the UK (because a subsidiary may act independently of its parent). However, if that subsidiary is acting on behalf of its parent in the UK it may no longer be regarded as being independent and so could be at risk of dragging the Channel Islands company into the UK regime thus requiring the Channel Islands company itself to implement anti-bribery procedures to protect itself against UK prosecution.

UK listing

The guidance states that the mere fact that a company’s securities have been admitted to trading on the London Stock Exchange (LSE) does not in itself mean that that company is carrying on a business, or part of a business, in the UK. Considering the large number of companies in the Channel Islands which are listed on the LSE, this ought to be very helpful. However, it has been reported that the UK Serious Fraud Office take an opposing view, leaving the position on Guernsey or Jersey companies with a UK listing somewhat confused. Companies in Guernsey or Jersey with a UK listing should press for clarification of the position as soon as possible.

Administration of UK entities

A Guernsey or Jersey administrator which provides services to a UK entity will be regarded as associated with that UK entity for the purposes of the Act. Since the UK entity will then be liable for any bribery committed by its Channel Island associate, the administrator may be expected to implement anti-bribery procedures in order to protect the UK entity against prosecution.

Portfolio companies

A portfolio company of a private equity fund will not usually be regarded as an associate of the fund or of any investment adviser to the fund since no services are provided by or to the portfolio company. However the reputational risks of a Private Equity house being associated (in the everyday sense of the word) with a company guilty of bribery means that ensuring portfolio companies comply with anti-bribery procedures may be a practical, if not a legal, necessity.

UK property

Neither the Act nor the Ministry of Justice has provided guidance on whether a non-UK company which owns land in the UK might be regarded as conducting business there. A Guernsey or Jersey company which passively owns a UK residential property is unlikely to be regarded as conducting business in the UK. However a more active involvement in the UK presents greater difficulty. Would a Guernsey or Jersey investment fund, which employs a property manager to actively manage its UK commercial property portfolio, be regarded as conducting any of its business in the UK? At present the answer is unclear.

The upshot is that organisations in the Channel Islands which have any business connection with the UK will need to consider very carefully whether that connection might amount to a “demonstrable business presence”. If so, that organisation would be well advised to establish UK compliant anti-bribery policies and procedures.

Please note that this briefing is only intended to provide a very general overview of the matters to which it relates. It is not intended as legal advice and should not be relied on as such.

© Carey Olsen 2011

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