UK bribery law will affect HK businesses

PUBLISHED : Thursday, 31 March, 2011, 7:00pm
UPDATED : Thursday, 31 March, 2011, 7:00pm

Britain yesterday released guidelines for the world's strictest anti-bribery legislation, which affects UK companies operating in Hong Kong and on the mainland.

The UK parliament passed the 2010 Bribery Act last April, which affects not only British firms but any company that conducts any part of its business in the country, as well as those that provide services to British companies. It goes into effect in July.

Until the British law was passed, the United States had the strongest anti-corruption legislation in the world in the shape of the Foreign Corrupt Practices Act, or FCPA, which bans the bribery of foreign officials. The UK's new law goes further, by also outlawing commercial bribes.

UK firms may also be liable for acts of bribery by a third-party service provider, such as an agent or contractor, if the bribe was to get business, keep business, or gain a business advantage for its UK client.

'One of the key issues that companies confront in Asia, and especially in China, is the use of agents, consultants and third-parties,' said Gary Seib, a partner at Baker & McKenzie in Hong Kong who heads the Firm's Global Dispute Resolution Practice.

Firms can defend themselves against bribery charges if they can show that they have 'adequate procedures' in place to prevent bribery.

But Seib said that the burden of implementing those procedures fell to the UK company, not local agents. 'Let's say that you have a local agent in Hong Kong or Taiwan. They may not be concerned with implementing due diligence procedures - the burden will be on the UK entity. It's the same situation in relation to the [American Foreign Corrupt Practices Act].'

Seib emphasised that companies operating in Hong Kong and the mainland should be mindful of local anti-corruption laws as well.

'We see, for example, local investigations take place. China, for example, has revised its Criminal Law, which has been dubbed the 'Chinese FCPA.' Hong Kong has its own anti-bribery laws.

'Taken as a whole, there's nothing in the guidelines that wasn't anticipated, it represents what we have been saying for years is 'best practice' for companies subject to home legislation which impacts on overseas operations. The more savvy companies with Asian operations have for a while been mindful of the issue of anti-corruption and put in place internal operating procedures because of the US FCPA and what was expected under the guideline.

'I think the message is, if you haven't started getting your house in order, then you really need to do it now,' Seib said.

But for many Hong Kong companies, anti-corruption procedures could be an entirely new concept.

A survey of top firms in Hong Kong , Singapore and South Korea, released in April last year, found nearly half 'failed to display any evidence of taking significant steps to counter bribery'. The survey by Experts in Responsible Investment Solutions studied the anti-bribery policies of nearly 2,000 FTSE All-World Developed Index firms for the survey.

'There are many corporates in this part of the world who are not aware of it, or haven't responded. There's room for much greater awareness,' Seib said.

A spokesman for the Hong Kong Trade Development Council said it had not heard about the newly published guidelines, but said that the council would examine the issue.

'We will always monitor anything that will impact business with another country. If it has immediate impact on Hong Kong, we will decide whether to inform our members,' he said.

Tough sanction

The UK parliament passed the 2010 Bribery Act last April

The maximum sentence for breaching the new act will be an unlimited fine, plus this many years in prison: 10