April 2013

LEGAL EASE: Unlikely gains from bribery

ChampagneGenerally speaking, we lawyers did a bad job of it. As the commencement date for the UK’s new Bribery Act 2010 approached on July 1, 2011, we made a lot of pronouncements about the new crime of excessive corporate hospitality. We questioned whether one could receive a glass of champagne from a potential supplier. These concerns were justified. What is a criminal act versus what is merely excessive corporate hospitality is inherently arbitrary. Possible criminal corporate hospitality is also easily addressed and many institutions quickly clamped down on what hospitality their employees were entitled to accept. Restaurant reservations were cancelled, speakers told audiences they could only address them via video conference because their employer viewed the conference venue as too plush, and people drank more beer. What was not addressed nearly as often, nor as vocally, was the new exposure to strict corporate criminal responsibility for the actions of anyone with whom the organisation has any sort of business relationship, or the extension of bribery to dealings with non-government entities and for facilitation payments. We are not going to cite statistics in support of our concerns because any – which is how mainland Chinese investors enter the funds market – would be inherently suspect. Speaking frankly, we cannot see how the new Bribery Act can be legally reconciled with the logistical realities of the rise of the mainland Chinese as investors in any fund connected with the UK.  For those who don’t know what we are talking about here, mainland Chinese investors are introduced to the outside world via “immigration consultants”. These immigration consultants purportedly advise the mainland Chinese investors but they are, in reality, paid large sums of money by external advisors in exchange for a share of the mainland investor’s business.   The payments to these immigration consultants cannot withstand scrutiny under the Bribery Act 2010. The payments are clearly (i) the provision of a financial advantage, (ii) intended to induce or reward improper (which includes breach of an expectation of good faith, impartiality or trust). The people – so long as they are British – that make these payments are likely criminally liable as are their employers and those that are in partnership with them, even if the immigration consultants are not. The only defence de jure available for the institutions whose employees make these payments would be the existence of adequate systems to prevent such abuses. However, it is inconceivable these defences are available de facto given how wide spread knowledge is of these corrupt practices. Ironically, the largest benefactor of these facilitated payments is likely the UK government. Many of these investments are made for the purposes of obtaining UK investor visa status and many of the financial institutions paying the immigration consultants insist that the investor purchase UK gilts. Only time will tell if the UK government means what is says about bribery and whether it can afford to take the steps it claims are necessary. Even if that means turning off a flow of Chinese money to the Treasury. Nicholas Holland is Partner and Head of Contentious Trusts and Alison Chaloner is a Trainee Solicitor at law firm Bircham Dyson Bell ©2013 funds europe

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