Regulatory & Investigations
The risks relating to bribery in the Middle East have increased, as scrutiny from regulators continues to rise and international legislation with extraterritorial reach, such as the UK Bribery Act 2010 (UKBA), is being enforced and widely applied. Seven years after its implementation in July 2011, the UK Ministry of Justice published a memorandum to review the application of the UKBA and analyse the act's enforcement, its successes and the challenges lying ahead. In this article, we look at how the UKBA has affected businesses in the Middle East and how we expect it to continue, as Dubai and the wider region look to be seen as a key business hub by the rest of the world.
Section 7 of the UKBA applies to UK companies wherever they operate, as well as to foreign companies with a demonstrable presence in the UK. It assumes that a company has sufficient control of its overseas operations to be aware of any illegal activity and to stamp it out, making the organisation liable, irrespective of its degree of knowledge.
This raises particular concerns in the Middle East, where it is common practice to employ local agents or to rely on local sponsorship in the course of business. Exercising sufficient control over the actions of such agents can be difficult, but it is crucial in the context of the UKBA.
Any gifts, bribes or facilitation payments paid by or to such agents could be deemed to be made on behalf of the company, and thus leave a company vulnerable to a Section 7 prosecution.
Businesses that are subject to the UKBA must ensure that the risks of such payments are mitigated. Procedures should be proportionate, taking account of regional risks. Organisations must take steps to educate employees and to foster an organisation-wide culture of good practice, lead from the top. Any procedures introduced should be regularly monitored and reviewed, and revised to meet new challenges and address new risks.
Indeed, the most significant impact of the UKBA is that UK businesses, wherever they are based, recognise the importance of, and have implemented, robust anti-bribery regimes. In the context of other cross-border legislation, non-UK businesses have largely followed suit.
Of particular relevance to the Middle East is the case of Sweett Group, which was the first organisation to be convicted of a Section 7 offence.
In July 2014, the SFO opened an investigation into the activities of its UAE-based subsidiary, Cyril Sweett International Limited (CSIL). It was found that between December 2012 and December 2015, Sweett Group had failed to prevent the bribery of another individual by CSIL, which was intended to secure a contract. Sweett Group admitted to an offence under Section 7, and in February 2016 it was sentenced and fined a total of £2.25 million.
Sweett Group's prosecution for the acts of a subsidiary operating in the UAE demonstrates the scope and far-reaching extraterritorial effect of the UKBA.
It highlights the necessity for companies with connections to the UK to exercise sufficiently strong oversight with regard to their global operations, particularly in developing and emerging markets where the potential risk may be higher.
Other high profile cases with a prominent Middle Eastern element include the Barclays Bank and Unaoil cases.
There has been a regional upshift in recent years regarding anti-corruption regulation, for example in the creation of the Kuwait Anti-Corruption Authority, the MENA-OECD Governance Programme. Saudi Arabia's Vision 2030 plan includes aims to improve transparency and accountability, coinciding with the recent crackdown on corruption in the Kingdom.
In the UAE, authorities are developing a strict policy on corruption. There is legislation to combat bribery, including specific provisions in the UAE Federal Penal Code and the UAE Federal Human Resources Law.
In 2016, the Dubai Economic Security Centre was established with a broad mandate, including powers to investigate and monitor bribery and corruption in the Emirate. The UAE's measures to tackle bribery and corruption in recent years resulted in Transparency International placing the UAE 21st globally in its 2017 Corruption Perception Index.
It would appear that the UKBA has encouraged businesses in the Middle East to adopt anti-bribery policies and procedures. In parallel, the UAE and other GCC nations continue to develop their anti-bribery and corruption initiatives recognising the necessity of creating a clean business landscape to attract foreign investment and improve local economies.
It remains important for businesses in the Middle East to regularly review their anti-bribery policies. Clients continue to ask for guidance and advice on what policies and procedures to put in place and whether their current frameworks should be reviewed, especially in light of the new legislation that comes into force, whether it is cross-border international legislation such as the UKBA and Sapin II (from France) or regional laws such as the recent laws in Saudi Arabia and the UAE protecting whistleblowers.
Companies must remain aware of specific regional risks, and ensure that their regional business units are educated and protected.