This year will see a new Bribery Bill. It promises to reform the criminal law so that a new and comprehensive scheme of bribery offences will enable courts and prosecutors to provide a more effective response to bribery in the 21st century at home and abroad.

The bill follows the publication of the Law Commission’s Reforming Bribery report on 20 November 2008, which recommended the introduction of two core bribery offences: one dealing with giving bribes and the other with agreeing to accept them. The report also recommended two new offences dealing with the bribery of foreign public officials to obtain a business advantage, and liability of companies for failures to prevent bribery committed on their behalf. For the first time, the commission’s recommendations deal with both the public and private sectors.

On 16 October 2008, the Organisation for Economic Cooperation and Development’s working group on bribery published a report sharply criticising the UK’s failure to bring its anti-bribery laws in line with its international obligations under the 1997 OECD Convention on Combating Bribery of Foreign Public Officials.

In the report the OECD working group, which comprises all 37 countries party to the convention, stated that it was ‘disappointed and seriously concerned’ with the unsatisfactory implementation of the convention by the UK. It was ‘particularly concerned that the UK’s continued failure to address deficiencies in its laws on bribery of foreign public officials and on corporate liability for foreign bribery has hindered investigations’.

In an OECD survey in 1999, UK companies were found to be among the worst offenders for bribing foreign officials.

However, in August 2008 the UK reported its first conviction for foreign bribery in the context of a plea agreement. The case was investigated by a dedicated team – which includes officers from the City of London Police and the Metropolitan Police Service – the overseas anti-corruption unit. The case involved the managing director of CBRN Team, a UK security company, who paid £83,000 in bribes in 2007/08 to two Ugandan officials in relation to a £210,000 contract. In September the briber received a five-month jail sentence, suspended for one year. The OECD working group regards this case as a positive development towards the UK’s commitment to implementing the 1997 convention.

US leads the wayThe UK’s lax efforts to bring legislation in line with the OECD convention compare unfavourably with the US, which ratified the convention and enacted implementing legislation in 1998.

The US has taken a strong stance on anti-corruption. In 1977 it passed the Foreign Corrupt Practices Act (FCPA) and any company listed on a US exchange or with significant operations in the US is subject to the act irrespective of where the corruption occurs.

US financial regulations give the FCPA global reach, and it is evident from the huge payout by the German engineering group Siemens in December last year that the US is taking the international lead in the fight against corruption. US authorities fined the group a record $800m (£523m) to settle a long-running bribery and corruption scandal. Siemens also agreed to pay €395m (£354m) to settle a case in its home town of Munich; it had been fined €201m (£179m) there a year ago over bribery by its former telecoms division. It is thought that the total cost to Siemens so far is a staggering €2.5bn (£2.2bn), including €850m (£759m) in lawyers’ and accountants’ fees.

After a year of negotiations and plea bargaining, Siemens agreed to pay the US Department of Justice about $450m (£296m), as well as $350m (£230m) to the Securities and Exchange Commission. The US Department of Justice highlighted in its decision ‘Siemens’ substantial assistance to the department in the investigation of other persons and entities, its extraordinary efforts to uncover evidence of prior corrupt activities, and its extensive commitment to restructure and remediate its operations to make it a worldwide leader in transparent and responsible corporate practices going forward’.

As well as the OECD convention there have been other attempts to tackle corruption, but there is no single coherent approach. In 1999 the EC introduced the Criminal Law Convention on Corruption, under which each member state must take legislative measures against active and passive bribery. The UN Convention against Corruption of December 2005 has been ratified, accepted, approved or acceded to by 107 states.

Although there is no neat package of anti-corruption legislation in the UK, Professor Mark Watson-Gandy, commercial fraud specialist at 13 Old Square chambers in London, says: ‘There already is a useful armoury of civil remedies to deal with corruption - particularly conspiracy, breach of fiduciary duty and the economic torts. Tracing accounts for secret profits can provide satisfying remedies in this regard. What better disincentive to corruption than forcing your untrustworthy employee to yield up the fruits of his dishonesty to you?’

While the civil remedies can be used in domestic situations, they are largely redundant in larger, cross-border cases. The high-profile case involving BAE highlighted the perceived inadequacy of the UK anti-corruption measures. The Woolf Committee’s report, Ethical business conduct in BAE Systems Plc – the way forward, published in June last year, was commissioned by BAE against the backdrop of allegations of ‘bribery and corruption in connection with the award of defence equipment contracts in a number of countries’. Particular focus fell on the contracts that formed part of the ‘Al Yamamah’ programme between the UK and Saudi governments.

The enquiry sought to identify the high ethical standards to which a global company should aspire and the extent to which BAE currently meets them, along with recommendations on how to achieve such standards.

The UK cannot afford to be complacent - corruption is not a problem restricted to developing countries or dictatorships. But corruption law in the UK urgently needs to be updated and codified.

Colin Joseph, a partner in the London office of US firm Edwards Angell Palmer & Dodge, says: ‘Our own [corruption] law is in such a mess that it simply does not get enforced. It looks as though this might at last be the year when we get a more comprehensible law on the statute book, but it will be a while yet before that leads to any sanctions.’

Legislation alone is not enough and stronger enforcement is needed, says Professor Watson-Gandy. ‘Even with a broad range of offences at their disposal to address corruption, you will find that the police are often reluctant to get involved,’ he says. ‘Moreover, anything below a £250,000 loss and the specialist agencies appear uninterested, and your local police force often won’t want to get involved. You’ll be surprised what your local constabulary thinks is "just a civil matter".’

Too many cooks?One of the problems with legislating against corruption is that protection from corruption is in the hands of several agencies and regulators. The Financial Services Authority, for example, tries to combat market abuse and, in particular, insider dealing. Sally Dewar, managing director of wholesale and institutional markets at the FSA, says: ‘Insider dealing, market manipulation and other forms of market misconduct are, put simply, cheating and reduce investor confidence in the UK markets.’

It is fundamental to the integrity of the stock exchanges that investors can have total confidence in the statements made to them. Consequently, false or misleading statements will fall foul of the exchange’s rules. In 2005 the FSA took action for the first time under section 397 of the Financial Services and Markets Act 2000. Carl Rigby, the former executive chairman at software firm AIT, was given a three-and-a-half-year prison sentence for publishing a misleading statement to the stock exchange; he was also ordered to pay investors compensation. Finance director Gareth Bailey received a two-year prison sentence.

The FSA is taking a robust line in the fight against corruption. Last week it fined Aon Limited £5.25m for failing to take reasonable care to establish and maintain effective systems and controls to counter the risks of bribery and corruption associated with making payments to overseas firms and individuals.

Between 14 January 2005 and 30 September 2007, Aon failed to properly assess the risks involved in its dealings with overseas firms and individuals who helped it win business. Suspicious payments, amounting to about $7m (£4.6m) were made to a number of overseas firms and individuals.

The OFT has also increased its investigations. The watchdog ordered fines of £237m in 2007, a huge increase on the £3.1m from the previous year and a mere £697,000 in 2005.

On 17 April last year the OFT issued a provisional Statement of Objections against 112 construction companies alleging they had been engaged in bid-rigging activities and giving them a chance to respond. The statement followed one of the largest ever Competition Act investigations involving some 3,000 contracts in the UK construction sector worth £3bn. The potential penalties are harsh: companies falling foul of the finding face fines of up to 10% of worldwide turnover.

Jeremy Lederman, a partner at London firm Cumberland Ellis, says: ‘It is important for businesses and individuals to see that there is a level playing field. All those in public life or in business are likely to face an increased risk of being on the receiving end of such an investigation.’

However, he adds: ‘There has to be a sense of proportion in investigations, particularly where it involves small and medium-sized businesses. By their nature they have less resources than larger enterprises.’

The penalties facing individuals and companies are severe. In 2007, businessman Adam Hauxwell-Smith was sentenced to three years’ imprisonment when it was found that he paid £1.3m in bribes to two Ikea employees to turn a blind eye to Ikea’s ‘40% turnover rule’. The employees, a buyer and sales leader, received custodial sentences of two years and 13 months respectively. One of the largest administrative penalties concerned Shell’s mis-statements of its proved reserves in 2004: the company was fined £17m by the FSA and $120m by the SEC for committing market abuse and breaching the listing rules. Shell said at the time it would pay the settlements ‘without admitting or denying the conclusions’.

Acting after the event is not the only option for the enforcement agencies. In 2006, the FSA obtained an asset-freezing injunction under the Financial Services and Markets Act in respect of the proceeds of suspected market abuse. One of the individuals was an insider to an impending takeover announcement; the other traded ahead of the announcement and appeared to have been acting on the basis of inside information.

Joseph at Edwards Angell Palmer & Dodge says: ‘There is a lot of talk about corruption in the news, but unfortunately there is not so much action in dealing with it [in the UK]. However the BAE saga ends up, we will hardly have covered ourselves in glory. All our major global companies would be absolutely correct to be far more in fear of falling foul of the FCPA than of breaching our own law.’

Katie Paxton-Doggett is a freelance journalist