Global business: ‘premier league’ and ‘the rest’

 

Following Anti-Bribery moves UK exporting companies are underestimating strength of anti-corruption measures in offshore destinations, says Steven Beharrell, a partner with Fasken Martineau.

Global business is at risk of dividing into a premier league of companies which will win contracts internationally and a second division which will struggle to operate outside their home country and unattractive, high-risk jurisdictions

A ‘significant number’ of UK-based exporters and trading companies are citing the Bribery Act as one of their motivations for actively exploring moving their operations to other jurisdictions.

Many of these companies are over estimating the burdens associated with the new legislation and underestimating the rigor of anti-bribery laws in popular offshore destinations such as Switzerland and Asia.

The 2010 Bribery Act is part of a wider global push to change some bad business habits and the laws in many of the favoured locations for offshore corporate headquarters are just as harsh as the UK. For the exporters and trading firms which have made the move – and incurred all the associated costs and disruption - the grass has proved to be no greener on the other side of the fence. Moreover, the very act of being seen to move to avoid the Bribery Act can cause reputation damage and make that firm a less attractive counter party.

Our own analysis of reaction to the Bribery Act among global companies confirms that rather than impeding export activity, operating from a low-risk jurisdiction with a rigorous anti-corruption law and enforcement regime is essential to doing business with serious companies, who will undertake extensive due diligence in order to protect themselves.

Among the few large international businesses which did engage in suspected bribery, such as British Aerospace and Siemens, the costs in terms of reputation and economic damage were significant. In both cases, once the companies were caught, there was a lengthy corporate effort to ensure that they were able to do business in future with no question of corruption.

Exporting companies used to make an argument that in sectors such as construction, defence, energy, health care and telecommunication, where there was government involvement in the procurement process or the letting of contracts; bribery was the cost of sale. In the last five years, as global moves to eradicate corruption have crystallized into laws, the issue is being taken off the table. The Bribery Act is the right law at the right time and will leave investors, governments and the companies themselves better off.

Some exporting businesses have got used to a form of institutionalized corruption and are going to suffer as they find themselves locked out of doing business in many territories and many global companies.

The global move to change corporate behaviour in the area of corruption is leading to the formation of a premier league and the rest. A second division of companies is emerging as a result of their lack of commitment to anti-corruption practices. These businesses will find themselves only able to operate in high-risk jurisdictions and to do business with other second division players, with all the commercial danger associated with that lack of transparency.

 

Steven Beharrell is a London-based lawyer who has examined the impact of the 2010 Bribery Act over the three months since it became law in July this year.

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