Home Knowledge Stopping the Rot: Irish Bribery and Corruption Law in Context

Stopping the Rot: Irish Bribery and Corruption Law in Context

Introduction

Greater and greater efforts are being made at international, regional and national levels to stamp out the evil twins of bribery and corruption.

Definitions abound of the two activities.  In simple terms, “bribery” involves giving someone a financial or other advantage to perform their functions or activities improperly. “Corruption” involves the abuse of a position of trust – in a public or private office – in order to gain an unfair advantage. To a degree, it is the counterpart of bribery, but it covers a lot more.  Legal definitions, of course, go into more detail – effective enforcement depends on proper definition of offences and the absence of loopholes. This is why recent developments in Ireland, and in the UK, tightening up the legal regimes are so important and why offenders should have more to fear than ever.

In many countries, a small sweetener to obtain a service quickly or at all is a way of life. Less so, the anti-corruption watchdog Transparency International (TI) tells us, in Ireland and the UK.  The TI Corruption Perceptions Index 2010 regards Ireland as relatively “clean”, ranking 14th in the world and 9th in Europe. According to the TI’s 2010 Global Corruption Barometer, 4% of users pay a bribe to “receive attention” from various service-providers (which is too many, but better than in most other EU Member States).

Unfortunately, Ireland has not been immune from more serious bribery and corruption cases. In terms of popular perception (reflected in the Global Corruption Barometer), there’s a strong feeling that public and other institutions are affected by corruption, with political parties and the legislature topping the poll. 82% of the sample assessed the then current government’s action in the fight against corruption to be ineffective.

So the time is right for all involved – including Irish business and business-people – to take a fresh look at what is being done to combat bribery and corruption in Ireland.

Why Does Bribery and Corruption Matter?

For a start, the loss to the economy is considerable. The World Bank has estimated that 1% of global GDP is lost to corruption. The European Commission thinks that 0.5% of EU-wide GDP is lost. Either figure is unacceptably high.

There are, of course, other convincing reasons for stamping these practices out. Any corrupt payment diminishes free and fair competition, and impedes the development and operation of free markets and “level playing fields”. This doesn’t just apply to foreign contracts: it can apply to contracts at home as well. It also hobbles social and economic development, especially in developing economies. From another perspective, it fosters and supports organised crime, including drug smuggling and people trafficking: a bribe to protect the guilty results in more crime and widens networks of criminality. Where politicians receive bungs (sometimes quite literally in brown paper envelopes), trust is undermined not only in the politicians, but also in democratic institutions. More fundamentally, a “bribery and corruption” culture saps the moral and legal foundations of society and State.

International and Regional Measures

In recent years, the question of bribery and corruption has been addressed at international and regional levels. National agendas have been influenced – and in some cases even driven – by developments in the UN, the OECD, the Council of Europe and the European Union. The main measures are outlined here.

The 2003 UN Convention against Corruption contains provisions on the prevention of corruption in the public and private sectors, criminalisation, international cooperation and asset recovery. A review mechanism was introduced in 2009. Ireland ratified the Convention only in November 2011.

The 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions seeks the sanctioning of bribery of foreign public officials. It addresses the standards to be met in defining the bribery offence, the responsibility of legal persons, the requirement for effective, proportionate and dissuasive criminal (or other) penalties, jurisdiction over offences,  enforcement, the definition of bribery as a predicate offence for money laundering, mutual legal assistance and extradition.  A large number of countries – including Ireland and the UK have ratified the Convention. Detailed peer reviews of individual State implementation of the Convention are carried out by the OECD Working Group on Bribery. Reports on Ireland have doubtless contributed to changes in Irish bribery and corruption law.

At regional level, the Council of Europe has long been active in the area. In 1997 the Committee of Ministers adopted a Resolution setting out the “Twenty Guiding Principles for the Fight against Corruption”.  The Council of Europe has adopted a Criminal Law Convention on Corruption (1999), with an Additional Protocol (2003), both of which have been ratified by Ireland and the UK. A Civil Law Convention on Corruption (1999) has not, so far, been ratified by either. A 2000 Recommendation concerns codes of conduct for public officials and a 2003 Recommendation addresses common rules against corruption in the funding of political parties and electoral campaigns. A body called GRECO (Group of States against Corruption) monitors the implementation of these instruments. Again, reports on Ireland have helped in prompting legislative change.

The European Union has also taken a variety of measures to combat bribery and corruption. In 1998, the Member States concluded a Convention on the fight against corruption involving officials of the EU or officials of the EU Member States.  In 2003 the Council adopted a Framework Decision on combating corruption in the private sector, requiring Member States to criminalise active and passive corruption in the private sector and containing provisions on sanctions, liability of and penalties for legal persons and jurisdiction. The uneven implementation of this Decision has been monitored by the European Commission in reports in 2007 and in June this year. Accession of the EU to UN Convention – as far as concerned areas in which the EU is competent – was approved in 2008. The 1995 Convention on the  protection of the EU’s financial interests and associated Protocols should also not be overlooked.

At political level, the EU fight against corruption has featured in the 2010-2011 Stockholm Programme on an open and secure Europe serving and protecting the citizens. There is a renewed focus on economic crime and corruption and on improving the prosecution of crime in the private sector. The European Commission has been invited to develop indicators to measure Member States’ efforts and, together, with GRECO, to develop a comprehensive anti-corruption policy. It has also been asked to increase coordination between Member States in the framework of the UN, GRECO and the OECD. In its June 2011 Communication on fighting corruption in the EU, the Commission has proposed that the EU introduce its own reporting mechanism (to act in synergy with existing monitoring systems and focus on “blind spots”) and produce an EU Anti-Corruption Report. The EU should participate in the work of GRECO (addressed in detail in a separate Commission Communication). Amongst other proposed actions are the revision of the EU framework on confiscation and asset recovery, measures to strengthen the quality of financial investigations, addressing corruption in public procurement, and supporting the training of media professionals to secure greater transparency and accountability.

The Position in Ireland

The Legislative Framework

Bribery and corruption is addressed in a number of separate Acts in Ireland.

The principal collection of legislation – the Prevention of Corruption Acts 1889 to 2010 – dates back from Victorian times, but includes more up-to-date measures including the Prevention of Corruption (Amendment) Act 2001 and the recent Prevention of Corruption (Amendment) Act 2010. The package is somewhat fragmented. However, in November 2011, the Minister for Justice, Equality and Defence announced that he would be introducing legislation in 2012 to consolidate and reform the law.

As matters stand, the main offences under this legislation are (in summary):

  • The corrupt giving to, or receipt of, gifts, etc., by a member, officer or servant of a public body (Section 1 Public Bodies Corrupt Practices Act 1889 as amended)
  • The corrupt accepting or obtaining by an “agent” of  a gift, consideration or advantage as an inducement, to, reward for of otherwise on account of the agent doing any act or making any omission in relation to his or her office or position or the corrupt giving of such a gift, etc. (Section 1(1) Prevention of Corruption Act 1906 as amended)
  • The doing by a public official of any act in relation to his or her office or position for the purpose of corruptly obtaining a gift, consideration or advantage for himself, herself or any other person (Section 8 Prevention of Corruption (Amendment) Act 2001).

A lot has happened over the past ten years. The 2001 Act strengthened the law on corruption, enabling Ireland to ratify the EU Convention on the Fight against Corruption, the OECD Convention and the Council of Europe Criminal Law Convention on Corruption. The wording of the corruption offence in Section 1 of the Prevention of Corruption Act 1906 was made more comprehensive. Foreign office holders and officials were covered for the first time. The offence was also extended to cover corruption in the private sector.  Penalties were increased, to ten years imprisonment and an unlimited fine on conviction on indictment. An important new provision dealing with corporate responsibility enabled responsibility to be attributed to individual directors, managers and other officers who had consented to or connived at the corporate offence or who had been wilfully neglectful in this regard. The Act introduced provisions on search warrants.

Important presumptions of corruption were introduced, to cover payments by way of political donations and payments to holders of certain domestic public offices.  In the latter case, the presumption applies to certain functions, involving licensing, the sale or purchase of property and planning.

A new offence of corruption in office was created, to cover Irish office holders and officials in cases where no bribe is made or offered. 

The 2001 Act also addressed jurisdictional issues, providing that a person could be tried for corruption even if only a part of the offence occurred in the State and extending Irish jurisdiction extra-territorially to corruption abroad involving Irish office holders or officials.  Even with these changes, the OECD considered that Ireland had failed to give full effect to the OECD Anti-Bribery Convention. The 2010 Act has largely resolved this concern, by extending extraterritorial jurisdiction to the givers of bribes with Irish connections (including Irish citizens, ordinary residents and Irish-registered companies) as well as corrupt officials.

The 2010 Act has extended the classes of persons who can be corrupted (so-called “agents”) to include persons under the indirect control of foreign States and members and employees of international organisations. The scope of corruption has been extended to cover any “advantage”, not just any “gift or consideration”.  The word “corruptly” – an important element of the basic corruption offence – was defined for the first time, to “include acting with an improper purpose personally or by influencing another person, whether by means of making a false or misleading statement, by means of withholding, concealing, altering or destroying a document or other information, or by any other means”: it should be stressed that this litany is not exhaustive.

The 2010 Act has also introduced “whistle-blower” protection for persons (including employees) reporting offences.  Provided they act in good faith, such persons are to have no liability for damages in respect of communications of opinions that an offence may have been or is being committed. Employers are guilty of an offence where they penalise or threaten to penalise employees.

It should  be noted that the Criminal Justice Act 2011 contains new provisions on the production of documents or the provision of information for relevant offences, including offences under the Prevention of Corruption Act 1906 and the Prevention of Corruption (Amendment) Act 2001. A key new element is the offence of withholding information: a person is guilty of an offence where he or she has information which he or she knows or believes might be of material assistance in preventing the commission by another of a relevant offence, or securing the apprehension, prosecution or conviction of another for a relevant offence. The relevant provisions entered into force on 9 August 2011, only seven days after enactment.

The Proceeds of Crime (Amendment) Act 2005 empowers the Criminal Assets Bureau to seize a suspected bribe and contains provisions on the forfeiture of bribes.

The Criminal Justice (Fraud and Theft Offences) Act 2001 gives force of law to the Convention on the protection of the EU’s financial interests and associated Protocols.

The issue of corruption on the part of politicians and public office holders is more generally addressed in a number of Acts in relation to which the Standards in Public Office Commission plays a key role.  The Ethics in Public Office Act 1995 and the Standards in Public Office Act 2001 provide for the disclosure of interests by members of the Oireachtas and public servants, the establishment of Committees of Members Interests of the Dáil and the Seanad, the drawing up and publication of codes of conduct, the furnishing of certificates of tax compliance, and investigations of possible non-compliance. The Electoral Act 1997, as amended a number of times, provides for the disclosure of political donations and for the State financing of political parties, and addresses the issue of election expenses. Limits have been imposed on the value of political donations, foreign donations have been prohibited and “political donation accounts” have to be used. Finally, the Oireachtas (Ministerial and Parliamentary Offices) (Amendment) Act 2001 provides for the payment of an annual allowance to the leaders of parliamentary parties in relation to expenses arising from parliamentary activities.

Enforcement

As matters stand, the giving and receiving of bribes in Ireland and outside Ireland, to public and private officials, is clearly outlawed.

Penalties for breach are potentially severe.  As seen above, conviction on indictment can result in up to 10 years in prison and an unlimited fine. Where the offence has been committed by a body corporate, complicit directors, managers and other officers may incur the same penalties. Conviction will result in director disqualification. Companies will be barred from seeking public contracts.

The key question is how this legislation has been, and will be, enforced.

The Government and State agencies have provided very little statistical information in this regard. Some information can be gleaned from a GRECO Evaluation Report on Ireland published in 2010 which pointed out that, between 2005 and 2008, 17 prosecutions were directed under the Prevention of Corruption Acts. Twelve cases were prosecutions on indictment, and ten of these resulted in convictions. Sentences of imprisonment of between 18 to 30 months were imposed in four cases. The maximum fine was €20,000. Other cases are pending. Successful prosecutions have been brought under the Electoral Acts, the ethics legislation and the Local Government Act 2001.

It is striking that no prosecutions have been brought in relation to bribery of foreign officials and there have been no prosecutions for private corruption.

The then DPP, James Hamilton, delivered a lecture on prosecuting corruption in Ireland in the Burren Law School in May 2010 and was remarkably candid about the problems of prosecuting corruption offences. In addition to the lack of whistle-blower protection (which has now been remedied) the DPP pointed to problems with the high volume of material to be used in such cases and the continued use of ordinary juries in complex cases. In a recent report, Transparency International has pointed to the use of Tribunals of Inquiry to look at corruption cases as a result of the “seemingly intractable problem of the State’s inability to prosecute corruption cases” and has called for increase in the capacity of the investigative authorities and a change in a prevailing culture where white collar-crime is not seen as equivalent to “ordinary” crime.

The problems may not be as intractable as feared.

In the first place, the law has been tightened up and gaps filled in.  White-collar crime –  including bribery and corruption offences – is being addressed more seriously by the legislator (witness the Criminal Justice Act 2011).

Second, there is an increasing risk of detection, and of a proper investigation and successful prosecution of cases. The new whistle-blower protection and mandatory reporting provisions are key in this regard. In addition, investigative techniques have undoubtedly improved: investigators can use new forensic tools to cope better with the flood of material. Prosecutors have learnt from past lessons. It will be surprising if the newly-appointed DPP, Claire Loftus, does not take an even-more focused approach to white-collar crime, including bribery and corruption.

Finally, even making allowance for a certain public scepticism (and even cynicism) about the likelihood of change, there is an increasing recognition that bribery and corruption in Ireland and abroad have to be properly addressed.

It is only a matter of time before companies and individuals will face prosecution for corruption of foreign officials and for private corruption.

Compliance

Given the potential criminal penalties and the likelihood of greater enforcement – not least following the introduction of “whistle-blowers” protection – Irish business should focus on compliance.

In determining its approach to compliance, a corporate body will need to consider the laws that apply to its operations and have a policy and procedures (which may vary in complexity depending on the nature of the business, its size and its assessment of risk) to address bribery and corruption. The requirements of different jurisdictions – where business is done, or where the body itself or its officers have connections – will need to be factored in. The impact of Irish legislation – including the updated Prevention of Corruption Acts and the very recent Criminal Justice Act 2011 – and the legislation of other States needs to be reflected in the policy and in the procedures.

The Irish Government has adopted a cross-departmental approach with its own dedicated website, www.anticorruption.ie, to raise awareness of anti-bribery measures.  Irish businesses, at home and abroad, are told that they should implement anti-corruption policies and practices, including guidelines, training, internal audit procedures and reporting requirements. Specific measures are suggested, including:

  • Establishing an anti-corruption policy
  • Ensuring that employees are familiar with relevant laws, their roles, their responsibilities, and the appropriate response to suspicions of corrupt activity
  • Ensuring that agents and partners, representing the business, have adequate and valid credentials for the activities being undertaken
  • Establishing monitoring and reporting requirements for agents and partners; and
  • Establishing a clear and accessible system for the reporting of any suspicious behaviour

As for other jurisdictions, an Irish company that “carries on business” in the UK (without needing to have a close connection to the UK) will be advised to have “adequate procedures” in place, following the Guidance issued by the UK Ministry of Justice.  “Best practice” compliance has been fostered by the US Department of Justice in its FCPA enforcement activity and this may need to be taken on board as well. Special care needs to be taken with countries with established enforcement records – Germany stands out as an “active enforcer” in the EU, for example.

Many Irish companies already have anti-bribery and corruption compliance programmes in place. Many do not. It is a good time to review internal policies and procedures in this area, or to introduce them.

Contributed by Cormac Little and Claire Waterson.