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Broadening the UK's horizons in international markets

Whilst the various reported reactions to ‘Brexit’ demonstrate polarised views on the opportunities and threats to UK businesses, we are nevertheless left in a position of having to make it work for us.

Some reports have been extremely positive in that since deciding to leave the EU, the UK has been approached by a plethora of countries wanting to enter into new trade deals. Of course whilst the UK has been a member of the EU such freedoms to negotiate have not been available. It has been suggested that the offers have come from around 27 countries with a combined GDP of £40 trillion which when compared with the combined GDP of the EU (estimated to be at around £12 trillion), seems to be a massive opportunity and certainly deviates from the despondency and angst which was forecast.

If these trade deals come to fruition then a very different landscape may be presented to UK exporters. The list of potential trading partners is expected to grow and the distance between these more attractive friends and the UK is also going to expand considerably. It may well be the case that there is a growth in UK exporters seeking agents in far flung places to help sell their products. Exciting times are no doubt ahead, but equally there are potential risks and pitfalls for the unwary.

Transparency International is a global movement with the objective of eradicating corruption and they publish a ‘Corruption Perceptions Index’ showing how 175 countries rank against each other in terms of how corrupt their public sector is perceived to be.

The lower their ranking, the more corrupt the country is perceived to be. Indeed, the rankings are used by risk analyst and forecasting experts. If we consider some of the countries which are reportedly proposing to offer enhanced trading terms with the UK, there is a range of rankings from the more ‘safe’ nations near the top of the list such as New Zealand, Canada, Australia, Germany and Japan to others whose position on this Index may well set alarm bells ringing. A leading risk analyst has considered the economic activities of close to 200 countries between August 2012 and August 2014. It found that sub-Saharan Africa and the Middle East held the most risk in terms of corruption and also the oil, gas and mining industries were found to be those most frequently exposed to the demands of bribery. In these sectors there are often public sector considerations and this provides a further layer of potential risk as will now be explained.

The Bribery Act 2010 sets out various offences and which are policed by the Serious Fraud Office. The legislation is centred around the proper performance of individuals and in this context their acting in good faith, impartiality or acting in accordance with a position of trust. If an individual intends to bring about the improper performance of others in their performance of their function or rewards that improper performance then an offence is committed. Similarly if that individual has knowledge or a belief that others have acted improperly in their role through inducement then an offence is committed. In order to make the assessment of any breach of expectation of proper performance, this is on the basis of what a reasonable person in the UK would expect to be the proper conduct of that person’s role. Overseas local customs or practices must be disregarded unless they are specifically allowed or required in written laws in that country. There is a separate offence of the bribery of a foreign public official where a financial or other advantage to influence the official in the performance of their official functions is made. In the landscape set out above and with the UK legislative position, it can be seen that there are treacherous waters ahead for individuals when conducting business overseas. Actions of agents and distributors can also steer businesses towards the rocks. Although individuals are at risk personally from rewarding corrupt practice, businesses can also fall foul by failing to take adequate steps to prevent corrupt practices. Policies need to be rigorous and adhered to in order to protect a business and indeed those who work within it. Training of staff to spot the warning signs and to appreciate the policies in place and the legislation behind them is another key step to protect business interests.

At first it seemed that the Serious Fraud Office had been slow on the uptake insofar as dealing with bribery and corruption offences has been concerned. Very few cases were reported in this area. This can no longer be described as the case with a number of bribery investigations and newly prosecuted cases forming part of the Serious Fraud Office’s workload. Indeed, there have been a number of high profile cases in recent months where the Serious Fraud Office has enjoyed some success in this particular field. Against this new landscape which could see an increased reliance on riskier overseas markets, it is therefore imperative for exporters to take the issue of eradicating or at least mitigating the risk of corrupt practices seriously as suggested, particularly as unlawful activity can easily find its way into transactions whether through the direct activities of employees or indeed the more indirect effects of agents in unfamiliar markets where their activities, through geography, are more difficult to control and monitor.

Effective anti-corruption policies and training can be a significant step in the right direction, as is obtaining sound advice should any fears or concerns arise.

Key Contact

John Davies