Anti-corruption in Spain: Compliance Confusion
April 2012 International Financial Law Review
In recent years, the fight against corruption in the context of cross-border business activities has brought about a raft of international legislation inspired by several conventions of the UN, the OECD and the Council of Europe and, particularly, by the extensive enforcement of the US Foreign Corrupt Practices Act (FCPA).
The UK Bribery Act 2010 was the first and, to date, the most important piece of national anti-corruption legislation to have an FCPA-inspired extraterritorial reach for the prosecution of legal entities. During 2011, China, Russia, Indonesia, and India, to name but a few countries, have enacted or were in the process of passing their own national versions of the FCPA or the Bribery Act.
Spain is no exception to this international legislative trend. In December 2010, the Spanish Criminal Code (SCC) was amended to introduce new and improved provisions on public and private corruption and the bribery of foreign public officials. The amendment also legislated for the corporate criminal liability of legal entities for bribery offences for the first time in Spanish legal history.
The amendment of the SCC occurred almost in parallel with the enactment of the UK Bribery Act 2010, and, to some extent, both were based on the same international conventions. Thus, the Spanish law enforcement authorities have been provided with a wide range of anti-corruption tools that are similar to those of their British counterparts.
However, the Spanish and British anti-corruption laws and their governments’ enforcement policies differ significantly when it comes to the legal effects of corporate compliance procedures. This core inconsistency generates shared concerns and a significant degree of uncertainty for British and Spanish companies that operate in both jurisdictions as to how to implement anti-corruption programs that are effective in such a challenging international context.
A UK facsimile?
Although there are essential differences in the foundations of the British and Spanish criminal law systems, the ratification and transposition of several international anti-corruption conventions by both countries (the 2003 UN Convention against Corruption, the 1999 Council of Europe Criminal Law Convention on Corruption and the 1997 OECD Convention on Combating Bribery of Foreign Public Officials) has meant that their domestic regulations on corruption share a significant number of similarities in terms of content despite their structural differences.
In brief, sections 1 and 2 of the UK Bribery Act 2010 regulate basic bribery offences and divide them into two main categories: active bribery (“bribing another person”) and passive bribery (“being bribed”). Both provisions are drafted generically as regards potential subjects, allowing for the prosecution of both commercial and private bribery and bribery of national public officials. The punishable conduct consists of offering or giving (active bribery) or requesting or accepting (passive bribery) a financial or other advantage in order to induce the bribed person to improperly perform a relevant function or activity or to reward such a performance. This improper performance is defined as an act carried out in breach of an expectation of good faith, impartiality or trust. The mere acceptance of the advantage itself may also constitute improper performance.
The Spanish provisions on basic bribery offences differ from sections 1 and 2 of the UK Bribery Act 2010 in terms of structure and categorisation. However, the objective and subjective grounds for criminal punishment are essentially the same.
The SCC, after the 2010 amendment, divides basic bribery offences into two main categories: public bribery (sections 419 to 427) and private bribery (section 286bis). Active and passive bribery are also expressly regulated within these provisions.
The bribery of Spanish public officials is regulated by the SCC on a progressive basis that takes into account the objective seriousness of the misconduct induced or rewarded by the bribe.
Section 419 of the SCC deals with the most serious bribery offence, where a public official requests or accepts a gift, favour or benefit of any kind (the bribe) to unlawfully perform his/her function. This means that a public function is performed in breach of the principle of impartiality, which is in itself illegal (matching the concept of improper performance used in the UK Bribery Act 2010).
Section 420 of the SCC punishes the less serious offence of where a public official requests a bribe to perform an act inherent to his or her function. This amounts to an express punishment of facilitation or grease payments in Spain, consistent with British regulations.
As regards these two types of bribery, section 421 of the SCC punishes a public official who requests a bribe as a reward for a lawful or unlawful act that has already been performed.
Finally, the least serious offence, regulated in article 422 of the SCC, is committed when a public official requests or accepts a bribe purely on the basis of his or her position. Under the UK Bribery Act 2010 this offence is equivalent to that of merely accepting the bribe which may itself constitute an improper performance.
These sections concern passive bribery (“being bribed”), which entails criminal liability for the public official alone. Active bribery (“bribing another person”) is regulated in section 424 of the SCC. This provision punishes the person who offers or gives a bribe to induce or reward a public official in the terms described in sections 419, 420, 421 and 422. This same section also makes it a criminal offence to comply with a request for a bribe from a public official.
Private or commercial bribery first became a criminal offence in Spain through the 2010 amendment of the SCC. Article 286bis of the SCC provides that active or passive bribery occurs when the following three requirements are met: (i) an offer or grant or request or acceptance of an unjustified benefit or advantage of any nature (the bribe) to or by a director, manager, employee or associate of a commercial organisation is made; (ii) the bribe is intended to obtain more favourable treatment from the bribed person than that given to others for the same commercial transaction; and (iii) the bribed individual acts in breach of his or her duties and obligations in the sale and purchase of goods and in the hiring of professional services as a result of the bribe (a form of improper performance).
In general terms, the UK and Spanish regulations on basic public and private bribery offences are to a great extent identical.
Bribery of foreign public officials
Both the Spanish and British regulations are based on the OECD Convention on Combating Bribery of Foreign Public Officials (ratified by the UK in 1998 and by Spain in 2000). Section 6 of the UK Bribery Act 2010 and section 445 of the SCC have almost the same criteria when punishing the bribery of foreign public officials in the terms of the OECD Convention. In fact, section 445 of the SCC is nearly a word-for-word transcription of article 1.1 of the Convention.
Thus, both countries punish the bribery of foreign officials committed by their nationals (individuals or legal entities) when the following requirements are met: (i) an offer, promise or grant of any undue pecuniary or other advantage (the bribe) is made directly or through intermediaries, to a foreign public official or a third person with the official’s acquiescence; (ii) the bribe aims to obtain or retain a business or other improper advantage in the conduct of international business; and (iii) the bribe must seek to influence the foreign official so that he or she acts or refrains from acting in relation to the performance of official duties.
Section 6 of the UK Bribery Act 2010 includes a series of definitions (for example “foreign public official”, “international organisation” and “written law applicable”) that assist the enforcement of this provision. Section 445 of the SCC lacks these interpretative tools, which is probably one of the reasons why it has barely been enforced by the Spanish authorities since its enactment in 2000 and subsequent amendments.
Corporate criminal liability
All of the mentioned anti-corruption conventions require that the signatory states expressly foresee corporate liability for bribery offences.
The UK Bribery Act 2010 establishes two main sources of corporate criminal liability for corruption offences. Firstly, where a commercial organisation itself commits active or passive bribery (sections 1 and 2) or bribes foreign officials (section 6) pursuant to the common law identification principle, that is, when the offence is perpetrated by an individual who is the directing mind or will of the organisation (i.e., senior executives or senior managers). Secondly, liability is established when a commercial organisation fails to prevent a person associated with it (for example an employee, agent or subsidiary) from bribing another person in an attempt to obtain or retain business or an advantage in the conduct of business for that organisation (section 7), but only if the associated person is or would be guilty of an offence under section 1 or 6.
Pursuant to the 2010 amendment, sections 31bis and 427.2 of the SCC introduce corporate criminal liability for bribery offences in Spain based on a transference model. That is, organisations will not be punished for their own conduct but for the acts committed by an individual. Criminal liability is transferred from the individual to the commercial organisation if one of the following requirements is met: (i) the offence is committed by a director or legal or de facto representative of the organisation who acted on its behalf or for its benefit; or (ii) the offence is committed for the benefit of the organisation by a person who is under its control and management (e.g., employee or agent) . Corporate criminal liability is of a cumulative nature: both the individuals and the organisation can be held criminally liable and may be found guilty and punished with various penalties for the same bribery offence.
There are easily identifiable similarities to the UK Bribery Act 2010’s corporate criminal liability regulations: corporate criminal liability applies to all categories of bribery; offences committed by senior managers are strictly attributed to the organisation through a type of identification principle; in the case of associated persons, there must have been a failure in the company’s control measures; and corporate liability does not exclude the personal criminal liability of the individuals involved.
Anti-corruption inconsistencies and uncertainties
The remarkable similarities between British and Spanish anti-corruption regulations, particularly as regards corporate liability, should allow commercial organisations to be relatively confident that if they put effective procedures in place to prevent bribery, they should have a defence in both jurisdictions that excludes, at a bare minimum, liability for offences of associated persons.
Regretfully, Spanish corporate criminal liability regulations do not provide for an affirmative defence of compliance as the UK Bribery Act 2010 does in section 7(2).
In fact, there is no provision in the Spanish legal system that expressly sets forth that organisations must establish and enforce programs to prevent and detect crimes within their structure. The amended SCC only contains two relatively explicit references to crime prevention and detection duties for legal entities.
The first of them, which expressly refers to preventive measures, is in section 4.d) of section 31bis, which states that corporate criminal liability may be mitigated if the organisation has “established, before the start of the criminal trial, effective measures to prevent and detect criminal offences that could be committed in the future, taking advantage of the means or under the scope of the entity”. This provision specifically refers to measures that are adopted after the criminal offence has been committed. The question therefore appears to be, what effects, if any, will a corporate crime prevention program have that was in place before the crime was committed? The current SCC provisions do not provide a clear answer to this question.
Secondly, as mentioned above, corporate criminal liability arises when an employee, agent or associate, who is under the organisation’s management, commits a crime for its benefit as a consequence of “not having been appropriately monitored”. Therefore, it can be concluded that if the subordinate individual committed the crime despite him or her being “appropriately monitored” (this means that the crime was committed by evading corporate controls), the entity should not be deemed criminally liable even though the crime committed was to its benefit. However, it cannot be concluded definitively from the text of the law that the concept of “appropriate control” equates to that of corporate criminal compliance (i.e., corporate crime prevention and detection plans).
It is difficult to conclude from this that the SCC imposes a legal duty on organisations to implement programs to prevent and detect criminal conduct and, therefore, provides for an affirmative defence, although it does at least appear to positively value procedures that are put in place to prevent crime (in this case, bribery).
In other words, Spanish companies, UK or other multinational subsidiaries operating in Spain that implement crime prevention and detection programs, or other similar compliance measures, will be showing a degree of diligence that is most likely more than that legally required given that there are hardly any statutory provisions expressly dealing with this matter.
Shaping adequate corporate procedures
A key area of uncertainty in Spain is the outline of crime prevention procedures. There is no regulation, provision or statute stating how organisations should shape their compliance programs, what their scope and extent should be or what specific measures, structures or procedures must be implemented by the company to prevent bribery and other criminal conduct. Spanish legislators made no reference to this matter in the 2010 amendment of the SCC.
Moreover, the Spanish government has not issued basic guidelines or performance standards for organisations on how to develop effective corporate anti-corruption policies, as the UK did with the Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing published by the Ministry of Justice.
This makes it difficult to analyse compliance in the context of corporate criminal liability arising from bribery offences since, strictly speaking, there are no specific regulations or statutes.
In addition, it remains to be seen how enforcement authorities will face and address this issue taking into account (i) the lack of clarity in the law, and (ii) the trend among Spanish prosecutors and courts to issue outcome-based judgments; if the crime was committed, this is proof that the prevention procedures in place were not effective. This contrasts remarkably with the UK enforcers’ approach: according to the Bribery Act 2010 joint prosecution guidance, “a single instance of bribery does not necessarily mean that an organisation’s procedures are inadequate”.
Under the current circumstances, it cannot be concluded that the implementation of bribery prevention procedures by Spanish companies or UK Spanish subsidiaries will ensure full exoneration from corporate criminal liability for crimes committed by associated persons (in the case of crimes carried out by senior managers, liability tends to be of a strict nature in both jurisdictions).
However, it is not possible to fully discard exoneration where effective anti-corruption procedures for associated persons can be proved, since Spanish courts have a substantial margin for interpretation.
Despite the uncertainties, the establishment and enforcement of programs to prevent and detect bribery within organisations operating in Spain must be deemed positive, desirable and necessary.
Spanish lawmakers are therefore sending a clear message with this new area of criminal liability, namely, that they are seeking a major shift in the conduct of commercial organisations, a shift whereby ethics regulate the corporate structure, production processes, market performance and investment of profits and, beyond these ethics, there is an increased risk of being held criminally liable if these mechanisms are not incorporated.
Taking into account the significant similarities between British and Spanish substantive regulations on bribery offences, the implementation in Spanish organisations of preventive procedures inspired by the six principles set out in the UK Bribery Act’s Guidance (i.e., proportionate procedures, top-level commitment, risk assessment, due diligence, communication and monitoring/review) and recommendations (on, for example, facilitation payments, gifts, hospitality and promotion expenditures) would appear to be highly advisable.