Dozens of foreign companies with London listings may be exempt from new anti-corruption laws, Ken Clarke has confirmed, a disclosure that will anger investors keen to preserve the integrity of London’s markets.
The justice secretary, who publishes guidelines today to companies on how to avoid falling foul of the Bribery Act, said a London listing did not automatically mean a company would have to abide by the new law.
“An African [company] or whatever listed on Aim will not in itself be covered by the act,” Mr. Clarke told the Financial Times in an interview. “The jurisdiction only extends to companies carrying on a business in the UK and I can’t see why investors would be terribly affected by whether the UK Bribery Act 2010 covers [a company] or not.”
The law, passed in April last year, will come into force from July after long delays in the wake of business complaints that the guidelines were confusing, especially in the area of corporate entertaining.
“The ultimate aim of this legislation is to make life difficult for the minority of organizations responsible for corruption, not to burden the vast majority of decent and law-abiding businesses,” writes Mr. Clarke in the FT.
While companies are likely to welcome clearer guidelines on corrupt practice, the decision by Mr. Clarke not to clarify the scope of the act will disappoint institutional investors. It will be left to the courts to decide whether a company falls under the jurisdiction of the new law.
F&C Investments, Aviva and Newton Investment Management have all made clear that as providers of capital to companies, they are concerned at what they describe as “the carve-out” of overseas companies listed in London.
Alistair Graham, partner at White & Case, said the issue of whether overseas companies listed in London was key to the law. “The Ministry of Justice’s guidance to leave it up to the courts to decide is not what businesses want to hear. When faced with a new and game-changing piece of legislation, businesses need as much clarity as possible.”
But many in industry are likely to be happier than the investment community, given that two of the three items on their wish list have been dealt with by Mr. Clarke. The guidelines make clear that corporate hospitality will no longer be under scrutiny.
“Under this law no one is going to try to stop businesses taking clients to Wimbledon or a Grand Prix,” said Mr. Clarke. The guidelines also spell out for companies what the boundaries of their liabilities are when it comes to foul play by suppliers and other third parties.
But the CBI’s call to change the rules of facilitation payments has not been heeded by Mr. Clarke, leaving employees who pay money in extreme situations to avoid injury, imprisonment or worse still open to prosecution. But Mr. Clarke played down business concerns, arguing that such cases were unlikely to make it into court. “I can’t imagine that anyone would think it was in the public interest to prosecute.”