F&C warns German firms about UK bribery law

German companies, particularly the Mittelstand, are at risk of legal action from Britain’s Serious Fraud Office if they engage in bribery, as UK anti-corruption law taking effect this week has extra-territorial reach, says investor F&C.

George Dallas, director of governance at the £106bn asset manager, says the UK Bribery Act applies to UK companies, and all foreign companies with “business relations and commercial presence” in the UK.

The law holds liable companies whose executives commit bribery, even in third countries, or those judged to have inadequate anti-bribery procedures.

Dallas said within corporate Germany, the Mittelstand was “potentially at the greatest risk, because they might be less aware of bribery being a business risk, and may have fewer resources to scan and monitor this”.

The law takes effect on Friday, at a time ever more European companies including mid-caps tap into growth markets – where payments might be regarded as normal – because consumption in developed markets has dried up.

More companies have approached F&C since the crunch over concerns involving bribery, Dallas said.

“I do not think it is good for companies to be in fear [of the Act] but to have a healthy respect for the law is good.” Companies admitting bribery to authorities may escape with lesser punishments, he said.

Dallas voiced concern, though, the UK SFO may lack resources to pursue all leads, so would rely on whistleblowers, and companies providing information about corrupt rivals. The SFO would take some action on companies soon after the new law takes effect, to show it has teeth, he predicted.

Companies convicted could be fined, miss out on government contracts, and suffer serious damage to their reputation and severe distraction of management as they faced up to sanctions, Dallas said.

“There is a moral issue at stake, but as investors while I think we have morals, too, there is also the fact this is a business risk and one you have to manage because the consequences of getting it wrong are getting bigger and bigger.

“Part of our engagement with companies is to make them aware of this and ask them what they are doing.” F&C engages with German companies on business practices, both as a bond- and equity holder, and on behalf of €8.4bn German clients have in its responsible engagement overlay program.

F&C does not automatically divest from all companies that mention bribery, but Dallas said he would have “significant concerns” over standards in other parts of a business involved in corruption.

David Walker

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