Bribery in Commercial Transactions

Background

Given the economic climate and the sanctions for bribery, many businesses need to consider what may amount to bribery, not only abroad but at home. The Scottish court recently had to consider this issue.

Lord Braid delivered his decision in the case of Oil States Industries (UK) Limited v “S” Limited and Lagan Building Contractors Limited (in administration) on 4th August 2022. Oil State’s claim was founded on an allegation that the award of a building contract to Lagan was procured by bribery; specifically, by the giving of bribes in the form of cash, and the provision of free building services, to Paul Galbraith. Mr Galbraith was a project manager employed by S, who ran the procurement process and whose decision it was to appoint Lagan. The court was asked to make a determination on whether there was a presence of bribery which influenced the procurement. S’ position was that it knew nothing of any bribes given to Mr Galbraith, who was by that time a former employee.

What is a bribe?

In determining the question of bribery, the court first had to consider the question of “What is a bribe”? Lord Braid looked to the English case of Airbus Operations Ltd v Withey [2014] EWHC 1126 (QB) and produced a concise summary for the components of a bribe as being: “(1) receipt of money or a valuable benefit (2) by a person who owes a fiduciary duty of loyalty to a principal with whom a donor wishes to transact business (3) which is kept secret from the principal and (4) which places the recipient in a position where his interest may potentially conflict with the fiduciary duty owed to his principal.”

The court concluded that there was no distinction between English and Scots law in the treatment of bribery, and that in both jurisdictions, it can be described as a free-standing cause of action, distinct from any cause of action arising out of fraud. This has two consequences. First, the court does not enquire into motive when considering a claim for bribery. Secondly, there is an irrebuttable presumption that the agent was influenced by the bribe.

The court then turned its focus to the evidence available in this case. While there was no direct first-hand evidence of any cash bribes having been paid (although there was direct evidence of the building works having been carried out and paid for by Lagan), the pursuer invited the court to hold the allegations of bribery proved on a combination of (a) circumstantial evidence surrounding the appointment of the second defender as building contractor, (b) the evidence of the building work and (c) hearsay evidence that bribes were paid. The judge ruled that the abundance of circumstantial evidence gave rise to a strong inference “not only that benefits were given to Mr Galbraith but that they induced him to award the contract ….”.

The final question was whether S was vicariously liable for Mr Galbraith’s actions in accepting bribes and for the subsequent loss to the pursuer. The judge concluded both Mr Galbraith and S owed a fiduciary duty of trust and confidence to the pursuer and in awarding the contract to Lagan, that fiduciary duty had been breached. He did, however, allow S to retain anonymity in reporting the case.

Employer Liability

This judgment sets out an important principle in relation to bribery as a cause of action in Scotland. In particular it serves as a reminder to employers that they should not only have a robust anti-bribery policy but that they should ensure it is being observed. If bribery is committed they may be held liable along with any rogue employee.