Check out the competition

The Bribery Act 2010, which came into force on 1 July, introduces a consolidated scheme of offences modernising and criminalising bribery in both the private and public sectors.

The Act has attracted a great deal of publicity, particularly the new offence of 'failure by a commercial organisation to prevent bribery', applicable both to UK companies and partnerships and to overseas entities which carry on business in the UK. An organisation will be liable for a bribe paid on its behalf, anywhere in the world, unless it can demonstrate that it had implemented 'adequate procedures' designed to prevent bribery. In addition to its own directors and employees, third parties performing services for or on behalf of an organisation can trigger liability.

The intention is to require commercial organisations to assess the bribery risks they face, and to implement, maintain and enforce policies, systems and controls designed to deter and detect bribery; and to make it easier to prosecute those that do not. The Serious Fraud Office will take the lead in enforcing the Bribery Act, and has said that bribery investigations will be a priority.

Unearthing corrupt practices

Meaningful efforts to investigate and prosecute bribery offences mean that evidence of bribery and other corrupt practices by companies may increasingly be unearthed, and put into the public domain. That could give companies that have lost bids or contracts sufficient evidence to contemplate making a claim against a bribing competitor.

Such claims have already been brought in the United States, where there has been vigorous enforcement of the Foreign Corrupt Practices Act (FCPA), a statute outlawing corrupt payments made to foreign public officials to win or retain business. Compass Group, the world's largest catering firm, was investigated for allegedly bribing United Nations officials to secure contracts for the provision of food rations to peacekeeping forces. Those investigations triggered private lawsuits brought by aggrieved competitors who claimed to have lost business because of the corrupt payments. The claims were reportedly settled for $74m.

Assuming it has sufficient evidence, what cause of action could a claimant deploy? There are a number of candidates. Unlawful means conspiracy is a promising one. A claimant must demonstrate injury as a result of an unlawful act where two or more people have combined to cause the injury. This fits: a bribe obviously requires someone to pay a bribe and someone to receive it. Both are conspirators.

However, it is necessary to show the briber intended to injure its bidding competitors. That may be problematic as it could be argued that the briber's only intention was to enrich itself. However, the bribe is necessarily injurious to the parties excluded from winning the contract as the result of its payment. The gain to the briber is inseparably linked to the damage to the claimant. There are a number of conspiracy cases where judges have decided that the necessary intention to injure is present where the inevitable damage caused to the claimant is the means to the objective of personal enrichment.

Implied contract

Contract law may also assist. Where a formal tender process is followed, there may be an implied contract between the customer and bidders that tenders will be considered honestly, impartially and on their merits. The payment of a bribe would breach that implied contract. That could found a claim against the bribing competitor for wrongfully procuring the breach of contract.

It might be possible to extend this principle to informal bidding processes. There could even be an implied contract between bidders that each would tender on an honest basis. If that is right, payment of a bribe would be an actionable breach of contract.

In all cases, a claimant will have to demonstrate causation and loss. While bidding expenses may be sought, the bigger prize is likely to be damages assessed as profits that could have been earned from the contract. A claimant would need to establish that it would have won the contract in a fair process. It may not, however, be necessary to establish this on the balance of probabilities, as the claim could be put as loss of a chance to win the tender and earn the profits. This requires a claimant to show more than a fanciful prospect that it would have been awarded the contract. If this relatively low threshold is passed damages will be calculated as a proportion of the likely profits, with the multiplier reflecting the likelihood that the contract would have been won.

Companies caught paying bribes face a real prospect not only of criminal investigation, fines and settlements, but also the additional risk of having to compensate competitors deprived of the opportunity to make profits.