Relations between companies and businessmen worldwide are often governed by contracts subject to English law. Bribery is – regrettably – common in worldwide business. A discussion as to how English civil law treats a bribe is therefore of relevance to the worldwide business community.
What is a Bribe?
In Petrotrade Inc v Smith  1 Lloyd’s Rep 486 para 16 David Steel J defined a bribe as follows:
"For the purposes of the civil law a bribe means the payment of a secret commission, which only means: (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that that person is acting as the agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person's agent."
The elements of a bribe are therefore:
The Consequences Of Bribery
If a payment or benefit is classified as a bribe:
If a principal discovers that their agent has been paid a bribe, they have the following rights.
Against The Agent
The principal can bring a claim against the agent to recover the bribe payment as either or all of money had and received, liability for profits, or as money held on a constructive trust. The principal will be able to trace into any asset bought with the bribe. These claims do not require the principal to show any financial loss. However, if the principal has suffered financial losses as a result of the bribe, these can be claimed as damages for fraud.
Against The Bribe Payer
The principal can rescind the underlying transaction (if rescission is still possible), and also may bring a claim in tort for the amount of the bribe. The briber is also considered to be jointly and severally liable in damages with the agent for fraud if the principal has suffered losses greater than the amount of the bribe. The briber may also be liable in tort for inducing the agent’s breach of contract, and/or in equity for assisting in the agent’s breach of fiduciary duty.
In claims involving fraud, breach of fiduciary duty and bribes, English law usually allows a claimant to “trace” what has become of funds which have been stolen or dishonestly appropriated rather than just recovering damages. Since the decision of the Supreme Court in FHR European Ventures LLP and others v Cedar Capital Partners LLC  UKSC 45 it is clear that a principal is entitled to trace into the proceeds of bribes and secret payments paid to a dishonest agent.
An aim of tracing is to ensure that corruption and dishonesty do not pay. This works by allowing a claimant to follow the value rather than the asset. If an asset changes hands, the claimant can decide whether to follow the original asset to the new owner, or else “trace” the original assets into the new asset. In practice, such claims often involve the purchase of property, as the London property market has performed well in recent years and has been a favoured destination for the proceeds of corruption and crime.
Consider the (hypothetical but plausible) scenario of a contract manager in a bank who took corrupt payments of US$1,000,000 from an IT company in return for ensuring that the IT company won a contract to develop new systems for the bank.