A radical overhaul of bribery laws proposed today by the Law Commission could make British companies liable to prosecution for any corruption in their activities overseas. It would also usher in a new offence of bribing a foreign public official.

The reforms, expected to be implemented in the next parliamentary session, would go some way to meeting accusations that Britain is failing to tackle allegations of foreign corruption.

The changes to the existing “unclear” and “uncertain” law would make it easier for prosecuting authorities to pursue such cases as the abandoned corruption inquiry by the Serious Fraud Office into BAE Systems in Saudi Arabia.

The Law Commission, the Government's law reform watchdog, urges a new offence of bribing a foreign public official; and a second new offence to apply to companies of negligently failing to prevent bribery by an employee or agent.

At the same time, the law of bribery will be extended to cover foreign nationals who live in Britain and conduct their business here.

Jeremy Horder, the Commissioner leading the project, said: “The Government has been striving to find a solution to the problem with the law of bribery for some time. We believe we have found a workable and fair solution that will bring the law up to date.”

The Law Commission would scrap the distinctions made in the present law between public and private sectors with a single set of offences for both.

Law firms reacted positively. Neil Blundell, head of financial crime at Eversheds, welcomed the “effort to bring in laws that are easy to understand and rightly impact in the same way on the public and private sectors... This is an area we have been playing ‘catch up' for far too long. The US has been placing pressure on us to modernise.”

Jeremy Summers, regulatory partner at Russell Jones & Walker, said that the long-awaited report was a further sign of the way “the business sector continues to be specifically targeted by the criminal law”.

The new corporate offence, under which a company could be prosecuted if it negligently failed to prevent bribery by an employee or agent, provided a lower threshold - negligence - than the usual criminal test of “intent”, he said.

Companies will have a defence that they had adequate systems in place to prevent bribery. They also will not be liable to prosecution where bribery is not a breach of the law where they indulge in such practices.

A Ministry of Justice spokesman said the the Government was giving “careful consideration” to the recommendations. It confirmed that its forthcoming draft would “be informed by the Law Commission's work”, but added that it was too early to confirm precise contents of the Bill.

Alistair Graham, a partner a White & Case, said that for years international companies, foreign governments and bodies such as the OECD and Transparency International had "rightly been critical of the antiquated and apathetic approach the UK has taken to corruption and bribery".

But the proposals heralded a "dramatic change" in the UK's approach and were a "significant step" in bringing forward the prospect of effective new legislation replacing the patchwork of common law and statute dating back over 100 years.

With the pledge by Richard Alderman, Director of the Serious Fraud Office, to allocate substantial new resources to tackling corruption and to adopt a new approach to enforcement at the SFO, it appeared that effective enforcement would become a reality, he said.

It was also time for UK companies to take note of the way in which Balfour Beatty reached an agreement with the SFO in October relating to past issues." Such companies will recognise that turning a blind eye to matters of corruption is no longer an option."

He added: "In the coming months it will also be interesting to see if these proposals, combined with the SFO’s new focus on self-reporting and non-prosecution remedies, will result in the UK adopting a more hard-line, US-style approach to dealing with bribery and corruption."

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