June 2011 - General - The Bribery Act 2010
Background
Businesses of all sizes which operate in the UK should be aware that the Bribery Act 2010 will come into force on 1 July 2011.
The enactment of the Bribery Act was controversial, with businesses concerned about the burden of yet more red tape and potential liabilities and the fact that the new measures may put them at an unfair disadvantage when competing for overseas work against non-UK companies.
This note summarises the key points arising for businesses.
New Offences
The Act creates several new criminal offences, which include:-
• Bribing another person (section 1);
• Requesting, receiving or agreeing to receive a bribe (section 2);
• Bribing a foreign public official (section 6); and
• the failure of a commercial organisation to prevent bribery (section 7).
The section 1, 2 and 6 offences can be committed by an individual or a company. If committed by a company with the consent or connivance of a senior officer of the company or a person purporting to act in such a capacity, that person is also liable to be prosecuted personally.
Any individual found guilty of a bribery offence can be fined up to £5,000, imprisoned for up to 10 years, or both. A company found guilty can be fined an unlimited amount and prevented from tendering for public contracts in the future.
Adequate Procedures
A business has a defence to the section 7 offence if it can demonstrate that it had in place adequate procedures designed to prevent anyone associated with it from undertaking bribery. In this context, businesses would be well advised to review their policies to ensure that this defence is available to them should the need arise.
Guidance
The Government has published Guidance on how organisations should conduct business so as to minimise the risk of prosecution for any of the bribery offences. The key themes within the guidance are set out below.
Jurisdiction
The Act does not just cover bribery offences committed in the UK.
Section 1, 2 or 6 offences committed outside the UK by an offender who, at the time of the offence, had a close connection with the UK may also be prosecuted here. An individual has a close connection with the UK if they are a British national or ordinarily resident in the UK. A business has a close connection with the UK if it is incorporated in the UK.
A company incorporated outside the UK would not be considered as carrying on a business in the UK by the mere fact that its securities are traded on the London Stock Exchange. Similarly, an overseas company with a UK subsidiary will not necessarily be liable for the independent acts of its subsidiary.
Associated Persons
A business is potentially liable under section 7 for the acts of any person associated with it.
Associated persons include employees, agents, subsidiaries and anyone else performing services for or on behalf of the business. This is a broad concept which will be determined by all the relevant circumstances. It may cover, on the facts, contractors or suppliers.
Six Principles
The Guidance sets out six principles to guide businesses towards implementing adequate procedures to prevent bribery (and thereby raise the section 7 defence).
The principles are intended to be flexible and outcome-focused, varying according to the different challenges faced by different businesses.
1. Proportionate procedures - businesses should put anti-bribery policies in place and implement them in a manner proportionate to the size, nature and complexity of their business and the type and nature of the persons associated with it. The policies and procedures should be clear, accessible and effectively enforced.
2. Top-level commitment - businesses should commit (from the top of the organisation downwards) to a zero-tolerance culture towards bribery and corruption. Senior managers need to take the lead in communicating the business’s anti-bribery stance, both internally and externally, and in developing anti-bribery procedures.
3. Risk assessment - businesses should carry out regular, documented assessments of the bribery risks they face. These risk assessments should be proportionate to the size and structure of their business and to the nature, scale and location of their work. External risk factors may include business activities in a perceived high risk country or using intermediaries in transactions with foreign public officials. Internal risk factors may include deficiencies in employee training, a bonus culture that rewards excessive risk taking or a lack of clarity in hospitality or promotional expenditure policies.
4. Due diligence - businesses should carry out due diligence on the persons performing services on their behalf in a proportionate and risk-based manner. This covers employees and associated persons.
5. Communication (including training) - businesses should ensure their anti-bribery policies and procedures are embedded in their organisation and are communicated effectively, both internally and externally. The content and extent of this communication and the training required for employees should be proportionate according to the size and nature of the business and the risks faced.
6. Monitoring and review - businesses should keep their anti-bribery policies and procedures under review and improve them as necessary. This will involve regular monitoring as well as specific reviews in response to external events, such as an incident of bribery or a change of government in a country in which the business operates. Internal financial control mechanisms may help to demonstrate how well the anti-bribery measures are working.
Corporate hospitality and promotional expenditure
The new bribery offences are so widely drafted that it was feared that businesses might be exposed to prosecution simply for taking a supplier to a dinner or a sporting event.
The Guidance accepts that this is a major and legitimate area of concern. It stresses that bona fide, reasonable and proportionate hospitality and promotional expenditure which aims to improve an organisation’s image or commercial relations is an established and important part of doing business, and confirms that the Act is not intended to criminalise such behaviour.
The main factor which may push hospitality over the edge into bribery is intent. Did the business intend the hospitality to achieve an improper advantage for itself? The test is what a reasonable person would think. A business inviting clients to, for example, an Olympic event or a dinner or a party in order to cement good relations generally or celebrate a particular transaction is highly unlikely to fall foul of this test.
To protect themselves, businesses should consider (in accordance with the six principles) issuing guidance on appropriate hospitality, gifts and expenditure. Any expenditure, given or received, should be fully and transparently documented. Senior management approval may be required over an upper limit. This guidance should also be communicated internally and externally.
Employers may also wish to amend their standard employment contracts and disciplinary and whistleblowing procedures to make express reference to bribery. Taking such steps as part of a response to the introduction of the legislation will improve the chances of a section 7 defence succeeding.
28 June 2011
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