Bribery Act 2010: an update

Updated April 2011

Two sets of guidance were issued on 30 March 2011. The first, by the Ministry of Justice (MoJ), outlines the procedures businesses will need to take to prevent bribery. The second, by the Serious Fraud Office (SFO) and Director of Public Prosecutions (DPP), outlines the factors to be taken into consideration when deciding whether or not to prosecute. This note deals with both because the MoJ Guidance is simply that, guidance, and can be revised at any time. It is the SFO and DPP who will decide who and when to prosecute.

Key points

• Timing: the Act comes into force 1 July 2011
• Non territorial: overseas activities by a UK organisation, anywhere, remain within the remit of the SFO and DPP. See comments below in relation to overseas companies.
• Adequate procedures: guidance given on what might constitute adequate procedures to form the basis of a defence to the new corporate offence of failure to prevent bribery. This is discussed in more detail below.
• Gifts and hospitality: "hospitality or promotional expenditure which is reasonable, proportionate and made in good faith will not be penalised". In order for hospitality to be considered bribery, the prosecution will need to show that it was given with the intention to induce improper conduct from the other party with regard to their business, trade or profession.
• Facilitation payments: outright ban. However, under SFO/DPP guidance, it is unlikely to be in the public interest to prosecute for one off small payments, payments made under duress or if the payment came to light as result of a proactive approach involving self-reporting.
• Overseas companies: organisations without a “demonstrable business presence” in the UK will not be caught by the Act. A non-UK company listed on the stock exchange is not automatically caught by the Act. However, there may be other business connections and overseas businesses should factor these in.
• Liability for third parties actions: the Guidance focuses on supply chains, joint ventures and subsidiaries and provides useful clarification, but the definition of an "associated person" is still very wide.
• Debarment from public contracts: Debarment from government contracts if convicted of a failure to prevent bribery will be a discretionary rather than mandatory outcome. The Government has said that relevant regulations will be amended to reflect this but this is unclear. This will not affect EU Public Procurement work which permanently excludes any organisation convicted of a corruption offence.

Adequate procedures

The Act creates a new strict liability offence for failure of an organisation to prevent bribery by persons "associated" with it. An associated person has a wide definition and may include employees, agents, subsidiaries, suppliers, joint venture partners and franchisees. But commercial organisations will have a defence if they have "adequate procedures" in place to prevent bribery.

The MoJ guidance is aimed at assisting organisations understand what will constitute adequate procedures. Adequate procedures need to be built around six principles of compliance:

• Proportionate Procedures;
• Top-Level Commitment;
• Risk Assessment;
• Due Diligence;
• Communication (including training); and
• Monitoring and Review.

It is up to each organisation to implement policies and procedures that will minimise bribery risk, taking into account the main risk areas of the organisation and its global presence. The higher the risks the more an organisation will need to do.

Ensuring the above criteria are properly followed and implemented will help organisations show they have taken the bribery risk seriously. For many companies this will mean

• new policies;
• new or improved training throughout the organisation (including training for all employees and intermediaries); and
• a more thorough approach to tackling the risk of bribery in the UK and abroad.

These should all be approved and led at a board level.

Example procedures

The MoJ guidance provides a number of useful case studies which give an indication of the sorts of procedures that may be required.

Small businesses operating solely within the domestic market

• Having in place an anti-corruption policy and communicating this to employees and third parties including consultants
• Undergoing due diligence/bribery risk assessments to ensure all potential arrangements are in line with the Act and, where necessary, including terms to ensure compliance in contractual arrangements
• Providing staff training and supervision including issuing internal guidance in relation to the provision of hospitality and promotional expenditure
• Regular monitoring, review and evaluation of internal procedures
• Giving staff the opportunity to air suspicions of bribery
• Incorporating assessment of bribery risk where considering market expansion

Medium/large businesses operating in both domestic and foreign markets

• Seeking legal advice on the distinction between properly payable fees and facilitation payments and incorporating procedures relating to facilitation payments into contractual arrangements
• Putting in place binding commitments between businesses forming joint ventures to comply with bribery laws. Also putting in place measures to ensure compliance, for example in relation to gifts and hospitality, procurement, contracts training and record keeping
• Where local agents are required, researching prospective agents and having a clear statement of the nature of services offered, fees and remuneration within any contract
• Making sure associated persons have their own anti-bribery policies in force
• In relation to charitable donations, adopting policies to ensure relationships with charitable organisations are conducted in a transparent and open manner.

Summary

The MoJ guidance may have limited weight in the English courts; the guidance does not have the force of law and can be revised at any time. The SFO/DPP guidance gives a degree of clarity around the day to day issues of gifts and hospitality but, ultimately, it's all about how it is interpreted by prosecutors and the courts. There remains a risk they will take a stricter line on issues like “associated persons”, "commercial organisation" and territoriality.

How can TLT help?

With three months to go, businesses should focus on conducting a risk assessment, implementing proportionate policies and procedures, training their staff and ensuring reporting/monitoring procedures are in place.

TLT regularly advises clients on anti corruption issues. We can review any existing policies to ensure compliance with the Act or, if necessary, assist with drafting and implementing new polices and procedures including risk assessments, board level policy statements, and specific policies focussing on areas such as gifts and hospitality. We can also offer in-house training tailored to suit your business requirements.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2011. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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