Bribery Act 2010 - what you should be aware of

The Bribery Act 2010 comes into force on 1 July 2011. This article considers its impact on businesses, and some of the steps they should take to comply with it.

The Bribery Act 2010 ("the Act") was designed to make the UK's complex laws on bribery and corruption more understandable. However, after members of the business community complained that parts of the Act were too widely drawn and open to interpretation, the Ministry of Justice has published detailed Guidance to help businesses consider what steps need to be taken to avoid breaching the Act.

What is "bribery"?

Broadly speaking, the Act defines bribery as a situation where an advantage (whether financial or otherwise) is offered, given or promised in order to induce or reward the improper performance of a function or activity. The acceptance of the advantage itself can also constitute improper performance. It is not only the person that offers the bribe who can be found liable under the Act. If a person bribes another intending to retain business or an advantage in the conduct of business for the organisation, the organisation itself will also be liable under the Act. It does not matter whether the organisation knew of the associated person's activities or not, it will be seen to have failed to prevent such activities unless it can show it had "adequate procedures" in place.

Extra-Territorial Reach

It is not only UK businesses that will feel the impact of the Act. Foreign companies that carry on any part of a business in the UK can also be prosecuted. "Part of a business" is not defined, although the Guidance offers some help. For example, a French yacht builder has a UK subsidiary. The French company appoints a third party to facilitate business in South America. That third party pays a bribe to a local official. Irrespective of whether the French company or UK subsidiary were aware of the actions of the third party, or whether the UK subsidiary receives any benefit, the French company could be liable under the Act for failing to prevent bribery. The French company is caught by the Act simply because it has a UK subsidiary. The UK subsidiary may also be liable under the Act if a person or company associated with it is involved in bribery. In addition, any foreign nationals working for the UK subsidiary and who are therefore considered to be "ordinarily resident" in the UK will be in breach of the Act if they pay or receive a bribe.

Adequate Procedures

A business can defend itself from an accusation of bribery if it can demonstrate it had adequate procedures in place to prevent it, and so can legitimately attribute the bribe to a "rogue element" in the organisation. "Adequate procedures" is not defined in the Act, but the Guidance gives 6 fundamental principles for businesses to adopt to show it had adequate procedures in place. They are:

1.    Proportionate procedures: A business needs to undertake a proportionate response to the risks it is exposed to. For instance, a company with overseas operations in a high-risk sector will need proportionately more procedures than a UK-only business in a low-risk sector. High-risk sectors would include financial services, construction, defence and energy sectors such as oil and gas.

2.    Top Level Commitment: The managers, directors or partners in the business must show effective leadership. This "top down" approach is designed to develop a culture within the organisation that will not tolerate bribery. There will need to be widely-publicised statements as to the consequences of being involved in bribery. Larger organisations should consider giving a senior manager responsibility for the anti-corruption programme, who will report to the board on such matters.

3.    Risk Assessment: Related to the first point, a business should monitor the potential bribery risks it faces in the sector and location in which it operates. The larger the organisation and further their territorial reach, the greater the risk assessment that will need to be undertaken. As an example, businesses should look at each country it does business in and risk assess each one for potential corruption on an individual basis.

4.    Due Diligence: A commercial organisation needs to understand who does business on its behalf, and how that business is undertaken. This is because it will be the one that is criminally liable if it fails to prevent bribery committed by an "associated person." Businesses will need to monitor agents, intermediaries, joint venture partners and other third parties before and after their appointment, and ensure any monitoring is ongoing.

5.    Communication (including training): The policies and procedures introduced by the business should be clear, practical and accessible, and cover all areas of the business from the shop floor to the boardroom. The anti-corruption policy should also extend to third parties and other associated persons. Businesses should have clear guidance on areas such as gifts and hospitality and what to do if a colleague or third party is suspected of bribery.

6.    Monitoring and Review: It is not enough for the anti-corruption policy to be printed out only to collect dust. The business must be able to prove it regularly monitors and reviews the suitability of its procedures, and adapts them when the business changes. It will need to allocate responsibilities, such as having an anti-corruption officer at board-level. There will need to be effective training of staff on what they should be aware of, including "dos and don'ts." This training can be done online if the business has an intranet site. Businesses in multiple locations may need to employ translation services for its anti-corruption policy. If one company acquires another that does at least part of its business in the UK, then it will need to ensure the acquired company complies with all their anti-corruption policies and procedures as well.

Corporate Hospitality
The offences of bribing public officials and failing to prevent bribery were originally a concern for business leaders, who felt the wording in the Act was wide enough to include the offering of hospitality to their clients. However, the Guidance indicates a permissive attitude towards corporate hospitality. As the foreword states, "no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix." Flights, airport to hotel transfers, hotel accommodation, fine dining and tickets to an event for a foreign public official and their spouse are unlikely to raise an inference, so long as there is a "business rationale" behind it. However, businesses should be cautious, since the more lavish the hospitality, the greater the inference will be that it is intended to influence the granting of business or business advantage in return.
The UK however, continues its zero-tolerance policy against "facilitation payments" to foreign public officials, and will not make a distinction between them and bribes.

Ashfords Can Help
Any business operating in the UK, either fully or partly, will need to show it has adequate procedures in place to prevent bribery. There is no one-size-fits-all approach to compliance, so businesses will need to tailor their anti-corruption policy to their business in an appropriate way. Ashfords can offer you advice on how to effectively implement these procedures and roll them out across your organisation.

Jonathan Hadley-Piggin
E: j.hadley-piggin@ashfords.co.uk
T: +44 (0) 1392 33 3990 F: +44 (0) 1392 33 6990

Rachel Stebbing
E: r.stebbing@ashfords.co.uk
T: +44 (0) 1392 33 3985 F: +44 (0) 1392 33 6985

Ashfords LLP is regulated by the Solicitors Regulation Authority.  The information in this note is intended to be general information about English law only and not comprehensive.  It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.  Links to other sites and resources provided by third parties are included for your information only.  We have no control over the content and accept no responsibility for them.