News & publications
The Bribery Act 2010 – what's in it for you?- 20/05/2011
The Bribery Act, which comes into force on 1 July 2011, has filled many column inches and prompted much discussion and concern about its potentially far reaching effects for British businesses and foreign businesses doing business in the UK. So just what is all the fuss about?
The UK's existing law on bribery and corruption was much derided as being too weak, fragmented and out of step with modern business practice. The aim of the new Act, therefore, is to consolidate and strengthen those previous provisions by way of a clear and comprehensive anti-bribery code. The Act creates the following four main offences:
- Bribing another person: i.e. offering or giving a financial or other advantage with the intention of either: inducing a person to perform a “relevant function or activity” “improperly”; or to reward that person for such improper performance. Note that the bribe does not have to be accepted for the offence to be committed, offering it would be sufficient.
- Being bribed: i.e. receipt of a financial or other advantage intending that a “relevant function or activity” should be performed “improperly” as a result.
- Bribing foreign public officials: i.e. offering or giving a financial or other advantage to a foreign public official with the intention of influencing the foreign public official and obtaining or retaining business, where the foreign public official was neither permitted nor required by written law to be so influenced.
So far, so unsurprising. However the fourth main offence is completely new and remains the most controversial and intensely debated aspect of the Act. - Failure of commercial organisations to prevent bribery: i.e. failure to prevent a person "associated" with a relevant commercial organisation from committing one of the offences listed above with the intention to obtain or retain a business advantage for that organisation AND where the organisation cannot show that it had "adequate procedures" in place to prevent such acts.
Debate has centred principally on the potential breadth of this novel offence and the definitions of the key terms. “Associated person” includes a person who performs services for or on behalf of the organisation and is wide enough to include employees, agents and incorporated or unincorporated bodies and, potentially, suppliers. “Relevant commercial organisation” is a body or partnership which carries on a business or part of a business in the UK, irrespective of the place of incorporation or formation. Business is also widely drafted to include trades and professions.
This new offence marks a radical departure from the previous regime where a company would only be guilty of a bribery offence if very senior management (the directing mind(s) of the company) were involved. Now, however, the emphasis is on commercial organisations proactively taking the initiative to assess their individual risks of bribery arising, both internally and externally, and addressing those risks with proportionate anti-corruption procedures and in the creation of an "anti-bribery culture" from the top down.
The long arm of the law
All of the offences will have extra-territorial application and the Serious Fraud Office (“SFO”) is currently flexing its muscles, with threats of taking a “wide view” of its prosecuting powers and talk of enforcing the Act as a “high priority”.
The sanctions for committing an offence under the Act range from a prison sentence of up to ten years and/or a fine for individuals, and an unlimited fine for companies which fail to prevent bribery. In addition, if a Senior Officer (Director or Manager) consents to or connives in the commission of any of the above three offences, they will be personally criminally liable too (s.14 of the Act).
In an effort to assist companies to comply with the Act, the Ministry of Justice (“MoJ”) has recently published guidance providing much needed clarification on the factual scenarios likely to constitute the commission of an offence; and procedures likely to be "adequate" in defence of the controversial new failure to prevent bribery offences (the Guidance).
The Government's Guidance
In the context of "adequate procedures", the Guidance sets out six key principles for bribery prevention:
- Proportionate procedures;
- Top-level commitment;
- Risk Assessment;
- Due diligence;
- Communication (including training); and
- Monitoring and review.
The key points to note from the Guidance are set out in our recent ebulletin (The Bribery Act: Are you ready?). The Guidance emphasises throughout that the six Principles are flexible and outcome focused so that the size of the commercial organisation, the countries and environments it operates in and the nature of its business sector will all be key factors in risk assessment and any investigations brought by the SFO. The touchstone of the Guidance is that combating the risks of bribery is “largely about common sense, not burdensome procedures”, and the Ministry of Justice has explicitly stated that it does not anticipate many prosecutions.
Of further practical reassurance to all commercial organisations, following some high profile scaremongering about gifts of champagne possibly leading to imprisonment, reasonable corporate hospitality to meet, network and get to know your clients will not fall foul of the Act; so you don’t have to return those corporate tickets to the Olympics.
Implications
The implications of the Bribery Act will only become clear with time. If the application of the Act is consistent with the common sense approach of the Guidance, much of the current criticism will prove to have been overblown (for SMEs, at least). However, the application of the Act may change greatly as the Court has occasion to consider how to interpret and apply the offences. Much also rests on whether the SFO’s bite matches its bark, given its shrinking budget.
That said, however, in the face of uncertainty, commercial organisations should ensure that their procedures and practices are in order and compliant with the Act well in advance of its July implementation date. Please see our Fact Sheet for a summary of the key considerations under the Guidance.
Whether through inserting clauses throughout a business’ supply chain to prohibit bribery, or amending Employee handbooks to raise the profile of your organisation’s anti-bribery culture, the Manches team is on hand to steer you towards minimising risk and maximising profitability. Please contact Alex Fox, John Doherty or Tom Walker for assistance in assessing your business’ potential exposure under the Act.