By Anna Birtwistle, CM Murray LLP, London
After having its implementation delayed a number of times, the Bribery Act 2010 (the “Act”) finally came into force on 1 July 2011 and replaces the UK’s antiquated anti-bribery laws which dated back to the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Acts 1906 and 1916 and various common law offences. Ironically, having long been criticised, the UK has, some would argue, ended up with the toughest anti-bribery law in the world.
The new offences
In summary, the Act introduces four categories of offence:
(1) Offering, promising or giving a bribe to another person (section 1);
(2) Requesting, agreeing to receive or accepting a bribe from another person (section 2);
(3) Bribing a foreign public official (section 6); and
(4) Failure by organisations to prevent bribery: the “Corporate Offence” (section 7).
The Corporate Offence
The so called “corporate offence” is undoubtedly the most significant departure from the UK’s previous law. Under section 7, a ‘commercial organisation’ (the definition of which includes body corporates, LLPs and general partnerships) will be liable for prosecution if a person associated with it bribes another person with the intention of gaining or retaining a business advantage.
The wide definition of “associated person” has attracted significant criticism; in effect, any person can be deemed to be “associated” with a company if that person is performing services for, or on behalf of, the company e.g. employees, agents, subsidiaries and even, potentially, contractors and joint venture partners.
The offence is a strict liability offence, meaning that there is no need to show any knowledge or element of intent by the commercial organisation that an act of bribery be committed by the associated person.
Corporate hospitality
Perhaps the most vocalised criticisms of the Act have been in the context of its impact on corporate hospitality and gift giving.
Whilst the Act fails to provide any financial thresholds setting out what will and will not amount to a bribe, the Serious Fraud Office (SFO), the main prosecutor of the Act, has made quite clear that reasonable and proportionate expenditure will not be caught.
The motivation behind offering the corporate hospitality is the essential element in differentiating between what will and will not amount to an offence under the Act: in order to make a case, the prosecution is required to prove that the hospitality conferred was intended to bring about improper performance of a function or activity and it follows that the more lavish the hospitality, the more likely it is to be inferred that such intention is apparent.
Hosting a client event following a successful transaction is unlikely to be seen as rewarding improper conduct. Similarly, taking potential clients to a sporting event with the intention of building relationships in a less formal context is unlikely to be seen as an attempt to induce improper conduct. At the other extreme, however, flying a key client to the Maldives for a private family holiday may be interpreted differently.
Jurisdictional reach of section 7
Internationally, the Act has been awaited, justifiably, with some trepidation. The section 7 offence is broad enough to cover acts committed by associated persons anywhere in the world and notwithstanding that the associated person has no connection with the UK whatsoever. Likewise, the commercial organisation in question does not have to be incorporated or formed in the UK and merely has to carry on some or part of its business in the UK to fall within scope.
The Adequate Procedures defence
The only defence available to a commercial organisation will be for it to demonstrate that it had adequate procedures in place to prevent the commission of bribery.
The Government Guidance sets out six key principles intended to guide commercial organisations in respect of putting adequate procedures in place, these are as follows: proportionality, top level commitment, risk assessment, due diligence, communication/training and monitoring and review.
Importantly, it is recognised that bribery prevention procedures should be proportionate to risk and it is noted that where commercial organisations have entirely domestic operations, as a general proposition, they will face lower risks of bribery than those operating in foreign markets.
Penalties for section 7 offence
In addition to reputational damage, the potential penalties for commercial organisations charged with the corporate offence include:
(1) an unlimited fine;
(2) potential discretionary debarment from public procurement under he UK’s implementation of the EU Procurement Directive (2004/18/EC);
(3) Confiscation Orders under the Proceeds of Crime Act 2002;
(4) Director disqualification order under the Company Directors Disqualification Act 1986 resulting in potential disqualification of up to 15 years.
Practical Steps
Some practical steps that employment lawyers advising organisations carrying on business in the UK might want to suggest to their clients are as follows:
Risk analysis:
(1) Checking whether the countries in which the company does business are at a high risk of bribery (for example by looking at the corruption index published by Transparency International).
(2) Analysing the business sectors in which the company is working to assess whether it might be at a high risk of bribery (for example oil and gas, financial services and pharmaceutical sectors).
Due diligence:
(1) Conducting background research on the business partners.
(2) Checking whether suppliers, agents and contractors have anti-bribery and corruption policies in place.
(3) Providing for the company’s contracts to allow for immediate termination where its anti-bribery policy is contravened. Ensuring that payment terms are clear and that the service being provided is properly identified.
Policies, procedures and training:
(1) Ensuring that anti-bribery policies are adequate and contain a clear statement prohibiting bribery in any form and providing for employment contracts to be immediately terminated for breach of those policies.
(2) Considering whether whistleblowing policies need to be updated to take account of bribery explicitly.
(3) Considering whether specific gift and hospitality policies should be put in place (including a log of all gifts and hospitality given and received).
(4) Providing training on policies to key staff, particularly managers and those employees whose roles make them potentially susceptible to acts of bribery.
The new offences
In summary, the Act introduces four categories of offence:
(1) Offering, promising or giving a bribe to another person (section 1);
(2) Requesting, agreeing to receive or accepting a bribe from another person (section 2);
(3) Bribing a foreign public official (section 6); and
(4) Failure by organisations to prevent bribery: the “Corporate Offence” (section 7).
The Corporate Offence
The so called “corporate offence” is undoubtedly the most significant departure from the UK’s previous law. Under section 7, a ‘commercial organisation’ (the definition of which includes body corporates, LLPs and general partnerships) will be liable for prosecution if a person associated with it bribes another person with the intention of gaining or retaining a business advantage.
The wide definition of “associated person” has attracted significant criticism; in effect, any person can be deemed to be “associated” with a company if that person is performing services for, or on behalf of, the company e.g. employees, agents, subsidiaries and even, potentially, contractors and joint venture partners.
The offence is a strict liability offence, meaning that there is no need to show any knowledge or element of intent by the commercial organisation that an act of bribery be committed by the associated person.
Corporate hospitality
Perhaps the most vocalised criticisms of the Act have been in the context of its impact on corporate hospitality and gift giving.
Whilst the Act fails to provide any financial thresholds setting out what will and will not amount to a bribe, the Serious Fraud Office (SFO), the main prosecutor of the Act, has made quite clear that reasonable and proportionate expenditure will not be caught.
The motivation behind offering the corporate hospitality is the essential element in differentiating between what will and will not amount to an offence under the Act: in order to make a case, the prosecution is required to prove that the hospitality conferred was intended to bring about improper performance of a function or activity and it follows that the more lavish the hospitality, the more likely it is to be inferred that such intention is apparent.
Hosting a client event following a successful transaction is unlikely to be seen as rewarding improper conduct. Similarly, taking potential clients to a sporting event with the intention of building relationships in a less formal context is unlikely to be seen as an attempt to induce improper conduct. At the other extreme, however, flying a key client to the Maldives for a private family holiday may be interpreted differently.
Jurisdictional reach of section 7
Internationally, the Act has been awaited, justifiably, with some trepidation. The section 7 offence is broad enough to cover acts committed by associated persons anywhere in the world and notwithstanding that the associated person has no connection with the UK whatsoever. Likewise, the commercial organisation in question does not have to be incorporated or formed in the UK and merely has to carry on some or part of its business in the UK to fall within scope.
The Adequate Procedures defence
The only defence available to a commercial organisation will be for it to demonstrate that it had adequate procedures in place to prevent the commission of bribery.
The Government Guidance sets out six key principles intended to guide commercial organisations in respect of putting adequate procedures in place, these are as follows: proportionality, top level commitment, risk assessment, due diligence, communication/training and monitoring and review.
Importantly, it is recognised that bribery prevention procedures should be proportionate to risk and it is noted that where commercial organisations have entirely domestic operations, as a general proposition, they will face lower risks of bribery than those operating in foreign markets.
Penalties for section 7 offence
In addition to reputational damage, the potential penalties for commercial organisations charged with the corporate offence include:
(1) an unlimited fine;
(2) potential discretionary debarment from public procurement under he UK’s implementation of the EU Procurement Directive (2004/18/EC);
(3) Confiscation Orders under the Proceeds of Crime Act 2002;
(4) Director disqualification order under the Company Directors Disqualification Act 1986 resulting in potential disqualification of up to 15 years.
Practical Steps
Some practical steps that employment lawyers advising organisations carrying on business in the UK might want to suggest to their clients are as follows:
Risk analysis:
(1) Checking whether the countries in which the company does business are at a high risk of bribery (for example by looking at the corruption index published by Transparency International).
(2) Analysing the business sectors in which the company is working to assess whether it might be at a high risk of bribery (for example oil and gas, financial services and pharmaceutical sectors).
Due diligence:
(1) Conducting background research on the business partners.
(2) Checking whether suppliers, agents and contractors have anti-bribery and corruption policies in place.
(3) Providing for the company’s contracts to allow for immediate termination where its anti-bribery policy is contravened. Ensuring that payment terms are clear and that the service being provided is properly identified.
Policies, procedures and training:
(1) Ensuring that anti-bribery policies are adequate and contain a clear statement prohibiting bribery in any form and providing for employment contracts to be immediately terminated for breach of those policies.
(2) Considering whether whistleblowing policies need to be updated to take account of bribery explicitly.
(3) Considering whether specific gift and hospitality policies should be put in place (including a log of all gifts and hospitality given and received).
(4) Providing training on policies to key staff, particularly managers and those employees whose roles make them potentially susceptible to acts of bribery.
