Described as "the toughest bribery legislation in the
world" by the Serious Fraud Office, the long awaited Bribery
Act 2010 is now due to come into force on 1 July 2011 and places a
greater burden on businesses than the current law on bribery.
The Act is fairly short but its far reaching scope should not be
underestimated.
Current Law
The existing law on bribery is contained in a combination of
statutes going as far back as the nineteenth century and of common
law. The existing law is considered to be both antiquated and
inadequate to deal with corruption in an increasingly global
market.
The Act will repeal the existing legislation and abolish the common
law offence. However, the Act will not have retrospective effect -
the existing law will still be around for many years and apply to
any activities occurring before the coming into force of the
Act.
The New Legislation
The Act creates four offences as follows:
(b) requesting, accepting or receiving a bribe (passive bribery)
(c) bribing a foreign public official
(d) failure by a commercial organisation to prevent bribery by its "associates"
Active Bribery and Passive Bribery
These general offences prohibit the following:
(ii) a request, agreement to receive or acceptance of a financial or other advantage with the intention that, as a consequence, a relevant function or activity should be performed improperly by the person receiving the bribe or by any other person.
The term "relevant function" includes any function of
a public nature or any activity connected with a business or
performed in the course of a person's employment or by or on
behalf of a body of persons (whether corporate or unincorporated),
where the person performing the function or activity is expected to
perform it in good faith, impartially or is in a position of
trust.
"Improper performance" is defined by reference to a
failure to perform a relevant function or activity in breach of a
relevant expectation, namely good faith, impartiality or a position
of trust. When determining the level of expectation, the test is
what a reasonable person in the UK would expect in relation to the
performance of the function or activity. It is worth noting that
the function or activity need not have any connection to the
UK.
Also, for passive bribery it is not necessary for a person to have
requested, agreed, received or accepted the advantage directly or
through a third party and, in some cases, it does not even matter
whether the person knows or believes that the performance of the
function or activity will be improper. For example, this will
be the case where:
(b) in anticipation or in consequence of a person ("A") requesting, agreeing to receive or accepting a financial or other advantage, a relevant function or activity is performed improperly by A, or another person at A's request or with A's assent or acquiescence.
Bribing a foreign public
official
This offence is committed if the person giving the bribe intends
to influence a foreign public official and intends to retain or
obtain business or an advantage in the course of business, where
the foreign public official is neither permitted or required by the
written law applicable to the foreign public official to be
influenced as such.
For the purpose of determining what is required or permitted by
local laws to which a foreign public official is subject to,
reference is to be made to the written law of that jurisdiction.
Customs and practices of a jurisdiction that do not form part of
the written law will not be taken into account.
Failure to prevent bribery
The offence of failure of commercial organisations to prevent
bribery by associated persons is a new offence and has important
implications for all organisations with a base in the UK. The
offence is one of strict liability and is committed if an
"associated person" is guilty of either (a) active or
passive bribery; or (b) bribing of a foreign public official. A
commercial organisation will be vicariously liable even where the
organisation was unaware of the activities by the associated
person. The only defence for commercial organisations is to
demonstrate that they had adequate procedures in place.
"Commercial organisation" will include any corporate or
partnership incorporated under UK law which carries on a business
or any other corporate or partnership, wherever incorporated, which
carries on business in the UK.
The definition of "associated person" is broad and means
any person who performs services for and on behalf of the
commercial organisation. The Act states that the capacity in which
the associated person performs its services does not matter and
that an associated person will include employees, agents and
subsidiaries. Importantly, the associated person does not need to
have a connection to the UK for commercial organisations to be
found guilty under the Act.
Adequate Procedures
It will be an absolute defence for a business charged under the new
offence of failing to prevent bribery if it can demonstrate that it
has "adequate procedures" in place. The meaning of
"adequate procedure" has not been defined in the Act,
although the government has recently published its long awaited
guidance on the procedures businesses should have in place.
The guidance sets out six general principles that businesses should
consider in their approach to preventing bribery. These
are:
(i) Proportionate procedures
Commercial organisations should have procedures to prevent bribery
that are proportionate to the bribery risks they face. The level of
risk an organisation faces will vary depending on the size and type
of organisation. Some procedures may be relevant to a certain set
of employees and perhaps not as much to other employees.
(ii) Top-level commitment
Senior staff members (whether directors or managers) should be
committed to establishing a zero-tolerance culture towards bribery
across the organisation.
(iii) Risk assessment
Commercial organisations must assess and understand the bribery
risks they face and maintain documentation to this effect.
(iv) Due diligence
Due diligence procedures should be proportionate to the risk
identified. The extent of due diligence will vary for each
organisation. The guidance indicates that in lower risk situations,
commercial organisations may determine that there is no need to
conduct much in the way of due diligence, while in higher risk
situations, due diligence can include conducting direct
interrogative enquiries, indirect investigations or general
research on associated persons.
(v) Communication (including
training)
Commercial organisations should ensure that anti-bribery policies
and procedures are embedded and understood throughout the
organisation through internal and external communication, including
training. Such communication and training should cover areas such
as decision making, financial control, hospitality and promotional
expenditure, charitable and political donations and penalties for
breach of the rules.
(vi) Monitoring and review
The bribery risks an organisation faces can change over time.
Commercial organisations must therefore institute monitoring and
review mechanisms to ensure compliance with the policies and
procedures and identify any issues as they arise.
As well as the above six principles, there are numerous other
actions organisations can legitimately take to prevent or mitigate
the risk of bribery, such as:
- inserting provisions into employment contracts and terms and conditions dealing with bribery
- having controlled bookkeeping, auditing and approval of expenditure
- procedures for disclosure of information on all transactions
- sanctions for breaching the organisation's bribery rules
- whistle blowing procedures
As the guidance points out, it is not a case of one size fits
all. Businesses are encouraged to carry out their due diligence now
and ensure they have adequate procedures in place to deter bribery.
Given the wide definition of "associated person" (which
can include contractors and suppliers if performing services on
behalf of a commercial organisation), it is important that any due
diligence carried out and procedures implemented are effective and
proportionate to the risks identified.
Corporate Hospitality
Before the publication of the guidance there was much speculation
about whether corporate hospitality may fall within the remit of
the Act. Much to the relief of many organisations, the Ministry of
Justice has recently confirmed that hospitality is not prohibited
by the Act.
As well as clarifying that the offering of tickets to sporting
events to cement good relations or enhance knowledge in the
organisation's field is not an offence (so long as it is
reasonable or proportionate), the guidance explains that in
deciding whether or not to prosecute, the Director of Public
Prosecutions or the Director of the Serious Fraud Office must
consider whether a prosecution is in the public interest.
Indeed in the run up to the London 2012 Olympics Games and with
tickets costing as much as £2,000, the guidance brings some
relief to those who have been lucky in the draw for tickets at the
Olympics, especially amongst the many businesses who consider such
sporting events as part and parcel of their marketing and public
relations agenda.
Businesses should still, however, err on the side of caution when
deciding whether to give away tickets for the Olympics or any other
prestigious event. This is on the basis that the government does
acknowledge that such expenditure can amount to bribery, if there
is an intention to gain a financial or other advantage.
Facilitation Payments
Unlike the US Foreign Corrupt Practices Act, which makes an
exception for small bribes (known as "facilitation
payments") to be paid to officials to speed up government
processes, the Act makes no such exception and any payments for
that purpose, no matter how big or small or whether accepted under
local custom, will be an offence.
Thus, businesses and their associated persons should be aware that
the fact that an action may be permissible in another jurisdiction
does not act as a defence to the prohibitions under UK law,
especially in light of the wide territorial scope of the Act (see
below).
Penalties
The consequences of being found guilty under the Act are
potentially severe. The maximum term of imprisonment has been
increased from seven years (under the current law) to ten years and
both businesses and individuals can face an unlimited fine.
Territory
The Act's territorial application is wide. Unlike the existing
law, its scope is not restricted to public officials but extends to
private organisations as well as individuals. Senior officers and
managers can be held liable for a company's involvement in
bribery if they consented to or connived in the offence.
Non-UK businesses are also caught under the Act if they have any
business activity in the UK. The Act goes as far as applying to any
person with a "close connection" to the UK.
In addition, the Act is not limited to offences committed in the UK
but extends to bribery activities committed anywhere in the world
by UK businesses or individuals if that activity would amount to an
offence in the UK.
Conclusion
The Act's adoption of a zero-tolerance approach, its wide
territorial scope and the absence of any exceptions to the offences
only serve to highlight that businesses cannot turn a blind eye to
this new piece of legislation.
A conviction under the Act may have a devastating effect for a
business, particularly for those relying on public sector
contracts. For example, under Article 45 of the EU Public Sector
Directive anyone found guilty of corruption may be prevented from
participating in such public sector contracts. All should also
remain aware of the possibility of unlimited financial
penalties.
Businesses need to assess their approach to anti-corruption
activities and adopt adequate procedures to ensure they do not fall
foul of the provisions of the Act.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.