In brief - Companies potentially liable if they do not prevent bribery
On 1 July 2011, the UK Bribery Act 2010 came into force. Any Australian company or subsidiary which carries on its business or part of its business in the UK to an extent which would qualify as a 'demonstrable business presence' will be affected by this legislation and be potentially liable if it has failed to prevent bribery.
Offering or receiving bribes or failing to prevent bribery
Under the Bribery Act, it is an offence:
- to offer, promise, or give a bribe to another person1 (active bribery)
- to request, agree to receive, or accept a bribe from another person2 (passive bribery)
- to bribe a foreign public official3
- for a commercial organisation to fail to prevent bribery by persons associated with them4
Factors to be considered if bribery is committed
If an offence of active or passive bribery is committed, the following factors will be considered:
- whether the offence was premeditated and included an element of corruption
- whether the offender was in a position of authority or trust and took advantage of that position
- whether there has been a genuine proactive approach involving self-reporting of the bribery and subsequent remedial action
It is worth noting that the Bribery Act itself is an unusual piece of legislation, detailing offences by reference to six scenarios, referred to in the legislation as "cases". The UK Ministry of Justice has released a guideline document, The Bribery Act 2010 - Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing .
What is classified as bribery?
Apart from the well recognised definition of bribery as monetary payments (typically large payments) or benefits for reward, there is also the murky area of 'facilitation payments'. Facilitation payments, often referred to as 'grease payments' are used frequently in developing or third world countries, particularly in trade and with government agencies.
Under Australian law there is a carve out (or exclusion) for facilitation payments or benefits which are documented and are "minor [in] nature" for the "sole or dominant purpose of expediting or securing the performance of a routine government action". There is no such exemption under the Bribery Act. The hardline approach taken by the Bribery Act prohibits any and all payments, large or small.
The exceptions as set out in the Guidance manual are bona fide hospitality, promotional, or other business expenditure that is reasonable and proportionate and will not constitute a breach of the Bribery Act.
What will be considered as "reasonable" expenditure is unknown. Presumably taking a client to lunch would be reasonable, but if a benefit is obtained from that lunch or the lunch is lavish, it may be moving outside what is considered "reasonable".
There also exists an exemption for duress, which may be more relevant for a company involved in trade which could experience duress on entering and leaving ports.
Who can commit an offence?
A commercial organisation:6
- incorporated, or a partnership formed, in the UK; it does not matter if it pursues primarily charitable or educational aims or purely public functions. It will be caught if it engages in commercial activities, irrespective of the purpose for which profits are made.7
- incorporated, or partnerships formed, outside the UK which carry on a business or part of a business 'in any part of the United Kingdom'. It is not intended that organisations that do not have a demonstrable business presence in the United Kingdom would be caught by the Act.8
A commercial organisation can be liable only for bribes by an "associated person". The Bribery Act defines an "associated person" as one who "performs services" for the commercial organisation9, such as an employee or agent who may pay a bribe to get business, keep business, or gain a business for the organisation.
The Bribery Act provides that a commercial organisation will be guilty of an offence if a person associated with the organisation bribes another person with the intention of obtaining or retaining business or an advantage in the conduct of business for that organisation10.
What can an organisation do to prevent bribery?
The Guidance manual outlines six areas of focus for commercial organisations in implementing adequate procedures to prevent bribery. They are:
Proportionate procedures - A commercial organisation's procedures to prevent bribery should be proportionate to the bribery risk the organisation faces and to the nature, scale and complexity of the organisation's activities.
Top level commitment - The top level management of a commercial organisation should be committed to preventing bribery by persons employed by and associated with it. The top level management should foster a culture within the organisation in which bribery is never acceptable and demonstrate a lack of tolerance of bribery.
Risk assessment - A commercial organisation should assess the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment should be periodic, informed and documented.
Due diligence - A commercial organisation should carry out due diligence procedures, taking a proportionate and risk-based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.
Communication - A commercial organisation should ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication (including training) that is proportionate to the risks it faces.
Monitoring and review - A commercial organisation should monitor and review its procedures designed to prevent bribery by persons associated with it and make improvements where necessary.
Penalties for bribery
An individual guilty of an offence is liable on a summary conviction to imprisonment not exceeding 12 months or a fine not exceeding the statutory maximum. An individual is liable on conviction to imprisonment for a term not exceeding 10 years.
Enforcement - only one bribery conviction to date
To date there has been one conviction under the Bribery Act. Mr Patel, administrative clerk at Redbridge Magistrates' Court in Ilford, Essex was the first person to be prosecuted and convicted on 15 October 2011. Mr Patel pleaded guilty to taking individual £500 bribes to clear the convictions of speeding motorists from the court's computer system.
On 23 November 2011 Mr Patel was sentenced to six years' imprisonment. The sentencing judge, Judge McCreath, noted that the offence was "serious", with Mr Patel personally gaining around £20,000 over a number of years. The sentence in relation to the offence under the Bribery Act was for three years, to be served with a concurrent six-year sentence for misconduct in public office.
Implications for Australian companies doing business in the UK
If your company has operations in the UK or does business with UK companies sufficient for a court to find that you have a "demonstrable business presence in the UK", you should ensure that you have adequate procedures to prevent and discourage bribery, as well as clearly setting out your company's position on bribery in education programs for your staff.
For more information on trade and transport law, please see the website of CBP Lawyers or contact Stuart Hetherington at firstname.lastname@example.org or Katherine Jones at email@example.com or Helen Tieu at firstname.lastname@example.org.
5 Section 70.2 Criminal Code (Cth)
Under the Bribery Act, it is an offence:
7 The Bribery Act 2010 - Guidance 
8 The Bribery Act 2010 - Guidance 
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.