Neil Swift, Partner in the Fraud & Regulatory Department, Peters & Peters Solicitors
*'This article was first published as 'Wake up Call' in Solicitors Journal on 2 February 2010 and is reproduced by kind permission', and with a link to www.solicitorsjournal.com
All businesses and their legal advisers need to get to grips with their obligations under the Bribery Bill, as failure to implement adequate procedures could have dire consequences, warns Neil Swift.
Confiscation, debarment from public contracts, fines and costs flowing from a criminal conviction; these are the potentially devastating consequences facing businesses that fail to put the correct procedures in place when the Bribery Bill eventually comes into force – which could be later this year.
All businesses, large and small, will find themselves within a new quasi-regulatory regime which requires them to have in place processes designed to prevent both employees and others from paying bribes in order either to obtain or retain business. All those professionally advising business clients should have this Bill in mind to ensure that their clients are prepared.
The need for reform
The modernisation of our law on bribery, originating in the common law and partially codified in a number of statutes dating from around the turn of the last century, is long overdue. Prompted by significant international criticism following the perceived failure by the United Kingdom to carry out its obligations under the OECD Convention, the general unfitness for purpose of our laws, and the decision to drop the investigation into alleged bribery in Saudi Arabia by BAE Systems, the Law Commission was tasked for a second time with reviewing our existing law and suggesting reform.
The Bill has already undergone a process of pre-legislative scrutiny and has finished its committee stage in the House of Lords; with its report stage due in early February. It is anticipated that amendments, certainly to the headline provisions outlined below, will be minimal.
The Bill contains four offences: the principal offences of bribing another person, being bribed and the bribery of foreign public officials, and a new offence of failing to prevent bribery.
The first three offences could, in theory if not regularly in practice, be prosecuted under our existing law, and liability could attach to both an individual and a company by which he was employed, provided that the individual was sufficiently senior to be considered a controlling mind of the company. Central to both offences of bribing and being bribed is the concept of the improper performance of a function by the person being bribed, be it a function of a public nature, in connection with a business, or during the course of their employment. Although there is overlap with the general offence of paying bribes, the Bill contains a specific offence, with markedly different elements, to cover the mischief of paying bribes to or on behalf of a foreign public official.
Failure to prevent bribery
The fourth is a new offence, attaching liability to partnerships and companies for failing to prevent one of the principal offences of paying bribes. It is this offence which effectively imposes the new regulatory requirement of which advisers should be aware.
The new corporate offence is a strict liability offence which applies to what are defined as relevant commercial organisations – essentially corporate bodies or partnerships which are either formed under the law of the United Kingdom or carry on business in any part of the UK. If a person who performs services for or on behalf of the organisation – for example as an employee, agent or corporate subsidiary – bribes another person with the intention of obtaining or retaining business (or an advantage in business) for the organisation, the organisation is guilty of a separate offence.
The organisation has a defence if it can prove that it had in place adequate procedures to prevent such persons from paying bribes. It is this requirement to have in place procedures which all those advising businesses should have in mind, but understandably the concern will be to know whether its procedures would be regarded as adequate if ever subject to scrutiny.
What it means for business
So what can and should businesses do? Doing nothing is not an option. If prosecuted and convicted of an offence, a business could face financial ruin. The total absence of any consideration clearly could not be regarded as adequate. Therefore, each business must have procedures in place. But what should they cover?
At every stage of the Bill's progression, concern has been expressed that government must provide some guidance on what would be considered adequate. However, the footnotes to the draft Bill make it clear that there is no 'one size fits all' solution. Rather "it is open to a defendant organisation to adduce evidence which shows that... given the size of the organisation, the particular sector or country in which it operated and the foreseeable risks, its procedures employed to prevent bribery... were adequate".
It is anticipated that the guidance will go further than this. The government's representatives in the House of Lords have indicated that Ministry of Justice officials are making progress in drafting guidance before the offence is brought into force, working with experts from organisations such as Transparency International, the Institute of Business Ethics and the Anti Corruption Forum, as well as giving representative business bodies a chance to be heard.
The issues likely to be addressed will include the responsibility of the board of directors, identification of a responsible senior officer, gifts and hospitality policies, facilitation payments, staff training, financial controls, risk management procedures and reporting and investigation procedures. However, at variance with, for example, the anti-money laundering regime, the government has rejected calls for a statutory requirement to provide, approve and update guidance.
What this all means is that while some businesses will have already taken steps to demonstrate that they have an effective anti-bribery policy, say if involved in certain tendering processes, this issue must now concern all those who own and operate businesses connected to the United Kingdom, be they large or small, domestic or international, and those that advise them.
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.
