UK: UK Bribery Act Guidance Part 1: Guidance Overview

The United Kingdom's Ministry of Justice today published its highly anticipated official guidance on the Bribery Act 2010 (the "Act") and announced that the Act will come into force after a three-month notice period, on 1 July 2011.¹ The guidance endorses a pragmatic approach to risk-based compliance and leans heavily on prosecutorial discretion to ensure that the Act's broad language does not impede the conduct of legitimate business.

The official guidance from the Ministry of Justice ("MOJ Guidance") includes statutory guidelines, illustrative case studies and a quick start guide for the broad range of United Kingdom and global organizations subject to the Act. In conjunction with the MOJ Guidance, the Director of the Serious Fraud Office and the Director of Public Prosecutions also released Joint Prosecution Guidance ("Joint Prosecution Guidance"), which instructs prosecutors on enforcing the Act.

The MOJ Guidance published today follows an eight-week public consultation held in autumn 2010 and addresses a number of concerns raised by businesses, interest groups, and anti-corruption organizations regarding the Act. Clients should be aware of the following key aspects of both sets of guidance.

Adequate Procedures in Proportion to Risk

Perhaps the most notable provision of the Act is its strict liability corporate offense for failing to prevent bribery. The MOJ Guidance provides guidelines for assessing whether a company has adequate procedures in place to evoke the only available defense to this provision. This nonprescriptive guidance highlights the principles of proportionate policies and procedures, top level commitment from senior management, risk assessment, due diligence on third parties and employees, communication and training regarding policies and procedures, and monitoring and reviewing the adequacy of the organization's procedures.

Hospitality: Business Courtesies, Travel and Entertainment

The MOJ Guidance makes clear that reasonable and proportionate hospitality is not prohibited by the Act. The examples of likely permissible hospitality include many customary expenditures such as tickets to sporting events, client dinners, client gifts, and reasonable travel and accommodation costs, when linked to a business purpose. The MOJ Guidance emphasizes that prosecutors should carefully consider public interest in determining whether to prosecute an organization for failure to prevent bribery based on such business courtesies. The Joint Prosecution Guidance instructs prosecutors to consider whether the hospitality or expenditure is lavish, concealed, or not connected with a legitimate business activity.

Facilitation Payments

Facilitation payments remain prohibited. The MOJ Guidance acknowledges that there are circumstances in which payments must be made to protect against loss of life, limb, or liberty and the likelihood that the common law defense of duress would be available in such circumstances. As with corporate hospitality, the MOJ Guidance emphasizes that prosecutors should carefully consider public interest in determining whether to prosecute an organization for failure to prevent facilitation payments. The Joint Prosecution Guidance outlines public interest factors to consider. Those factors favoring prosecution include large and repeated payments that are more likely to attract a significant sentence, payments that are planned for or accepted as a standard way of conducting the company's business, payments that may indicate an element of active corruption of a public official, and instances in which an individual fails to follow a commercial organization's clear and appropriate policy setting out procedures for responding to a request for a facilitation payment. To that end, the Joint Prosecution Guidance notes as a factor weighing against prosecution the maintenance of a clear and appropriate policy regarding procedures to be followed when facilitation payments are requested and compliance with that policy.

Extent of corporate liability

The guidelines set out the limits of a corporation's potential liability in relation to suppliers and third parties, including joint venture partners. The MOJ Guidance addresses concerns regarding the potential wide liability for actions by persons "associated" with a commercial organization by emphasizing that liability most often extends to a company's contractual counterparty and is generally limited to parties over which a company exercises control. Additionally, the MOJ Guidance explains that a bribe paid by a joint venture entity may not necessarily lead to liability for the individual members of the joint venture simply because they receive an indirect benefit from the bribe.

No clarification of the scope of the Act for investors

The MOJ Guidance acknowledges that United Kingdom courts will ultimately determine whether a company "carries on business" in the United Kingdom but expresses the Government's expectation that a foreign company whose only connection to the United Kingdom is a London listing would not qualify as a "relevant commercial organisation" for the purposes of the corporate offense of failing to prevent bribery. Similarly, the existence of a United Kingdom subsidiary, acting independently, will not necessarily incur liability for a foreign parent or group company.

Preparing for 1 July

Now that United Kingdom authorities have provided long-awaited guidance, companies have three months to assess their current corruption risks and review their policies and procedures to ensure that they minimize their potential liability under the Act. Further analysis of the guidance will follow in the coming days as we continue to monitor developments related to the Act.

Links to Relevant Materials

For the full MOJ Guidance, click here. For the quick start guide, click here. For the Joint Prosecution Guidance, click here.

Footnotes

1. See previous Client Alerts regarding the Bribery Act. A Comparison of the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act (October 28, 2010); Timetable for Implementation of the UK Bribery Act 2010 (July 23, 2010) (The Ministry of Justice had previously been announced that today's guidance would be published in January, 2011 and it was expected that the Act would come into force in April 2011, following a three month notice period.); No Room for Complacency in Corruption Crackdown (April 14, 2010).

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.