UK: The Bribery Act 2010

Last Updated: 19 May 2010
Article by Samantha Roberts and Shamir Khimji

Click here to download the PDF of our Client Briefing.

Introduction

As a result of increasing international cooperation on anti-bribery issues and a general acceptance that legislation relating to the issue in the UK is outdated, the UK has recently seen the passage of the Bribery Act 2010 ("the Act"), which partially came into force on 8 April 2010. Politically there has been a need, fuelled by public outrage, to push through the legislation particularly in the wake of the Parliamentary expenses scandals. Before the introduction of the Act, the only statutes that dealt with bribery were the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption Act 1906, in conjunction with the common law.

The benefit of the Act is that it makes what is historically a complicated area of law (particularly in terms of UK cases that actually resulted in a successful prosecution) clearer, outlining in what circumstances both employees and companies have committed an offence and avoiding the uncertainties which can arise when a principal and/or agent are involved.

At present, only some provisions of the Act are in force. Current expectations are that the Act will come into force in full some time between June and October 2010. This briefing will deal with the effect of the Act as a whole.

Purpose of the Act

The Act:

  • Provides a more effective legal framework to combat bribery in the public and private sectors.
  • Creates two general offences covering the offering, promising or giving of an advantage, and the requesting, agreeing to receive, or accepting of an advantage.
  • Creates two specific offences of bribing a foreign public official and of failure by a commercial organisation to prevent a bribe being paid for or on its behalf.

As well as covering bribery in the UK, the Act will also catch bribery performed outside of the UK if the offence is committed by a British national, or resident or a national of a British overseas territory.

The practical effect of the Act is that for the first time, the employer of someone engaged in bribery can be held to account for that employee's actions, even if the employer did not condone such actions or even know about them. The Act imposes strict liability on companies for bribery and corruption that takes place on their behalf (we deal with the corporate offence in more detail below).

The corporate offence

To be liable for the corporate offence of failure to prevent bribery, the defendant company or partnership must be incorporated or carry on business or a part of a business in any part of the UK. The offence can be committed anywhere in the world by a person performing services on its behalf intending to obtain or retain business or a business advantage for the company or partnership. The offence is mirrored in the United States by the Foreign Corrupt Practices Act (FCPA), which was designed to prevent active bribery for or on behalf of a corporate body by its employees, agents or subsidiaries. Directors will no longer be able to claim ignorance of the dealings of their offshore subsidiaries – it is their responsibility to police activities centrally or they will face criminal liability.

Statutory defence to bribery

The Act provides for a single statutory defence to the corporate offence. Companies must show that they have "adequate" anti-corruption systems and controls in place. It is expected that the test for what is "adequate" will be applied with regard to the size of the company, its business sector and the degree to which it operates in high risk markets. A more stringent risk assessment will therefore be required where UK based companies are conducting business in high risk areas such as South America, Eastern Europe and West Africa.

The Act does not expand on what constitutes adequate controls and systems but the Secretary of State will be required to publish guidance about procedures that relevant commercial organisations can put in place to prevent bribery on their behalf. The guidance is expected to be released in June or July of this year but will not be prescriptive. It is likely to cover anti-bribery policies, training of staff, corporate entertainment and gifts and better due diligence on agents and business partners.

Retaining control

The Act will cover companies with a UK base and employees based abroad, for example, those employees working at a port or terminal in another country. If an employee of a company, ("Portco"), bribes a public official in order to obtain a contract to build a port and that public official is convicted of having received a bribe from Portco, or one of Portco's agents, then on the face of it, there has been an offence committed by Portco under the Act for which both the directors of Portco and Portco may be liable. Consequently, a greater degree of control and, perhaps training, will need to be imposed by UK-based companies over their employees working abroad.

Danger lies in regions where it is viewed as 'customary' to offer some sort of benefit or facilitation payment to counterparties or agents in order to conduct day to day business. Certainly, this will not be accepted as a valid form of defence to charges under the Act.

Companies entering into joint ventures also need to ensure that their counterparties adopt practices that don't fall foul of the Act, otherwise they too may be caught under the corporate offence. The corporate offence catches companies under this section if a person "associated" with the company bribes another person intending to obtain or retain business for the company or obtain or retain an advantage in the conduct of business for the company. A company that enters into a joint venture would therefore be "associated" with the conduct of the employees of the joint venture, and can be held responsible for the acts of these employees and subject to the penalties outlined below.

Corporate hospitality is an issue on which companies will be seeking guidance from the Government as there is currently a grey area with regard to what constitutes acceptable hospitality under the Act.

Penalties under the Act

Individuals and companies can now both be subject to criminal penalties.

Individuals, if found guilty of bribing another person, of being bribed, or of bribing a public official can be liable to a term in prison of up to ten years and/or an unlimited fine.

Companies can now also be subject to an unlimited fine, debarment from public contracts and a confiscation order under the Proceeds of Crime Act 2002 (POCA).

What should UK based companies be doing?

At a general level, UK based companies should:

  • Review the adequacy of their internal procedures to prevent bribery.
  • Put in place staff training and ensure they have written procedures available to staff and contracted consultants.
  • Carry out due diligence before entering into arrangements with other parties.
  • Ensure that all appropriate checks are carried out during the processing of payments.
  • Understand how they will deal with an allegation of bribery or corruption made within the company or in public.

Companies, and in particular those with a large international dimension, must ensure that they exercise a greater degree of control over their employees to prevent them from engaging in bribery. They should take steps to do so immediately. They should also begin to review their risk profile and anti-bribery programmes now, acknowledging that a long transitional period may be required to adapt to the changes required by the Act. This strategy will prove an effective way of combating prosecution as regulators are less likely to push for maximum punishment against firms who have demonstrated that they are taking active steps to adapt to the Act and prevent employees from engaging in corruption.

One way for companies to demonstrate that they are taking the new measures on board is by publishing a list of steps that they intend to implement on their website as an indication of how they plan to adapt to the Act. For example, employees should be given guidance as to how to deal with situations when they believe that they may be asked or expected to give a facilitation payment.

There must be procedures in place within companies so that employees can immediately report their concerns to the appropriate individuals who will then be able to take any necessary action. This will provide for a clear line of communication so that management can both be aware of the problem and adequately address the situation.

The Act is a significant new development in this area of the law which is likely to impact a large number of companies and individuals involved in ports and terminals work.

Affected companies will need to start work on making the necessary changes without delay, not only to meet the requirements of the Act but also, in this transitional period, to show that they are making every effort to do so.

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.

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