UK: The Bribery Act 2010 - what does it mean for your business?

Last Updated: 21 May 2010
Article by Maurice Kenton and Tim Strong

On 8 April 2010, the Bribery Act (the Act) received Royal Assent. Although it is unlikely to come into force before October, the Act represents a significant step towards creating a level playing field for international business, by taking an uncompromising stand against corruption both at home and abroad.

Background

Prior to this change, the law comprised a mix of common law and statute that was increasingly criticised as being unfit for purpose.

The Act also marks the belated implementation of the UK's commitments under the Organisation for Economic Cooperation and Development's (OECD) Convention on Combating Bribery of Foreign Public Officials which it signed in December 1997. Notwithstanding the time it has taken to bring this statute onto the books, the changes it implements present immediate and urgent organisational challenges to business. They will be well advised to review existing relationships and compliance procedures to take account of a new range of bribery offences (in some respects surpassing US requirements), a new and demanding strict liability "corporate offence", rigorous record keeping requirements and extraterritorial application.

The new offences The four new offences can be summarised as follows:

  1. Bribing Another Person (active): offering or giving a financial or other advantage to a person (1) intending to induce (or to reward) them, or another person, to perform improperly a public function or business activity, or (2) knowing or believing the acceptance in itself would constitute improper performance;
  2. Offences Relating to Being Bribed (passive):(1) requesting or accepting an advantage or reward intending personally, or through another, to perform improperly a public function or business activity; (2) requesting or accepting such advantage when the request or acceptance would constitute improper performance of a public function or business activity, or (3) improperly performing such a function or activity in anticipation of receiving such an advantage;
  3. Bribery of Foreign Public Officials: offering or giving to (or with the assent of) a foreign public official any advantage that is neither permitted nor required by the written law applicable to that official intending (1) to influence them in their capacity as a public official, and (ii) to obtain or retain business or business advantage; and
  4. Failure of Commercial Organisations to Prevent Bribery: The 'Corporate Offence': a commercial organisation or a partnership will be guilty of an offence if an associated person (including an employee, agent or subsidiary providing services for the organisation) bribes another person intending (a) to obtain or retain business for the organisation, or (b) to obtain or retain an advantage in the conduct of business for the organisation.

The adequate procedures defence

Where an organisation might be liable because an associated person has committed a relevant offence, the sole defence available to the organisation will be for it to show that it had in place "adequate procedures" to prevent bribery. The Act, therefore, places the onus on organisations to ensure that their own procedures (and where necessary those of their associated persons) are adequate.

Compliance procedures

In this regard, businesses may look to government for guidance on the standard to be achieved and the Act contemplates that the Ministry of Justice will issue guidance before the Act comes into force. However, that guidance is expected to be principle based, rather than prescriptive, and it seems unlikely that it will be capable of direct implementation. Instead, organisations will be expected to develop and refine procedures appropriate to their own circumstances and will be well advised to use the period before the Act comes into force to undertake a root and branch review of their business practices and reassess whether the protective measures and compliance procedures now in place are appropriate, given the nature of the risks faced.

Looking forward, organisations will also have to ensure they have the necessary resource to implement their procedures and it will certainly not be sufficient for large commercial organisations to simply produce written policies and compliance programmes without effective implementation and record keeping.

Good anti-corruption policies will involve tailored risk analysis, clear and cogent strategies and training to combat specific risk, and evidence of careful and committed monitoring with rigorous enforcement at all business levels.

We suggest below some steps that businesses should be taking now to prepare for the introduction of the Act.

International scope

The first three offences will be committed, and can be prosecuted in UK courts, if any act or omission which forms part of the offence takes place in the UK or if, although committed entirely outside of the UK, it would have been an offence if committed within the UK and the person involved has a close connection with the UK.

The fourth, Corporate Offence, is committed "irrespective of whether the acts or omissions which form part of the offence take place in the United Kingdomor elsewhere."

The extraterritorial reach of this Act is wide and has important implications, particularly as regards the Corporate Offence. A business, even if based entirely in the UK, may be held responsible for the acts of its foreign associated persons. Similarly, organisations incorporated elsewhere but carrying on business in the UK or employing British citizens should not assume that they will fall outside the reach of the Act, and even those multinational businesses that have organised their procedures to comply with the US Foreign Corrupt Practices Act will need to consider whether readjustment is necessary to reflect the different requirements and scope of the Act.

Penalties

An individual guilty of one of the first three offences is liable to a maximum of 10 years' imprisonment and/or an unlimited fine. Commercial organisations convicted of committing the Corporate Offence will also be subject to an unlimited fine.

Recent judicial comment in R v Innospec suggests that the English courts will exercise increasing assertiveness in assessing and handing down sentences that are at least as stringent as those coming out of the US.

The courts and settlements

It is increasingly common for corruption to be identified through internal audits and reviews.

In recent years, self reporting and whistleblowing, in exchange for a reduction in sentencing, received significant impetus in the UK when the Serious Fraud Office embraced co-operation with the Department of Justice (DOJ) in the US and struck deals with defendants and other law enforcement organisations on the basis that 'voluntary' disclosures would be rewarded with 'credit' in the form of potentially reduced fines. It is a culture which some would say encourages early identification of issues and enables a company to rectify any problems head-on, whilst preserving its reputation, (this last point being critical). Recent judicial statements, however, suggest this approach is unlikely to continue.

The decision in R v Innospec (which concerned a global settlement of criminal charges brought by the UK's Serious Fraud Office and the US DOJ) strongly criticised any approach to plea bargaining that would fetter the UK criminal court's discretion on sentencing. While the case demonstrates the tensions that can arise between different legal cultures when assessing an appropriate sentence, it poses a dilemma for international organisations which, in disclosing problems within their organisations in the hope of earning credit on one jurisdiction, will be mindful that such co-operation may provide evidence that could lead to unlimited fines in another jurisdiction.

So what should your business be doing?

The steps needed to prepare for the introduction of the new Act will vary from business to business, but here are some points that organisations should be considering now in developing or enhancing their procedures to prevent bribery:

  • Procedures to assess the likely risks of bribery arising in the organisation's business;
  • A clear and unambiguous code of conduct including appropriate anticorruption elements, which is publicised internally and externally and applies right across the business;
  • Employment procedures involving preemployment vetting, express anticorruption obligations in employment contracts and clear disciplinary consequences for breach of those obligations;
  • A programme of anti-corruption training and guidance for staff;
  • Formal whistleblowing procedures for staff to report corruption;
  • Formal procedures for suitably qualified persons to investigate and report on allegations of corruption;
  • Undertaking due diligence on any proposed new business relationship, both as to counterparty and geographical risk of corruption; and
  • Using procurement and contract management procedures to minimise the opportunity for corruption by agents, partners and sub-contractors of the business, and to require them to reflect your own anti-corruption policies and procedures in their own businesses.

In the unfortunate event that you discover a corruption issue in your business, you should seek prompt independent legal advice to ensure that the way the issue is investigated and handled minimises the resulting legal and reputational consequences for your business.

Conclusion

The World Bank estimates that over $1 trillion is paid annually in bribes, adding over 10 per cent to the cost of doing business in certain countries. In the UK, prosecutions of companies on foreign bribery charges looks set to increase.

With governmental guidance on the scope of the 'adequate procedures' defence expected shortly, it is imperative that firms meet the standards expected under the Act as soon as they are reasonably able to do so. If they do not, they may find that they are too late to avoid being penalised with the harshest of penalties.

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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