UK: The Bribery Act 2010 - A Tough New Approach in the UK Towards Bribery

Last Updated: 18 June 2010
Article by David Strang

The UK has for many years lagged behind other countries in the severity of its anti-bribery legislation but this will change when the Bribery Act 2010 ("the Act") comes into effect. It seems that this will not occur until later in 2010. This note considers what steps businesses need to be taking in advance of implementation in order not to fall foul of the new offences created by the Act

Background

The Act was adopted with all-party political support in response to a number of different pressures. Over many years, reviews of UK law had concluded that the previous mixture of common law and statutory offences, with certain statutes dating back to the 19th century, was highly unsatisfactory. The previous law also did not meet OECD requirements, to which the UK signed up over a decade ago.

While some of the Act represents a restatement in up-to-date terms of traditional bribery offences and so largely targets individuals' behaviour, it goes beyond this in one important respect, namely in the introduction of a specific offence where businesses fail to prevent bribery.

The new offences

Four offences are introduced by the Act:

  1. Bribing another person (active): offering or giving a financial or other advantage to a person (a) intending to induce (or to reward) them, or another person, to perform improperly a public function or business activity; or (b) knowing or believing the acceptance in itself would constitute improper performance;
  2. Being bribed (passive): (a) requesting or accepting an advantage or reward intending personally, or through another, to perform improperly a public function or business activity; (b) requesting or accepting such advantage when the request or acceptance would constitute improper performance of a public function or business activity; or (c) 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 (a) to influence them in their capacity as a public official, and (b) to obtain or retain business or business advantage; and
  4. Failure of commercial organisations to prevent bribery - the "corporate offence": a "relevant commercial organisation" 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.

Penalties

Individuals convicted of one of the first three offences ("the primary offences") are liable to a maximum of 10 years' imprisonment and/or an unlimited fine while companies or other bodies convicted of these offences or of the corporate offence face unlimited fines. Commercial organisations have the added risk of reputational damage and The Public Contracts Regulations 2006 exclude businesses from competing for public sector contracts where they have been convicted of bribery.

Some key points

This brief summary reveals a number of important issues.

  • The Act deals both with bribery of public officials and with bribery in business affairs - both are prohibited.
  • The primary offences are absolute and no exceptions are, for example, made in respect of "facilitation" payments such as are sometimes made to public officials to secure speedy clearance of goods through customs. Neither is there any express exclusion of corporate hospitality from the scope of the offence.
  • The key concept in the legislation is that of "improper performance", defined by reference to whether the person performing the activity or function is expected to perform it in good faith or impartially, or is in a position of trust.

The legislation is also broad in territorial terms. The primary 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 the UK, would have been an offence if committed here and the person involved has a close connection with the UK.

The corporate offence

Although companies can commit the primary offences, the potential scope of the corporate offence has led to particular interest in its terms.

As has been seen, liability is imposed on companies and partnerships for the acts or omissions of "associated persons", typically employees or agents receiving or giving bribes with the intention of benefitting the employer/principal. However, the precise status of the associated person is likely to be immaterial given the broad definition in the Act of a "person who performs services for or on behalf of" the relevant commercial organisation.

Almost all businesses with a connection to the UK are likely to find that the Act applies to their activities. The new law applies to bribery committed overseas by UK entities and to bribery by overseas entities carrying on business in the UK.

The corporate offence also has the potential to affect the officers of the relevant commercial organisation. In a further novel provision, the law provides for the extension of criminal liability to "senior officers" who have consented to or connived with the offence. For these purposes, in relation to a company, senior officers include directors, managers, secretaries or other similar officers.

The adequate procedures defence

While there are no specific defences to the primary offences, there is nonetheless a defence to the corporate offence where companies can prove that they had in place "adequate procedures" designed to prevent associated persons from engaging in bribery.

For many businesses, this will be the single most important feature of the Act and it is expected that many companies will either introduce anti-bribery programmes as a result of the Act or amend the scope of existing programmes to take account of the new legislation.

During the procedure leading up to the adoption of the Act, the Government agreed to help allay concerns about the new corporate offence by issuing guidance in respect of the "adequate procedures" defence. The new offences will not come into effect until after the guidance has been issued. As at the date of this note, the guidance has not been issued and it is not expected that the Act will come into force before October 2010.

While the steps needed to prepare for the introduction of the new Act will vary from business to business, a number of measures are likely to be common to many businesses.

  • The implementation of any anti-bribery programme needs to start with an assessment of the risks to which the particular business is exposed. This will be a function of the sector in which the business operates, the nature of the business, and the territories in which business is carried out. If a business largely operates in the UK orWestern Europe for example, the risks of facilitation payments being made may be small. On the other hand, it may be more important to set out more extensive rules dealing with giving and receiving gifts and corporate hospitality.
  • Once the risk assessment has identified the areas of concern, these need to be reflected in corporate policy documents and these will then need to be disseminated to staff, particularly those in functions where bribery is a particular risk. For many organisations, a significant, targeted training programme will need to be put in place. Depending on the nature of an organisation's business, the "adequate procedures" defence may also require the establishment of internal procedures designed to detect possible bribery. This could include sign-offs for certain political donations or scrutiny of anomalous expenses claims. Where businesses do not already have anonymous helplines to allow staff to report illegal activity, this is an opportunity to introduce such a facility.
  • The requirements of the Act also need to be reflected in contracts of employment and for the appointment of agents and/or representatives. In both cases, one might expect to see statements of acceptable business practice and of the consequences of non-compliance.
  • Equally, businesses will wish to introduce new procedures in their dealings with third parties in order to detect potential areas of risk and to minimise the risk of incurring liability for bribery. This might entail enhanced due diligence in respect of potential business partners and increased contractual protection in business acquisition and joint venture documentation.

Conclusion

The adoption of the new Act and the creation of the corporate offence will no doubt force bribery up the corporate agenda. While it would be misleading to suggest that there is likely to be a wave of prosecutions resulting solely from the new Act, it also seems clear that its implementation will make it significantly easier for the prosecuting authorities to take action where bribery is discovered. Prudent businesses will wish to start considering now how they are affected by the Act and what procedures they need to implement in order to reduce the risk of prosecution.

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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