UK: Bribery Act Implementation Moves A Step Closer

Last Updated: 22 September 2010
Article by Neil Gerrard and Jonathan Pickworth

Ministry of Justice opens consultation on adequate procedures guidance

On 14 September 2010 the Ministry of Justice (MOJ) opened a consultation on its draft adequate procedures guidance.  As we have explained in previous alerts, the Government is obliged to produce such guidance under section 9 of the Bribery Act 2010 (the Act) and has pledged to consult and publish a final version before the Act comes into force in April 2011.

The MOJ is seeking the views of business and any other interested parties.  In his introduction Kenneth Clarke (Lord Chancellor and Secretary of State for Justice) states:

"In deciding what bribery prevention measures best suit their particular circumstances, commercial organisations should be assisted by the guidance published under section 9 of the Act. It is essential that any guidance the Government publishes is informed by the wealth of knowledge, experience and expertise to be found outside Government, in for example the business community and non-governmental organisations. "

The consultation documents include:

  • a questionnaire for interested parties comprising 5 specific questions;
  • draft guidance focusing on 6 key principles;
  • additional commentary on some specific issues - e.g. facilitation payments; and
  • 5 illustrative examples (not part of the guidance) focusing on some key risk areas - e.g. hospitality.

The consultation documents and questionnaire can be found on the MOJ website: www.justice.gov.uk/consultations/briberyactconsultation.htm

For those who have been following the development of the Act, the draft guidance does not provide any real surprises.  It offers broad principles that businesses should try to follow.

Six principles of good compliance

The draft guidance is based around six key principles of good compliance:

  1. Risk asessment – knowing and keeping up to date with the bribery risks in your sector and market.
  2. Top level commitment – establishing a culture across your organisation in which bribery is unacceptable.  
  3. Due diligence – knowing who you do business with; knowing why, when and to whom you are releasing funds and seeking reciprocal anti-bribery agreements.
  4. Clear, practical and accessible policies and procedures – applying them to everyone you employ and business partners under your effective control and covering all relevant risks.
  5. Effective implementation – going beyond 'paper compliance' to embed anti-bribery in the organisation.
  6. Monitoring and review – auditing and financial controls, how regularly you need to review your policies and procedures, and whether external verification would help.

What's a bribe? Further clarification provided

Beyond the principles the draft guidance also touches on some of the more difficult issues raised by the Act and provides some interesting further commentary on the following subjects:

The effect of written local law under section 6 - bribery of foreign public officials:

 ""Offset" arrangements, whereby some kind of additional investment is offered or required as part of an organisation's tender are unlikely to give rise to any difficulties under section 6 where such arrangements are subject to legislative or regulatory provision."

Hospitality and promotional expenditure

  • "... reasonable and proportionate hospitality or promotional expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations, is recognised as an established and important part of doing business. "
  • "In order to amount to a bribe under section 1, hospitality or promotional expenditure must be intended to induce a person to perform a function improperly (as defined in sections 3, 4 and 5)."
  • "Under section 6 there must be an intention for a financial or other advantage to influence the official in his or her official role and thereby secure business or a business advantage."
  • "In some circumstances it may be that hospitality or promotional expenditure in the form of travel and accommodation costs does not even amount to "a financial or other advantage" to the relevant official as required by section 6 because it is a cost that would otherwise be borne by the relevant foreign Government rather than the official him or herself."
  • "Where the prosecution is able to establish a financial or other advantage has been offered, promised or given but there is no sufficient connection between the advantage and the intention to influence and secure business or a business advantage then section 6 is unlikely to be engaged." 

Facilitation payments

"Small bribes paid to facilitate routine Government action – otherwise called 'facilitation payments' are likely to trigger the section 6 offence and the section 1 offence (where there is an intention to induce improper conduct, including where the acceptance of such payments is itself improper)."

Prosecutorial discretion

"The more serious the offence, the more likely it is that a prosecution will be required in the public interest. In cases where hospitality, promotional expenditure or facilitation payments do on their face trigger the provisions of the Act the exercise of prosecutorial discretion provides the degree of flexibility required to ensure the just and fair operation of the Act."

Illustrative scenarios

In addition to the above, an annex to the draft guidance sets out 5 scenarios to illustrate typical high risk situations which businesses may encounter:

  • Intermediaries and agents.
  • Hospitality and promotional expenditure.
  • Business partners - joint ventures, consortia, etc.
  • Facilitation payments.
  • Political and charitable donations.

Each scenario is followed by a series of questions that the business should have asked in order to ensure compliance with the six principles.  There is no guidance given as to the right answers to these questions or the proper outcome to the scenarios.  These scenarios will also, undoubtedly, provide prosecutors with guidance as to the type of question they should ask when deciding whether to prosecute the corporate offence. 

Five consultation questions

  1. Are there principles other than those set out in the draft guidance that are relevant and important to the formulation of bribery prevention in commercial organisations? If so what are they and why do you think they are important? 
  2. Are there any procedures other than those set out in the draft guidance that are relevant and important to a wide range of commercial organisations? If so what are they and why do you think they are important? 
  3. Are there any ways in which the format of the draft guidance could be improved in order to be of more assistance to commercial organisations in determining how to apply the guidance to their particular circumstances? 
  4. Are there any principles or procedures that are particularly relevant and important to small and medium sized enterprises that are not covered by the draft guidance and which should be? If so what are they and why do you think they are they important? 
  5. In what ways, if any, could the principles in the draft guidance be improved in order to provide more assistance to small and medium sized enterprises in preventing bribery on their behalf? 

Commentary

The Government is trying to avoid a one-size-fits-all solution and believes that the principles based approach allows for more flexibility.  It is accepted that the anti-bribery procedures appropriate for a large multi-national organisation will be different to those appropriate to a small or medium sized domestic business.

However, the broad brush approach means that there are some areas of uncertainty and, until there are decided cases, it will be difficult for a company to be entirely confident that their procedures measure up.  Nevertheless, it is unlikely that there will be any radical amendments to the draft guidance, so all businesses need to take stock of the general principles and examine their anti-bribery and corruption compliance programme.

Those that have already been examining their programmes may wish to share the difficulties they envisage in complying with the Act and interpreting "adequate procedures".  This is the last opportunity for those working at the coal face of anti-bribery and corruption compliance to have their say. Once issued, it is not expected that the guidance will be reviewed again until 2014.

The consultation period lasts just 8 weeks and all responses have to be filed at the MOJ by 5pm on 8 November 2010.  We intend to contribute to the consultation process.  If you have any comments or views which you would like us to add to our submissions, please contact Jonathan Pickworth (details below).

How can we help?

DLA Piper's Corporate Crime, Investigations and Compliance team has been giving advice and assistance to companies and individuals on regulatory risk, investigations and all aspects of white collar crime for over 15 years. We can provide assistance with training your staff, running risk and compliance audits, managing negotiations with the regulators in the UK or overseas, or defending you in court. We have developed a Bribery Act Toolkit of innovative products, services and training packages (including our acclaimed film, 'Counting the Cost', which has recently been nominated for the FT Legal Innovation Awards 2010 in the anti-corruption and fraud category) to help our clients to minimise their bribery and corruption risks and avoid regulatory intervention.

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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