UK: The Bribery Act 2010: Briefing and Guidance

Last Updated: 26 October 2010
Article by Andrew Ottley and Chris Jefferis

The Bribery Act 2010 comes into force in April 2011 against the background of increasing international pressure for a concerted crackdown on bribery and corruption, exemplified by the OECD Convention on Combating Bribery of Foreign Public Officials, to which the UK signed up in 1998, and the judicial view that "There can be no doubt that corruption of foreign government officials or foreign government ministers is at the top end of serious corporate offending." While bribery is a crime at common law, and also under various statutes from the late nineteenth and early twentieth centuries, the Bribery Act significantly extends the range of current UK offences.

Its effect is to demand a culture change, in which no UK business any longer regards the payment of bribes in certain jurisdictions as a regrettable fact of life, but would forego business rather than pay a bribe. Indeed, in a manner reminiscent of the money laundering legislation, it effectively compels businesses to become self-policing. Going beyond, for example, the US Foreign Corrupt Practices Act, it has been said to set a new "gold standard" in anti bribery legislation.

New offences

One key innovation is the introduction of the offence of "Failure of commercial organisations to prevent bribery". The offence is committed if a person "associated with" a commercial organisation bribes another intending to obtain or retain business, or an advantage in the conduct of business, for the organisation (irrespective of whether the organisation collectively has any knowledge of the bribe). A person is "associated with" a commercial organisation if he carries out services for it, or on its behalf. The obvious examples are employees and agents but the definition is elastic and each case will turn on its own facts.

The only defence – apart from contesting the facts – is for the organisation to show that it had in place "adequate procedures" designed to prevent associated persons committing bribery. It is this provision which effectively obliges businesses to adopt anti bribery procedures.

It is therefore vital to understand what constitutes a bribe, and the Act provides a modern definition: it is a financial or other advantage intended to induce or reward the "improper performance" of a person's function or activity where, very broadly, any personal benefit to the recipient could create a conflict between his own interests and the interests of those he is supposed to be serving. Improper performance is anything done in breach of the expectations of good faith and impartiality which a reasonable person in the UK would have.

The Act gives the UK courts jurisdiction over bribery committed anywhere in the world provided that the alleged offender has a "close connection" with the UK and the Act expressly excludes any appeal to local custom or practice (in, for example, a country where backhanders are accepted as the norm) by way of defence.

The Act's second key innovation is the introduction of the separate offence of "bribing a Foreign Public Official." This offence is committed where a person offers or provides a financial or other advantage intending to influence the foreign public official in that capacity and to obtain or retain business, or an advantage in the conduct of business (unless the Foreign Public Official is permitted or required by the local written law to be influenced by the inducement). This is a stringent provision, as the offence can be committed without there being any intention to induce improper performance.

Zero tolerance

The Act's zero tolerance approach has given rise to a number of concerns. One major concern is that corporate hospitality, entertainment and gifts might be alleged to constitute financial or other advantages intended to induce or reward the improper performance of the recipients' functions. Another is that, as the legislators acknowledge, the offence of bribing a Foreign Public Official catches facilitation payments – payments made to officials to ensure that they perform, or perform more quickly, steps which they are in fact under a duty to carry out, and which are often extorted by the officials themselves.

Adequate procedures

Over-arching everything is the requirement to institute adequate procedures as a protection against corporate liability. The government (as required by the Act) is to issue guidelines but the draft already available indicates that these will be high level and outcome focussed; each business will need to work out for itself what is required, starting with an assessment of the bribery and corruption risks it faces. The procedures will have to deal with matters such as hospitality and gifts and facilitation payments, as well as due diligence on third party agents and others, and will need to be implemented from the top down.

Failure to take these steps will place businesses at severe risk, as the penalty for a corporate offence is an unlimited fine and the indications are that the courts will be prepared to consider fining a guilty company into extinction if it is perceived to represent an ongoing corruption risk.

What steps should you be taking?

The bottom line is that all commercial organisations should take immediate steps to implement anti-bribery policies. What does this mean in practice?

  • Risk assessment

The first step is to carry out a risk assessment of the business. You will need to consider the territories and industry sectors in which your organisation operates - the risk of corruption will be higher in some than others – and the types of transaction in which you engage. Areas to watch out for include the use of political donations or charitable contributions, information brokering and offsets.

  • Top level commitment

It is important to encourage top down responsibility for establishing a culture whereby bribery is unacceptable practice. It is worth noting here that if a bribery offence is proved to have been committed by an organisation with the consent or connivance of a senior officer then s/he is guilty of the offence as well as the organisation.

  • Due diligence

It is essential, because of the associated persons risk, to know your contractor, especially the agent who works on your behalf. This means that an appropriate degree of due diligence will have to be carried out on agents, joint venturers and even suppliers, not only to establish their track record but also whether they too maintain acceptable anti-bribery procedures. Due diligence must also be conducted internally. All money held by a company should be accounted for; bribery is typically paid for out of 'slush funds' which are not accounted for in a firm's books and records. No one individual should have sole control of a payment transaction from start to finish. Anyone authorising payment needs to be trained to look out for tell tale signs of bribery on the part of agents, for example invoices for work that is ill defined, and therefore covers a multitude of sins, or for amounts which are excessivefor the work involved.

  • Clear, practical and accessible policies and procedures

Anti-bribery policies and procedures must be embedded in all an employer's dealings with its employees. It may begin at the recruitment stage for example, if you operate in an area where there is a risk of corruption in the recruitment process. It will certainly involve training – which means far more than that the employee has merely read and signed the policy – and monitoring to ensure that it has been implemented.

Just as the procedures will place certain demands on employees, so they need support: for example training and support in anti extortion strategies to deal with the entry fee, the threat of arrest, or whatever it might be. Likewise there needs to be a clear policy statement that employees' careers will not suffer if they forego business because they will not bribe; or indeed will not suffer, but rather be supported, if they blow the whistle.

And where bribery is reported, the procedures will include a response plan; there will be an internal reporting chain leading to, possibly, external reporting. For obvious reasons, businesses are encouraged to self report instances of bribery which they uncover, on the basis that a constructive engagement with the authorities will be much better in the long run than a cover up and subsequent discovery.

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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