The Bribery Act received Royal Assent in April this year and is due to come into force in April 2011. The Act consolidates and modernises previous UK anti-corruption legislation applying to both public and private sectors in the UK.
Although it has been recognised for some time that the UK's law on bribery was outdated, unclear and difficult to enforce, the need for reform of our anti-bribery practices became evident when the Organisation of Economic Cooperation and Development highlighted the inconsistencies between our current law and the UK's application of the OECD Bribery Convention, which we ratified in 1998.
The Act itself
The Act creates four distinct statutory bribery offences:
- A general offence covering offering, promising or giving a bribe;
- A general offence covering requesting, agreeing to receive or accepting a bribe;
- A distinct offence of bribing a foreign public official to obtain or retain business;
- New strict liability offence for commercial organisations where they fail to prevent bribery by those acting on their behalf.
The Corporate Offence under Section 7 of the Act represents the most significant departure from the old law on bribery and will place the onus on the Corporate to ensure that their anti bribery procedures are robust – hence it is the offence which has attracted the most attention.
The Corporate Offence
Section 7(1) provides that a relevant commercial organisation is guilty of an offence if a person associated with that organisation bribes another person, intending to obtain or retain business or a business advantage for the organisation.
The offence can be committed in the UK and overseas.
However, the organisation has a defence if it can show that it had in place adequate procedures designed to prevent any employees, agents or other third parties acting on the organisation's behalf from committing bribery.
Definitions
The definition of a "commercial organisation" is very wide and catches:
- a body corporate or partnership incorporated in the UK and which carries on a business anywhere; and
- any other body corporate or partnership incorporated outside the UK which carries on business (or part of a business) in the UK;
and for the purpose of section 7 a trade or profession is deemed to be a business.
The definition of "associated person" is set out in section 8 of the Act and provides that a person is associated with a commercial organisation if he performs services for or on behalf of that organisation. It does not matter in what capacity that person is acting – he could be an agent, employee, a subsidiary company or even a joint venture partner.
Consent and connivance
Under section 14 of the Act we have the "consent and connivance" provision which sets out circumstances in which organisations may be found guilty of the "individual" offences under the Act. If a body corporate commits an offence and the offence has been committed with the consent or connivance of a director, partner or similar senior manager (including the company secretary), that person is also guilty of an offence.
In practice, this will also catch any person who is aware of the offence taking place and who subsequently ignores it – so potentially this provision has far reaching consequences.
Defences to the Corporate Offence
As already mentioned, a commercial organisation has a defence to the section 7 offence if it can prove it had adequate procedures in place to prevent bribery.
As part of the preparation for its introduction, the Ministry of
Justice has published some draft guidance in relation to the
procedures which can be implemented by commercial organisations to
prevent bribery. Click here to
view.
The consultation paper is designed to help commercial organisations
of all sizes and sectors understand the types of procedures that
can be implemented to prevent bribery from occurring. The draft
guidance, which comprises six principles, each followed by
commentary and an explanation, is not prescriptive and the question
of whether an organisation has adequate systems in place to prevent
bribery will depend on the particular facts and circumstances of
the case.
The six general principles are as follows:
- risk assessment;
- top level commitment;
- due diligence;
- clear and practical and accessible policies and procedures;
- effective implementation; and
- monitoring and review.
The Ministry of Justice believes that by adhering to the general principles and implementing and maintaining policies and procedures in accordance with the principles, commercial organisations lessen the risk of bribery taking place on their behalf.
The consultation ends on 8 November 2010 and it is anticipated that final guidance will be issued in early 2011 to enable companies to formulate their bribery prevention measures and implement them in advance of the Act coming into force in April.
We understand that the Serious Fraud Office has also commented on "adequate procedures" and has suggested the types of internal controls and procedures they would be looking for to find evidence. These include:
- a policy on gifts and hospitality and facilitation payments;
- a policy on outside advisers/third parties including vetting and due diligence and appropriate risk assessment;
- a policy concerning political contributions and lobbying activities;
- training to ensure dissemination of anti-corruption culture to all staff at all levels within the corporate body;
- regular checks and auditing in a proportionate manner;
- a helpline within the corporate body which enables employees to report concerns;
- appropriate and consistent disciplinary processes;
- a commitment to making it explicit that the anti-bribery code applies to business partners.
It has also been recommended that detailed checks on any new parties be carried out when entering into contracts and when processing payments and parallels have been drawn to an organisation's existing anti-money laundering regimes which may be in place.
Penalties and Sanctions
As regards penalties for a breach of section 7, a person or body corporate found guilty of failing to prevent bribery will be liable to a fine (up to an unlimited amount) although no guidance has yet been published for the courts as to how to approach the levels of fines. If the same line is taken as that followed by the EU with regards to its competition provisions regime, we could see fines imposed up to 10% of a company's turnover.
Organisations should also note that a contract obtained
following a bribery offence is likely to be void and under the
Public Contracts Regulations 2006 public authorities are required
to exclude from public contracts any suppliers which have been
convicted of a corruption offence and in certain circumstances
organisations could face permanent exclusion from all government
contracts.
Such a conviction will also have a reputational impact and for
listed companies potentially a detrimental impact on its share
price.
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.
