UK: Commercial Briefing - The Bribery Act 2010 – In Force April 2011

The Bribery Act 2010 received Royal Assent on 9 April 2010 and will come into force from April 2011. The UK has previously been criticised for its perceived soft touch in tackling corruption and this Act takes anti-bribery legislation further than any other jurisdiction.

What is the scope of the Bribery Act 2010

An individual or a company can be prosecuted for offering or receiving a bribe (which may not be monetary and which need not actually be received for the offence to take place) to bring about or reward the improper performance of a function or activity. It includes individuals working for, and companies engaged in, private business. This goes further than most anti-bribery legislation around the world which tends to focus on the bribery of foreign public officials, an offence which is also caught by this Act (although there is a specific provision for this and the definition for "foreign public official" is wide, and includes the situation where the foreign public official is asked for a bride).

Companies will be liable for bribery and corruption committed by or on their behalf by any person "associated" with them anywhere in the world. "Associated" is defined within the Act as providing services to that company. The guidance indicates that this includes employees, subsidiaries, some joint ventures (where control, either actual or ostensible, lies with the company), agents and intermediaries.

This essentially means that where there has been a conviction for bribery or corruption of any employee, company or organisation associated with that company then the company will automatically be liable for failing to prevent bribery. There is, however, a defence available of having in place "adequate procedures" to prevent bribery (see further below).

Penalties

Individuals can face up to 10 years imprisonment and unlimited fines. Companies can face unlimited fines and debarment from entering into public tenders. In addition, on conviction, both individuals and companies can be subject to confiscation proceedings under the Proceeds of Crime Act 2002. It is worth noting that the cost to companies of having to defend any investigation by the Serious Fraud Office will be serious, in financial as well as reputational terms.

Guidance on "adequate procedures"

The draft guidance on this defence has been published, with the final guidance due to be published in January 2011. The draft guidance is very much principle-based and has been widely criticised for not providing much comfort or real guidance to companies as to how they would be best placed to implement policies and procedures which would give them a strong defence. The following are the six principles set out in the guidance:

1 Risk assessment

2 Top level commitment

3 Due diligence

4 Clear, practical and accessible policies and procedures

5 Effective implementation

6 Monitoring and review

Risk assessment

The guidance suggests risk assessment should be integrated into every part of a business, and in particular with regard to relationships with third parties. It is acknowledged that there may be a huge cost impact on small and medium businesses and the Ministry of Justice has suggested that it will review this once the Act has come into force and had time to take effect.

Top level commitment

Organisations are advised to consider whether it will be appropriate to use external consultants to implement and monitor their compliance with the Act. However, our advice on this principle is to be mindful to keep a high level of 'buy in' at Board level and to demonstrate commitment from the "top down". In addition, the guidance suggests that companies may wish to publicise their efforts to combat bribery and corruption, and also advertise their ethical message to their stakeholders in annual accounts or by other means of publication, as a means of demonstrating their commitment to the Act.

Due diligence

Due diligence should be conducted on all people with whom the company is considering entering into a business relationship, including agents, intermediaries and all forms of joint venture. Associated companies are defined in the guidance as companies over which organisations have some measure of control; however, the guidance has been widely criticised as not giving enough of a steer as to what the Act requires and we are hoping for clearer indicators in the final published guidance due out in January 2011. At this stage our advice is that this due diligence process should be repeated whenever any aspect of the business relationship changes, and at least annually.

Clear, practical and accessible policies and procedures

This is self explanatory and companies should ensure that there are clear reporting structures through which any concerns can be raised and proper whistle blowing procedures put in place.

Effective implementation

The guidance suggests that anti-bribery policies should be clear, practical, accessible and enforceable, taking into account the roles of the whole work force and "all people and entities of which the company has control". It advises that this be incorporated into contracts, training and regular reviews as well as getting management to sign declarations having considered issues and conducted training.

Monitoring and review

This principle places emphasis on organisations learning from the mistakes of others, continually reviewing procedures and having regular audits of a legal and accounting nature. There are early indications that large multi-nationals may be given less leeway than smaller or medium-sized businesses in this regard.

It is widely acknowledged that the Act will have huge implications in the UK going forward both in terms of heightening the risks for UK companies involved in conducting business overseas, as well as for companies not registered in the UK who may be considering making investments in the UK and will now have to consider whether or not falling under the jurisdiction of the Bribery Act 2010 is too great a risk for them to take.

We will send you a further update once the guidance is released in January 2011, at which stage we hope to have a clearer steer from the Government on how they intend to police and enforce the provisions of the Act.

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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