UK: Real Estate Briefing – January 2011

Last Updated: 14 January 2011
Article by Lucy Campbell, Jennifer Chappell and Michael Parker

The Bribery Act 2010

The Bribery Bill received Royal Assent on 8 April 2010 becoming the Bribery Act 2010 (the Act) and is due to come into effect in April 2011. Its purpose is to reform the UK's criminal law of bribery and to reinforce the UK's reputation as one of the least corrupt countries in the world. The changes are significant and businesses are likely to face a number of difficulties in complying with the new regime.

The Act replaces the existing mixture of common law and statutory offences with four offences:

Bribing another person (section 1): This offence covers the offering, promising or giving an advantage to another.

Being bribed (section 2): This offence deals with requesting, agreeing to receive or accepting an advantage.

Bribing a foreign public official (section 6): This offence only covers offering, promising or giving bribes but not acceptance of them. The person giving the bribe must intend to influence the recipient in the performance of their functions as a public official and must intend to obtain or retain business or a business advantage.

Commercial organisations failing to prevent bribery (section 7): A commercial organisation (a company or partnership) will be guilty if a person associated with it (including an employee, agent, subsidiary or possibly even a joint-venture partner), bribes another person to obtain or retain business or a business advantage for the organisation. The offence is a strict liability offence so a company can be guilty even if no-one within the company knew of the bribery. As discussed below this is a change to the existing law.

In addition, senior managers and directors can be held personally liable under the Act for offences committed by the commercial organisation if they are found to have consented to or connived in the commission of a bribery offence under sections 1, 2 or 6.

Territorial scope

The jurisdiction of the Act is wide and companies and partnerships incorporated in the UK, and those carrying on business in the UK (wherever formed), are all subject to the Act. The corporate offence under section 7 is committed regardless of where it takes place in the world and offences under section 1, 2 and 6 are committed if the act takes place in the UK or by a person who has a close connection with the UK (including a citizen, a body incorporated under UK law or a resident).


Under the Act the maximum penalty for all the offences except the offence relating to commercial organisations has been increased to 10 years imprisonment and/ or an unlimited fine for individuals. Commercial organisations that fail to prevent bribery face an unlimited fine. Apart from the financial penalties a successful prosecution under the Act could leave a company permanently debarred from tendering for public sector contracts and also with serious reputational damage from the adverse publicity.

Corporate liability

Unsurprisingly the new section 7 corporate offence has created the most comment and concern from commercial organisations. Under existing law it is difficult to convict a company of bribery unless senior management can be shown to have known of it. The offence under the new Act is one of strict liability meaning the prosecution will not have to prove knowledge or intention on the part of the management in order to gain a conviction. Where bribery is shown to have taken place the only defence open to the commercial organisation will be to show it had in place adequate procedures designed to prevent bribery by persons working on behalf of the business – and this will have to be demonstrated against a background of an offence actually having occurred. The Act itself does not set out a 'one size fits all' set of adequate procedures so there is no safe harbour as such but it requires the Government to give companies illustrative guidance on what adequate procedures might be.

Government guidance

To comply with this obligation and to give businesses the chance to input their concerns, in September 2010 the Ministry of Justice launched a public consultation on its draft guidance This consultation closed on 8 November 2010 and it is expected the final form of this guidance will be published early this year, to allow businesses time to familiarise themselves with it before the Act comes into force. The Government guidelines will clearly be of great importance both to companies and their advisers in seeking to finalise their arrangements to comply with the Act.

Other areas of concern

The Act does not permit reasonable corporate entertainment expenditure, for which there is an exemption under the US Foreign Corrupt Practices Act, so companies doing business both in the UK and abroad will need to bear in mind the possibility that corporate entertainment can always potentially amount to bribery. The Government believes that it should be left to the prosecutors at the SFO to decide whether bribery has occurred in any case, but this leaves an unsatisfactory level of uncertainty for companies until cases have been brought and the approach adopted by the SFO becomes clear.

What does this mean for property companies and partnerships?

In the first instance, directors and/or senior managers should make sure they are aware of the new law so that they can ensure that the commercial organisations for which they work start to review existing policies and consider the need for any new policies and procedures to be implemented in order to minimise the risk of corporate liability. The senior management of all organisations should be thinking about the risk of bribery in the context of their businesses and develop a risk profile; the higher the risk of bribery taking place the more stringent the policies and procedures need to be. In particular, organisations should consider the sectors in which they operate, the countries they do business in and their relationships with third parties.

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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Jennifer Chappell
Michael Parker
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