UK: Charities And The Bribery Act 2010

Last Updated: 2 March 2011
Article by Sarah Rowley

The Bribery Act 2010 (the "Act") received Royal Assent on 8th April 2010. It was due to come into force in April 2011, but the Ministry of Justice has recently decided to delay implementation of the Act until further notice, to enable the guidance required to be published under section 9 of the Act to be reconsidered and clarified.

The relevant offences

Section 7 of the Act creates a criminal offence of a failure to prevent bribery on the part of a "relevant commercial organisation". However, section 7 provides that a commercial organisation has a defence if it is able to demonstrate that it had "adequate procedures" in place to prevent persons associated with it from bribing. For the purposes of section 7, a person associated with the "relevant commercial organisation" will be considered to have bribed another person if their actions constitute an offence under section 1 of the Act (bribing another person) or section 6 of the Act (bribing foreign public officials) and it is irrelevant whether the person has actually been convicted of such offence. However, the prosecution will need to be able to prove "beyond reasonable doubt" that a section 1 or 6 offence has been committed.

Published guidance

Section 9 of the Act requires the Secretary of State to publish guidance about the procedures which commercial organisations can put in place to prevent persons associated with them from bribing. The consultation on the draft guidance ended on 8th November and it has been confirmed that the draft guidance will now be amended as a result of the consultation and that the implementation of the Act will be delayed until this has been done. It is hoped that the final version of the guidance will provide much needed clarification on the applicability of the Act for charities and other not for profit organisations.

The applicability of the Act to charities

Section 7(5) of the Act provides that a "relevant commercial organisation" includes a body which is incorporated under the law of any part of the United Kingdom and which carries on a business. Charitable companies subject to the law in England and Wales are bodies incorporated in the United Kingdom, and as such satisfy the first part of this test. It is also likely that charitable companies will satisfy the second part of the test as arguably these Charities carry on a business, albeit for the public benefit rather than for private commercial gain. The term "business" has no particular legal meaning and is not defined in the Act and therefore the extent to which the Act will apply to charities is unclear, but legal commentators are of the view that as currently drafted section 7 of the Act will apply to charities, particularly as in other areas of the law charities can be deemed to be carrying out "business activity". For example, for VAT purposes a "business activity" includes anything that is carried on for consideration including the provision of services for consideration by a charity. It is hoped that this point will be clarified in the final version of the guidance, and representations seeking clarification on this point have been made to the Ministry of Justice by the Charity Law Association.

It needs to be remembered that even if the final version of the guidance excludes charities from the definition of a "relevant commercial organisation" in section 7, a charity could still be liable for the offences under sections 1 (bribing another person), 2 (offences relating to being bribed) and 6 (bribing foreign public officials) of the Act as these offences can be committed by any bodies corporate (as well as individuals connected to the body corporate if the offence is proved to have been committed with the consent or connivance of a senior officer of the body corporate or a person purporting to act in such a capacity).

Prosecutors have discretion whether or not to prosecute an offence under the Act and while it would be risky for a charity to rely on prosecutorial discretion, informal statements have been made by representatives of the Ministry of Justice that the prosecuting authorities are not likely to consider there to be a public interest in prosecuting activities that are intended to further legitimate charitable activity. The Charity Law Association has made representations to the Ministry of Justice asking for such a statement to be included formally in the guidance issued under section 9 of the Act to give charities some comfort. However, we feel that such clarification is unlikely, as it will effectively remove such discretion.

How will the Act apply to trading subsidiaries?

Even if the final version of the guidance clarifies that charities do not fall within the definition of "relevant commercial organisation", it is likely that section 7 will apply to charity subsidiaries who will need to ensure that "adequate procedures" designed to prevent bribery on their behalf are in place. The Charity Law Association has made representations to the Ministry of Justice that it would be helpful if the guidance could expressly provide clarification on this point.

The draft guidance states that the principles set out within it are "intended to be used as a flexible guide to deciding what procedures are right for an organisation". The procedures set out in the guidance are intended to be generally applicable, but may not be applicable to all organisations and whether certain procedures will be applicable will depend on the circumstances of any particular case. The guidance sets out six principles for bribery prevention but these have obviously been drafted with large and multinational corporations in mind rather than small or medium sized businesses and charities. In addition there is a fear that the cost of complying with the provisions will not be proportionate to income for charitable organisations if it transpires that they are caught by section 7 of the Act.

It is anticipated (and hoped) that some of the grey areas set out above will be clarified in the final version of the guidance providing greater certainty on these points

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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