UK: Bribery Act Guidance

The UK Bribery Act 2010 ("the Act") reforms criminal law and introduces a new strict liability offence of failure by a commercial organisation to prevent a bribe being paid for or on its behalf. There is a defence of having in place adequate policies and procedures to prevent bribery. The Guidance aims to give commercial organisations a steer as to how they ought to be working to prevent bribery and what the Serious Fraud Office (the "SFO") will expect them to have done to be compliant with the law. As the Act will be extraterritorial and carry criminal sanctions, it will have far-reaching implications for UK businesses and multinationals operating in the UK. The Act will come into force on 1 July 2011.

Yesterday the Government published its guidance on the Bribery Act 2010. Below are some preliminary comments and a summary of the Principles.

Scope of jurisdiction

The scope of the jurisdiction of the Act has not been significantly narrowed by the Guidance. The message from the SFO and the Guidance is that companies need to be mindful that the Courts will ultimately decided the jurisdictional scope. The Guidance confirms that any organisation doing business in the UK will be captured by the Act for any acts of bribery committed anywhere in the world.

Having entered into discussions with the SFO on this topic this week it is confirmed that this could mean a parent company located abroad, but with a subsidiary in the UK, being held liable for the actions of a sister subsidiary committing acts of bribery elsewhere in the world. However, the Guidance clarifies this further, saying that there needs to be a demonstrable business presence in the UK and simply having a subsidiary here will not necessarily be sufficient. It is apparent that the level of control over the subsidiary will be one of the key factors in deciding if there is a business presence. In addition, the Guidance specifically says that simply being listed on the stock exchange will not be sufficient to say that business is being carried on in the UK.

In essence there should be a common sense approach to the jurisdictional scope of the Act but the Court will be the final arbiter in that, as in other respects. This is something that the SFO has repeatedly stressed. One comfort to industry is that there is continual reference to the need for there to be a public interest in any prosecutions brought.

Associated person

As to the definition of "associated person" the Guidance advises that the definition goes beyond employees, agents and subsidiaries to include suppliers and joint ventures. It advises that a commercial organisation will be responsible for the activities carried out on its behalf by suppliers but limits this to, for instance, the main contractor where there is a main contractor and a number of sub-contractors.

In relation to Joint Ventures, where the joint venture is a separate legal entity it is less likely to be seen as an associated person to any commercial organisation involved in the joint venture. If it is a contractual joint venture then the degree of control over that joint venture will need to be considered.

Facilitation Payments

The Guidance goes into detail as to the detrimental effect of the facilitation payments on the global economy and particularly on third world countries. Facilitation payments are illegal under the Act, and remain so. However, the Guidance says that there will be careful consideration before any prosecutions are brought in relation to facilitation payments and, in addition, where there are health and safety situations, the common law defence of duress might be available.

Hospitality

In relation to hospitality, the Guidance states that careful consideration has to be given as to whether any prosecution will be brought in relation to hospitality or promotional expenditure. Where a certain level of hospitality is normal and commensurate in a particular sector then that is deemed to be acceptable.

Foreign Public Officials

Where written local law allows foreign public officials to be influenced by additional investment or benefits, then there is no breach of the Act. The example given is, where tenders are being placed for government contacts and there is a legal requirement for the foreign public official to give weight to additional added value such as the provision of charitable organisations or the building of public facilities. It would not be acceptable if there was no legal allowance for such additional benefit there is an actual benefit to a foreign public official or where the local law is silent on the matter.

In relation to hospitality given to foreign public officials, the Guidance makes it clear that there will be no advantage seen to be given where the cost of accommodation and travel have been paid for if the alternative would have been that the relevant foreign official would have had to pay. In addition, where the hospitality is commensurate with the reasonable and proportionate norms of a particular industry then it is not deemed to be bribery. The example given is of dinner and tickets to an event.

Six Principles

There are no surprises in relation to the Principles. The Government is clear that it understands that small and medium size businesses will not necessarily be able to achieve the same changes as larger organisations. Top level commitment by board members and senior management to all six principles is required across all sectors. This is caveated by the statement that there is an expectation that changes made will be proportionate to each particular sector, industry and organisation.

Principle 1 – Proportionate procedures

Principle 1 sets out that an organisation's anti-bribery procedures should be "clear, practical, accessible, effectively implemented and enforced." Procedures are termed to include both the prevention policies and the procedures to implement these policies. The question of whether such procedures are proportionate depends on the assessment of risk, which is in turn linked to the size of the company. Where the risk is considered to be extensive, and the size of the organisation large, the procedures must be proportionate to that. Conversely, where the risk of bribery is considered minimal, and the organisation small, the degree of procedures required will be greatly reduced. For example, smaller organisations may be able to implement their "procedures" simply in periodic oral communications with staff, whereas larger organisations will need to implement these policies with extensive written communications. Principle 1 of the Guidance provides an indicative list of topics which organisations should consider when putting together their procedures.

Principle 2 – Top-level commitment

Top-level commitment is emphasised as the best way of ensuring an organisation is unified in tackling bribery. The Guidance suggests that formal statements issued from senior managers are an effective way of showing such commitment, and provides a list of examples of what such communications might include. Top-level commitment is couched in terms of proportionality in respect of the size of the organisation, and the involvement expected of the senior members. In every case, policies and procedures should remain under periodic review.

Key points:

  • For smaller organisations, top-level commitment should involve senior managers.
  • For large organisations, top-level commitment should involve the board of directors.
  • Communications to the organisation may include the following examples (a more extensive list can be found at Principle 2 of the Guidance):
    • consequences of employees' breach of the organisation's procedures
    • consequences of an associated persons' breach of the organisations procedures
    • reference to the organisation's involvement in collective action against bribery within the business sector

Principle 3 – Risk assessment

Organisations are expected to carry out periodic risk assessments in relation to bribery and should keep records of the processes and conclusions reached. These may form part of a more general risk assessment carried out in relation to business objectives or may be specific to bribery. Risk assessment procedures should be proportionate to the organisation's size and structure and to the nature, scale and location of its activities.

Key points:

  • Ensure senior management oversee the risk assessment.
  • Employ resources appropriate to the organisation.
  • Identify information sources and carry out due diligence (see Principle 4).
  • Keep records of the risk assessment and its conclusions.
  • Adapt to the evolution of the business – e.g. when entering new markets.
  • External risks – categories to consider:
    • Country risk
    • Sectoral risk
    • Transaction risk
    • Business opportunity risk
    • Business partnership risk
  • Internal risks – factors to consider:
    • Is more employee training needed?
    • Does bonus culture reward excessive risk taking?
    • Are there clear policies and procedures for hospitality, promotional expenditure, and political or charitable contributions?
    • Are there clear financial controls?
    • Does senior management communicate a clear anti-bribery message?

Principle 4 – Due diligence

Due diligence in relation to associated persons forms part of bribery risk assessment (see Principle 3) but is also significant as a means of mitigating risk so is included as a separate Principle. Due diligence procedures should reflect a proportionate and risk based approach.

Key points:

  • "Associated person" is broadly defined to include any person performing services for a commercial organisation – intermediaries, employees etc.
  • Proportionate approach – an IT service provider may be low risk whereas an intermediary in foreign markets will require a higher level of due diligence.
  • Thorough due diligence is essential for certain business relationships – e.g. where local law dictates the use of local agents; mergers and acquisitions.
  • Risk-based approach – higher risk situations may require indirect investigations and continued monitoring.
  • More information is required from companies than individuals.
  • Incorporate due diligence into recruitment and human resources procedures except for lower risk posts.

Principle 5 – Communication (including training)

Appropriate communication both internally and externally demonstrates an organisation's commitment to avoid bribery and may have a deterrent effect. Training ensures that the organisation has the necessary knowledge and skills to deal with bribery-related issues.

Key points:

  • Communication and training will vary according to the bribery risks faced, size of organisation, and the scale and nature of its activities.
  • Appropriate policies and procedures should be communicated from the top level down.
  • Put in place whistle-blowing procedures and sources of advice.
  • Consider making training mandatory for new employees and agents. Keep training under review.
  • Organisations may wish to encourage high risk associated persons to adopt bribery prevention training.

Principle 6 - Monitoring and review

Emphasis is placed on the need for organisations' policies and procedures to be monitored and reviewed. The message is that it is insufficient to put in place procedures and then forget about them. If the procedures implemented appear inefficient, these should be reevaluated.

Key points:

  • Establish internal financial control mechanisms and systems to alert the organisation of any failings.
  • Conduct staff surveys and feedback forms.
  • Set aside a date for a formal periodic review.
  • Seek external verification of internal policies and procedures.

Clyde & Co is hosting a presentation on the Guidance on 7 April 2011 in association with Transparency International. Please click here for further details.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.