UK: The Bribery Act: Now In Force

Last Updated: 13 September 2011
Article by Ian Rose

Commercial Thinking

After some delay, the Bribery Act 2010 (the 'Act') finally came into force on 1 July 2011 (see Commercial Thinking 2010 – 2nd Edition for our comments on the Act when it was originally enacted).

Now that the Act is in force, companies must ensure that their policies and procedures take into account the effects of the new law.

In recent months both the Government and, by way of guidance to prosecutors, the Serious Fraud Office (the 'SFO'), have published guidance which is intended to address issues, including facilitation payments, corporate hospitality, the application of the Act to foreign companies, and the procedures that companies are expected to put in place to prevent bribery. This update will outline the content of this guidance in relation to these key issues.

The offences

The Act clarifies and defines the offences of giving/offering and/or receiving/requesting a bribe (sections 1 and 2). It also creates two specific offences, the first being bribery of a foreign public official (section 6). Any individual or company with a close connection to the UK is subject to prosecution under sections 1, 2 and 6, no matter where in the world the bribery took place.

The second specific offence of failing to prevent bribery only affects commercial organisations (section 7). Any organisation which carries on business in the UK, wherever it is incorporated, is subject to prosecution under section 7 no matter where in the world the bribery took place and no matter whether it was committed by the organisation itself or by a person performing services for the organisation (e.g. an employee or agent). The only defence to such a charge is for a company to show that it had "adequate procedures" in place to prevent bribery.

Adequate procedures

The Government's guidance addresses the subject of "adequate procedures" by setting out six principles, designed to be flexible to allow for the variety of circumstances in which commercial organisations find themselves. These principles are expressed in general terms and the guidance stresses that the key is for each organisation to identify and manage the specific risk profile that it faces. Organisations will face very different risk profiles depending on the specific factors affecting them. However, the six principles, together with the associated commentary, offer companies a useful starting point for developing appropriate policies and procedures. The six principles are:

  • Proportionate procedures
  • Top-level commitment
  • Risk assessment
  • Due diligence
  • Communication
  • Monitoring and review.

Corporate hospitality

The guidance provided by each of the Government and the SFO emphasises that sensible and proportionate corporate hospitality/promotional expenditure is perfectly acceptable and can continue. However, exceptionally lavish entertainment or expenditure may result in questions being asked about the intentions behind such expenditure. The key is being able to objectively justify the outlay.

Facilitation payments

The Government and the SFO also appear to be aligned in relation to facilitation payments. Facilitation payments are unofficial payments made to public officials in order to secure or expedite the performance of a routine or necessary action (such as "grease" payments to customs officials). Both the Government's guidance and the SFO's guidance to prosecutors make it clear that such payments are illegal and must be eradicated. However, the Director of the SFO, Richard Alderman, suggested in a speech to Salans' clients and guests on 7 April 2011 that the SFO was not expecting an immediate end to such payments. The key for the SFO appears to be that companies commit to eradicating facilitation payments in due course, and that they have put in place sufficiently robust procedures to achieve that goal.

Implementation of the Act

The Government and the SFO may, however, take divergent approaches to the applicability of section 7 of the Act to foreign companies. The Government's guidance is that the mere listing of a forigen company on a UK exchange does not mean, on its own, that the UK courts would have jurisdiction over that company (in contrast to the position under the US Foreign Corrupt Practices Act). Equally, the Government considers that just having a UK subsidiary does not mean, on its own, that the courts will have jurisdiction over the foreign parent, since subsidiaries can be independent of their parent company.

The SFO will, however, adopt a broad interpretation of the Act, and that it would be very dangerous for a foreign company to rely on a technical interpretation of the law to try and avoid prosecution. The SFO's position appears to be that it would be very rare for a foreign company listed in the UK, or having a UK subsidiary, to have no other connection with the UK. The SFO will probe carefully into these cases to find any connection to the UK, since it has made clear its intention to prosecute bribery committed by foreign companies which adversely affects the business interests of "ethical" UK companies. The key question is the economic engagement of the foreign business in the UK.

Notable considerations

The Act is now in force and must be considered carefully by businesses, both in the UK and abroad. The Government's guidance, while useful, is not an authoritative statement of the law. Ultimately it is the courts which will decide any questions as to the scope of the legislation, and the SFO is keen to bring prosecutions before the courts to test that scope. However, until the courts do rule on the scope of the Act, businesses are left with a number of unresolved issues. The only way to deal with these issues is to adopt a robust, pragmatic and thorough approach to anti-bribery compliance which is adapted to the specific needs of the organisation.

The Government's guidance, and its six principles, are a useful starting point. However, these are no replacement for a thorough understanding of the risks facing your particular organisation and the implementation of strong policy and procedures to address those risks.

In this regard, it is important for companies to be rigorous in developing compliance policies and procedures in order to provide a defence to a charge of failing to prevent bribery. Salans has developed an 'Anti-bribery tool-kit' to help you to minimise risks, and ensure that you are safe, guarded against liability under 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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