The Bribery Act comes into force shortly (1 July 2011), and introduces a corporate offence of failing to prevent bribery if an "associated person" performing services on its behalf offers, promises or gives a financial or other advantage to another person with the intention of obtaining or retaining business or a business advantage for the organisation. This will clearly have broad implications for businesses. One area of impact is corporate hospitality. It could be argued that all corporate hospitality, from lunches, to tickets for sporting events, are an attempt to gain more work/contracts for the business. The Act does, however, provide a defence for the organisation if it can prove it had "adequate procedures" in place designed to prevent bribery taking place.
What are "adequate procedures"?
Given the strict liability nature of this offence, the definition of "adequate procedures" is key. The Ministry of Justice ("MOJ") has produced guidance ("the Guidance") for companies which is framed around 6 guiding principles:
- Proportionality: The action an organisation takes should be proportionate to its size and the risks it faces. A large organisation might need to do more to prevent bribery, particularly if it is operating in markets where bribery is known to be commonplace.
- Top level commitment: Those at the top of an organisation are in the best position to ensure their organisation conducts business without bribery. Top level management should be committed to preventing bribery and should foster a culture within the organisation in which bribery is never acceptable. The key people who do business with the organisation should understand that it does not tolerate bribery.
- Risk assessment: The organisation should assess the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment should be periodic, informed and documented.
- Due-diligence: The organisation should apply due-diligence procedures, taking a proportionate and risk based approach in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate and identify bribery risks.
- Communication: The organisation should seek to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.
- Monitoring and review: The organisation should monitor and review procedures designed to prevent bribery by persons associated with it and make improvements where necessary.
These principles are followed by more detailed commentary on each and the Guidance also contains 11 case studies looking at how the principles might apply to a number of hypothetical situations companies could face. These cover topics such as facilitation payments, hospitality and promotional expenditure, and charitable donations.
To deal with the criticism of the Act by media and business organisations, the Guidance seeks to allay fears in its opening pages by making a number of points such as:
- No one can be prosecuted in England and Wales unless one of the two most senior prosecutors is personally satisfied that a conviction is more than likely and the prosecution is in the public interest. This suggests that whilst the Act is drafted strictly, prosecutorial discretion will be exercised to ensure minor or innocent breaches of the Act are not penalised. Nevertheless, it is always a risky strategy to assume minor infringements will not be prosecuted. It is far better to do everything possible to ensure good anti-bribery procedures are in place
- The MOJ does not intend that genuine hospitality or similar business expenditure that is reasonable and proportionate be caught by the Act. Where it is thought the hospitality was really a cover for bribing someone, the authorities will look at such things as the level of hospitality offered, the way in which it was provided and the level of influence the person receiving it had on the business decision in question. As a general rule, organisations can continue to provide tickets to sporting events, take clients for dinner, offer gifts to clients as a reflection of good relations or pay for reasonable travel expenses in order to demonstrate goods or services to clients if that is reasonable and proportionate for the business.
- The MOJ has confirmed that facilitation payments are illegal and explains the rationale for this. These payments are recognised world-wide as being extremely corrosive and any exemptions would perpetuate cultures of bribery. Nevertheless, the MOJ recognises the problems businesses may face with such payments and confirms that prosecutors will consider all the circumstances and whether prosecution is in the public interest.
- The Guidance makes it clear, in relation to associated persons, a business will only be liable under the Act for the actions of the person performing services on its behalf. It is unlikely to be liable for the actions of a supplier who simply supplies it. Similarly, a joint venture partner will not be liable for the bribes of the other partner if it can show it did not benefit from that bribe.
- The MOJ emphasises that there is no need for extensive written policies where the risk of bribery for the company is small.
- The MOJ has confirmed that the mere fact that a company is listed on the UK Stock Exchange will not qualify it as carrying on a business in the UK for the purpose of the Act.
Businesses should review any ethics or anti-bribery policies as soon as possible to ensure these will meet the standards imposed by the Guidance. If a business has no such policies then serious consideration must be given to introducing them. Related rules on expenses and conduct must also be reviewed.
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.