The much talked about Bribery Act 2010 (the "Act") comes into force on 1st July 2011 adding to the abundance of legislation charities now need to have regard to when furthering their good causes. Read on to find out how the legislation applies to charities and the steps charities need to take to ensure that they do not fall foul of the Act.
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". The Ministry of Justice has published its statutory guidance (required under section 9 of the Act) (the "Guidance") about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing. The lack of clarity regarding the use of the term "commercial organisations" in the original draft guidance published by the Ministry of Justice gave charities hope that the new section 7 offence would not apply to them. However, the final version of the published Guidance has confirmed that incorporated charities will not be immune from prosecution as the guidance states that: "it does not matter if it [the commercial organisation] pursues primarily charitable or educational aims or purely public functions. It will be caught if it engages in commercial activities, irrespective of the purpose for which profits are made". 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.
It also needs to be remembered that a charity could also be held 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).
The defence
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. The Guidance provides that bribery prevention procedures (the term "procedures" is used to embrace both bribery prevention policies and the procedures which implement them) should be proportionate to risk and therefore charities need to be mindful of this when considering what is required of them under the Act particularly smaller UK based charities, who do not work in areas of the world where bribery is prevalent.
Trustees of incorporated charities must now therefore look at their activities and identify possible opportunities for those associated with them to commit an offence under the Act and take care to protect the charity by ensuring that appropriate adequate procedures are in place. All incorporated charities should undertake an audit of areas of their activity which may expose them to risks of bribery by their employees and others, including their subsidiaries, agents and volunteers. The level of risk will vary widely from charity to charity and some charities may properly assess that there is no risk of bribery on the part of its associated persons and therefore will require very little in the way of procedures to prevent bribery from occurring. However, trustees of charities disregarding the possibility of bribery as unlikely without having conducted a proper risk assessment to back up such a position may find themselves to be in breach of their duty as charity trustees and therefore personally liable to the charity for any resulting loss.
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, the guidance states that the prosecuting authorities will only decide to prosecute an offence under the Act if such a prosecution is in the public interest. It is therefore arguable that the prosecuting authorities are unlikely to consider there to be any public interest in prosecuting activities that are intended to further legitimate charitable activity unless there are special circumstances to that particular case. The common law defence of duress is also likely to be available to individuals who are left with no alternative but to make payments in order to protect against loss of life, limb or liberty and this may be of comfort to charities that have personnel working in potentially dangerous situations overseas.
How will the Act apply to trading subsidiaries?
The offences under the Act will apply to charity subsidiaries who will also need to ensure that "adequate procedures" designed to prevent bribery on their behalf are in place.
Other concerns for charities
Charities may be concerned that corporations operating in an area which benefits from a charity's projects may be cautious about donating to the charity for fear that this may be seen to be a bribe, perhaps as a sweetener to offset any damaging effects of the corporation's activities in the area. Legitimate corporate donor relationships are of course not tantamount to a bribe and case study 8 in appendix A of the Guidance sets out some considerations a commercial organisation should make when making a charitable donation in connection with a procurement process or as part of its business arrangements overseas.
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.