Posts for April 2011

The Bribery Act - are you affected?

As summer begins, taking a client prospect to Wimbledon shouldn’t be a problem – but could you end up being done for another type of backhand?

Finally, after months of delay, the Guidance Notes to the Bribery Act 2010 have finally been unveiled. Were they worth the wait?

The cheers of acclaim for the Government’s efforts have been less than resounding. Some anti-corruption campaigning groups, such as Transparency International UK, are outraged at what they perceive to be a dilution of the principles of the Act. The Act itself will come into force on 1 July 2011, many months after it was first due to appear.

Bribery is defined as “giving someone a financial or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so.” That is rather a wide definition and a lead to one criticism of the Act - its scope is imprecise. The answer is that you know bribery when you see it. Is that satisfactory?

For those of you who have not been anxiously following the progress of the Bribery Bill before it became an Act of Parliament, it is a piece of legislation that sought to ratify the existing law, which was in a mess. The Act covers the giving or taking of bribes and not offences like money laundering or insider dealing.  

Employment lawyers are interested in the new law because, under section 7, a corporate offence of failing to prevent bribery was created. This means that if someone who is “associated” with your firm (eg works for you, or you engage or retain) bribes someone in the course of business, your firm might be prosecuted. However, if you can show your firm had “adequate procedures” in place to stop it happening, this will defend you.  

Where does the Act apply? In this instance, the long arm of the law is very long:

“a commercial organisation can be liable for conduct amounting to a section 1 offence (bribing another person) or a section 6 offence (bribing a foreign official) on the part of a person who is neither a UK national or resident in the UK, nor a body incorporated or formed in the UK.” It doesn’t matter either if the offence of failing to prevent bribery was committed abroad. Wherever in the world offences are committed, the law applies to any firm set up, incorporated or working in the UK.

Many people were concerned that the Bribery Act would make an offence of business hospitality - that taking a business prospect to Twickenham would land you up in the dock, not a corporate box. The concern is understandable as penalties are fairly toothsome: the maximum sentence an individual can receive is 10 years. But the Guidance specifically makes clear this is not a risk, stating: “the Government does not intend for the Act to prohibit reasonable and proportionate hospitality and promotional or other similar business expenditure intended for these purposes.”

That’s ok then, although the Guidance recognises that hospitality could amount to a bribe, without setting out where the dividing line is. It will be a matter of fact and degree, although one theme that runs through the whole of the rather chunky Guidance Notes, on my reading, appears to be that “you will know bribery when you see it”, which is less than helpful. A day’s boozing and chomping of strawberries at Wimbledon may well be acceptable, but the party bag containing a Rolex watch for him or a diamond necklace for “the wife” probably isn’t.

So what are “adequate procedures”? The Guidance talks of the need to carry out an assessment of the risk your organisation faces of being bribed. That will depend on the type of business you are in, the size of the organisation and, crucially, the geography of where you do business. In other words, if you do business in a part of the world where bribery is commonplace you need to consider your position very carefully.

By way of assistance, the Guidance set out six principles to help. They are flexible and, in the jargon de nos jours “outcomes-focussed”, which means “the detail of how organisations might apply these principles, taken as a whole, will vary, but the outcome should always be robust and effective anti-bribery procedures.”

The six new anti-bribery principles are:

• Procedures should be proportionate – this means anti-bribery policies and procedures should take into account the risks the organisation faces of being bribed.
• Top- level commitment – senior management must work to create a working culture where bribery is never acceptable
• Risk assessment – what is your firm’s exposure to risk? Which markets does it trade in and where?
• Due diligence – in other words, be careful with whom you do business.
• Communication – anti-bribery policies and procedures need to be communicated throughout the business and amongst all workers. This includes training on how to deal with any issues or problems that arise.
• Monitoring and review of procedures – make sure they work and review regularly.

The Guidance finishes with case studies of each principle. In respect of hospitality, it is suggested that a company make clear to any people it entertains that the largesse provided isn’t given in return for an obligation to give business to them. Limits on amounts spent should be set and consideration given to the appropriateness (or otherwise) of the hospitality to be given.

In summary, the Guidance Notes are necessarily high-level, but provide some useful background to the type of steps that businesses should be taking to prevent bribery. For many businesses, undertaking commercial activity in countries where bribery is rife, I suspect they will not be greatly comforted, especially with regard to so-called “facilitation payments” to foreign officials.

Perhaps the 45 pages could have been shortened to this: keep your eyes and wits about you and you won’t go wrong.

Michael Scutt, Dale Langley & Co
 
Find out more 

• Government guidance aims to clarify Bribery Act for small firms
• Small firms warned to review policies ahead of Bribery Act