A recent case puts businesses on notice that the Bribery Act 2010 has bite. Punished for failing to prevent the corrupt acts of its subsidiary, and defenceless because of a complete absence of procedures to prevent acts of bribery being committed on its behalf, Sweett Group PLC has the unwelcome distinction of being the first company to be convicted under the Bribery Act's corporate offence.

Sweett Group PLC (Sweett) is a construction company listed on AIM. Its subsidiary in the UAE paid a bribe to a senior Emirati official at an insurance company in order to secure a consultancy contract relating to the construction of a hotel. The bribe amounted to GBP 680,000 and was made in monthly payments under a sub-consultancy agreement.

A company can be guilty of an offence under section 7 of the Bribery Act if "a person associated with the company" bribes another person, with the intention of obtaining or retaining business or an advantage in the conduct of business for the company (corporate offence).

Following an SFO investigation, Sweett pleaded guilty to the corporate offence and was ordered to pay GBP 2.25 million, made up of a GBP 1.4 million fine, a GBP 851,152.23 confiscation order and GBP 95,031.97 in respect of the SFO's costs.

The key takeaways for your business are as follows.

  • Associated persons: Sweett's subsidiary, a separate legal entity, paid the bribe to win the contract for itself, and yet Sweett was the company which was penalised. The court found that where a subsidiary is not operating autonomously from its parent company, the parent company may be liable for acts of bribery committed by the subsidiary, which is held to be an "associated person". Ensure that you have sufficient oversight of your overseas subsidiaries as these could, in some circumstances, fall within the scope of "associated persons", making your business liable for their corrupt acts.
  • Adequate Procedures: Section 7(2) of the Bribery Act provides a defence if a company can show that it had adequate procedures in place to prevent bribery being committed on its behalf. Sweett admitted that it had no such controls in place. Worse still, earlier audits and reports had identified concerns regarding the subsidiary's activities, which Sweett did not address. Assess where the corruption risks lie in your business and discuss with your advisers how best to mitigate them. If you fail to do so, the penalties can be hard to swallow.

"The whole point of section 7 is to impose a duty on those running such companies throughout the world properly to supervise them. Rogue elements can only operate in this way and operate for so long because of a failure properly to supervise what they are doing and the way they are doing it."

HHJ Bedoe's sentencing remarks