The 2012 Summer Olympic and Paralympic Games in London offer a unique opportunity for companies to promote their businesses through entertainment of customers or clients at the various game venues. Has the UK Bribery Act 2010 put a damper on these time-honored business practices and the manner and methods by which business organisations seek to obtain and retain business?
The UK Bribery Act ("the Act") applies to all organizations incorporated or formed in the UK, or conducting any part of their business in the UK. It has a potential global impact on both UK and foreign businesses that may regard the London Olympic Games as a wonderful opportunity to entertain customers and clients. Yet, the Act clearly criminalises the provision of any financial or other advantage to another person offered or provided with the intention of inducing the recipient to perform a relevant function improperly, or with the knowledge that the acceptance of the advantage itself would be improper performance of an official or business function. The measure of impropriety is expected to be that conduct which would reasonably be considered by a UK person to be intended to induce a breach of the expectation that a person in the recipient’s position would otherwise act in good faith, impartially, or in accordance with a position of trust. The Act also provides that companies will be held strictly liable for failure to prevent bribery by associated persons, unless the company can show that it had adequate procedures in place to prevent the bribery.1
Thus, under the broadly worded provisions of the Act, providing or accepting corporate hospitality might be considered illegal. In compliance with the Act and in response to an outcry from the business community when the Act was first published for public consultation, the Ministry of Justice provided guidance which attempted to make clear that the Act is not intended to penalize reasonable expenditures for corporate hospitality for legitimate commercial purposes. In the Government’s view, "bona fide hospitality and promotional, or other business expenditure which seek to improve the image of a commercial organisation, to present products and services, or establish cordial relations, is recognised as an established and important part of doing business and it is not the intention of the Act to criminalise such behaviour". Nor does the Government intend for the Act to prohibit "reasonable and proportionate hospitality". The guidance did attach a caveat that the more lavish the hospitality provided or the higher the expenditure, the greater the potential inference that such benefits were intended to improperly influence the recipient.
Therefore, the guidance might lead companies to assume that no one in the UK prosecutorial or administrative services is going to second-guess or interfere with their getting to know their customers, and their customers getting to know them and their products and services, during events like the Olympic Games. This may well be true, but companies are still best advised to remain mindful of the factors suggested in the guidance. It is also worth considering that the newly appointed director of the Serious Fraud Office has stated an intent to be more prosecutorial and less conciliatory in approach.2 They should also keep in mind that the judges who will be the ultimate arbiters of what the Act means and how it must be applied have at least informally indicated that guidance is simply that, and may have no more authority than an academic treatise or even articles such as this.
Therefore, in order to minimize the chance of running afoul of the Act, businesses should carefully consider the following:
- Is the planned expenditure reasonable and proportionate not just to the monetary resources of the provider but to the business relationship in question?
- Can you define and document a legitimate business purpose, such as the development of a specific business relationship or the promotion of a particular product or service? Can you be satisfied that nothing would appear to an objective observer as placing the recipient under any obligation or otherwise influencing objectivity, and that there is no expectation of a quid pro quo business advantage?
- Does the invitation or the event itself coincide with a key business decision such as a pending bid process, request for proposals, the renewal of an existing contract, etc.?
- Although the recent report of the Organisation for Economic Cooperation and Development Working Group (OECD Working Group; Phase 3 Report on Implementing the OECD Anti-Bribery Convention in the United Kingdom) was highly critical of this guidance factor, can you benchmark your expenditures against the market and what has traditionally been acceptable in your particular industry to ensure that the hospitality falls within generally accepted business practice? But remember, “everyone else does it” is not a recognised defence.
- Does the hospitality conform to your own organisation’s (preferably written) policies, rules and practices for business development expenditures, management approvals and transparent documentation and accounting?
- Does the hospitality comply with the recipient’s employer’s rules and procedures for the acceptance of entertainment, as well as any documentation that might be required?
- Was the invitation itself openly offered and appropriately documented?
- •Was the invitation extended to an appropriate level business contact, or were others such as a spouse or guests of the recipient included?
- Has the recipient been invited to a number of events, and has due consideration been given to the possible cumulative effect and a resulting appearance of impropriety?
The Summer Olympic Games come around only every four years and are not always held in venues as accessible and otherwise attractive as London. But the cost is commensurately also quite significant, as even moderately priced ticket packages can run into the thousands of pounds. Nevertheless, the Games do offer a truly unique opportunity to promote business and build commercial relationships. The Act should not prevent legitimate business development activities, particularly for those organisations that have heeded our advice and established appropriate governance policies and procedures that take into account factors such as those listed above.