On 14 September 2010, the Ministry of Justice ("MoJ") published its long-awaited consultation paper on the meaning of "adequate procedures" for the purposes of section 7 of the Bribery Act 2010. (For an overview of the Act, please see the June 2010 issue of the Corporate Newsletter.)
Section 7 introduces a new strict liability offence whereby corporates can be automatically liable for bribes paid by employees, subsidiaries, agents and other third parties acting on their behalf. In a reversal of the ordinary burden of proof, the corporate can only avoid conviction if it can show that it had "adequate procedures" in place to prevent bribery. In other words, the corporate is given the opportunity to demonstrate that this was an isolated incident rather than an organisational failure.
The six principles
- The consultation paper sets out six broad "management principles" which are intended to guide corporates in deciding what bribery prevention measures to put in place. These principles are:
- risk assessment - corporates should monitor the bribery risks associated with their market
- top level commitment - the anti-bribery "tone from the top" must be clearly articulated both internally and externally
- due diligence - businesses should take steps to understand who they are doing business with
- clear, practical and accessible policies and procedures - written documents should be readily accessible, and cover matters such as political and charitable contributions, gifts and hospitality, promotional expenses, facilitation payments and "whistle-blowing"
- effective implementation - policies need to be put into practice in all areas of the business, from recruitment to training
- monitoring and review - auditing and financial controls should be put in place, and the company's procedures should be regularly reviewed, including externally, if appropriate.
As the MoJ emphasises, these six principles are not intended to be prescriptive. It is not possible to have a "one size fits all" approach to anti-corruption compliance, and the question whether a particular organisation had "adequate procedures" in place will ultimately have to be resolved, in the context of a particular prosecution, by the court in the light of the particular facts and circumstances.
While the six principles provide some useful guidance, including as regards the difficult question of corporate hospitality, the onus is still on corporates to determine for themselves, in the light of the nature and scale of their activities, their resources, their exposure to high-risk jurisdictions and business sectors, and their third party relationships, what they consider to be proportionate.
The consultation process is due to end on 8 November 2010, in order to allow the finalised guidance to be published early in 2011. Section 7, along with the Act as a whole, is then expected to come into force in April 2011. While that is still some time away, corporates are well advised to act now to start to consider the application of the Act to their business, and the extent of their potential exposure.