The Bribery Act 2010 is a new piece of legislation designed to combat bribery and corruption. The existing laws on bribery are considered too outdated to meet the UK's international obligations. In this edition we look at the impact that this new law could have on your business.
Pushed onto the statute books just before the General Election under international political pressure, the offences created by the Bribery Act 2010 are due to be brought into full effect in April 2011. In preparation for that, all commercial organisations will need to assess the areas of risk for their business. Do they operate in high risk or potentially corrupt sectors or countries? Do they rely heavily on third parties or interact with public officials on a regular basis?
Companies would do well to take a look at their historic approach to issues such as corporate hospitality, gifts, and charitable and political donations. They must consider whether changes to policy need to be made to ensure compliance with this new legislation – especially when it is not only the company that can be guilty of the offence, but also senior managers or directors who have consented or even simply turned a blind eye.
A bribe need not be a bundle of cash in a brown envelope – there are a wide variety of either financial or any other types of advantage being given to another person or organisation. The key issue is context – what is the intention of the party giving that gift or benefit? If it is to encourage them to perform their role improperly or to reward them for doing so, then an offence is likely to have been committed.
So what impact does this Act have for UK businesses operating elsewhere in the world? For a start, the treatment of overseas activities as 'out of sight, out of mind', will no longer wash. A company registered in the UK or, in the case of a director, a British citizen or UK resident, can still commit an offence under this Act despite the actual acts of bribery taking place elsewhere.
Unlike the equivalent US legislation, the fact that activities like facilitation payments - more colloquially known as the old-fashioned 'greasing of palms' - are simply a matter of local custom and practice will not be any defence.
Likewise, a company which is incorporated outside of the UK, but which carries on any part of its business in the UK, can also commit the new corporate offence. This is the offence of a commercial organisation failing to prevent bribery taking place. The bribe that triggers this offence can happen anywhere in the world, and by anyone providing services to the business – whether an employee, an agent, a subsidiary company or a third party.
The legislation, then, is framed in a zero tolerance attitude, and the SFO will be looking to make examples of businesses that fail to take the appropriate action to avoid an offence happening. Businesses must make a concerted effort to put into place the procedures that will provide a solid defence against 'failing to prevent' an act of bribery to protect their businesses and its directors from prosecution.
Given the substantial penalties for offences committed under the legislation (unlimited fines for corporations and potential prison terms for individuals) all businesses would be prudent to be prepared. Taking advice prior to the legislation coming into force will be the best route to manage the risk it creates and save the financial and human cost of falling foul of its draconian provisions.