The Bribery Act 2010 (the Act) came into force on 1 July 2011. It provides a comprehensive scheme of bribery offences that will apply to private-sector bribery, as well as to corruption of public officials, including some officials of state-owned companies.

General offences include offering or paying bribes, requesting or receiving bribes, and the bribery of foreign public officials. These offences apply to the activities of UK companies and individuals anywhere in the world, and to foreign companies where part of the bribery scheme occurs in the UK.

A bribe is a payment (or another financial or non-financial advantage) that is intended to induce “improper performance” of some kind of duty, obligation, function or activity. Improper performance does not require dishonesty: breach of an obligation of good faith, impartiality or trust will suffice.

The Act also introduces a new offence of “a failure by a commercial organisation to prevent bribery”, applicable both to organisations incorporated or formed in the UK, and to foreign organisations which carry on any business in the UK. Here, an organisation may be liable for a bribe paid anywhere in the world by a person associated with it, unless it can demonstrate that it had implemented adequate procedures designed to prevent bribery. The intention is to require companies to assess and address the bribery risks they face, and to implement, maintain and enforce effective anti-bribery policies, systems and controls.

A person is associated with a commercial organisation if he or she performs services, in whatever capacity, for or on behalf of the organisation. This is wide in scope. The definition necessarily includes directors and employees, but extends much further to include a wide-range of third parties. It will extend to coverholders, to at least some broking arrangements, to loss adjusters, and even to external lawyers and accountants.

Brokers are a particularly difficult issue. Whilst brokers are agents of insureds, and therefore not often acting “on behalf of” an insurer, it will be difficult to argue under many broking arrangements that they are not also performing services for insurers. Brokers are, after all, bringing business to insurers. Thus a broker could pay a bribe to the risk manager of the insured to obtain the insured’s instruction to place the insured’s risks in the London market, with the insurer underwriting the risks. The broker would not be acting on behalf of the insurer, but would have paid a bribe to obtain business for it.

Further, the Act makes directors, company secretaries and managers personally criminally liable if they consent to or ignore bribery.

Risk is not confined to the Bribery Act. Money laundering legislation may also be engaged. Revenues or profits deriving from criminal conduct are criminal property. That includes revenue or profits from contracts obtained by bribes. Any dealings with those funds, with knowledge or suspicion that they represent criminal property, could constitute a money laundering offence. The only defence to a money laundering charge is for a report to be made to the Serious Organised Crime Agency disclosing the payment of bribes. Law enforcement agencies may try to forfeit revenue or profit from a tainted contract as the proceeds of crime.

Bribes are not confined to the payment of money, and extend to non-financial advantages, including, for example, unduly lavish hospitality or gifts. There has been much media comment that hospitality will be treated as bribes, much of which exaggerates the risk. Government and prosecutors have given assurances that the Act is not intended to criminalise ordinary and established corporate hospitality intended to build and maintain relationships, such as invitations to sporting and cultural events, and fine-dining. The question is whether the hospitality is reasonable and proportionate. In most cases, the dividing line is clear.

In assessing the reasonableness of the hospitality and spend, regard can be paid to the nature of the individuals that are entertained and their leading role in major sources of funds. A good practical question is whether the hospitality is something the recipient could easily afford from their own resources, or whether you would feel embarrassment if the hospitality became a media story.


First Scenario

A Lloyd’s syndicate underwrites reinsurance of a South American insurer in respect of insurance of the property of a state-owned energy company, broked by Broker A.

Broker A asks Lloyd’s broker B to place the reinsurance. Reinsurance premium is paid via Broker A’s account at a bank in Zurich. Broker A has agreed to pay Mr Big at the energy company a bribe, to be deducted out of Broker A’s commission as it passes through Zurich, and paid into Mr Big’s Swiss account.

What is the exposure of the Lloyd’s Syndicate? What is the exposure of Broker B?


It is unlikely that the Syndicate has an exposure under the Bribery Act as Broker A (who paid the bribe) is unlikely to be an associate of the Syndicate because the broker does not provide services to the Syndicate. The Syndicate’s exposure may arise under anti-money laundering (AML) regulations because the premium will be the proceeds of crime, as it has been procured by the bribe.

Broker B’s exposure under the Bribery Act will depend on whether Broker A is an associate of Broker B, which will depend on whether it is providing services for Broker B (for instance by procuring business for Broker B). Broker B may also have exposure under the AML regulations.

Second Scenario

A European insurer has branches in London and Sao Paolo. The Sao Paolo branch appoints a coverholder in Detroit. The coverholder (a) pays a claim on a risk written under the binder which is 10% less than the amount claimed and (b) pays 5% of the claim to the policyholder’s adjuster in consideration of the claim being reduced by 10%.

What is the insurer’s exposure?


The coverholder is an agent of the insurer and is accordingly an associate for the purposes of the Bribery Act. The payment by the coverholder has induced improper conduct by the insured’s agent, the adjuster, and is a bribe under the Act. The bribe has been paid to obtain an advantage for the insurer. To avoid liability under the Act, the insurer must demonstrate that it has adequate procedures in place to prevent bribery: for example, what due diligence has it conducted into the coverholder? What audit procedures does it have in place? The insurer’s exposure in London may arise if the US authorities refer what has happened to the UK authorities for investigation and prosecution, because, for example, the payment of bribes by the coverholder has been widespread to the detriment of US policyholders.

Scenario Three

Broker Y brokes a professional indemnity lineslip to the market. In addition to the commission of 15% in the slip, the broker says that it requires payment of a commission of 5% of claims paid under the lineslip. The insurers agree to pay the commission annually. What is the exposure of the insurers and the broker?


Broker Y is broking the lineslip as agent for the future insureds under slips issued off the lineslip. Insureds are taken to consent to usual levels of commission payable under the lineslip (here 15%).

The questions as regards the 5% claims commission are: Is it usual? Is it disclosed to the insureds? Is it reasonable compensation for the work performed by the broker for the insured in handling claims? Is it being paid to induce the broker to act improperly, for example to place the lineslip only with those insurers willing to pay the 5% commission irrespective of whether that is in the best interests of the insureds? If the answers to the first 3 questions are “No” and the answer to the last question is “Yes”, then the payment may be a bribe under the Bribery Act and both the insurers (as payers) and the brokers (as receivers) may be committing an offence.

Fourth Scenario

There is a competitive tender for UK PLC’s insurance programme. London insurer X is successful and the underwriter invites the brokers to one of the most expensive London restaurants to celebrate. He buys a £25,000 bottle of wine.

What is the exposure of insurer X? What is the exposure of the brokers? Would the answer be different if the dinner took place before or during the tender process?


The brokers are the agents of UK PLC. Is the dinner intended to induce the brokers to act improperly as regards their duties to their client, for example to recommend X’s tender even though it is not the most competitive? Was it promised to the brokers during the course of the tender as a reward? May it improperly influence the brokers as regards future tenders? Although in the vast majority of cases, corporate entertainment is unlikely to infringe the Act, if the hospitality is lavish and disproportionate, it may amount to a bribe and expose X to criminal prosecution.