Having received royal assent back in April 2010, with implementation originally expected in October 2010, then April 2011, the Bribery Act 2010 seems a long time coming. However, as the Ministry of Justice has published its long-awaited guidance on the “adequate procedures” defence, the Act will come into force on 1 July 2011. What can we expect?
Our Health and Safety Brief of 13 January 2011 set out the main provisions of the Act, as well as what it might mean in practice and some advice on what organisations should do. By way of a brief recap, the Act begins with the offences of bribing another person and being bribed, followed by new offences of bribing foreign public officials and the failure of commercial organisations to prevent bribery.
It is the new corporate offence which has generated most concern. Section 7(1) provides that a relevant commercial organisation is guilty of an offence if a person associated with it bribes another person intending to obtain or retain business or a business advantage for the organisation. Essentially, it is a strict liability offence, meaning there is no need to establish fault/negligence, although s.7(2) provides a defence where the commercial organisation can prove it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct.
As this defence will be key, s.9 requires the Secretary of State to publish guidance about such procedures. At the date of our previous briefing, draft guidance had been published but subsequent reaction led the Government to postpone implementation of the Act whilst further consultation was undertaken. On 30 March, the Government published the final version of its guidance and announced the Act would come into force on 1 July 2011.
“Adequate procedures” guidance
Kenneth Clarke’s foreword states, “… as I hope this guidance shows, combating the risks of bribery is largely about common sense, not burdensome procedures. The core principle it sets out is proportionality.”
The guidance is not prescriptive, nor a one-size-fits-all document. Instead, it is designed to be of general application, formulated around six guiding principles:
- Proportionate procedures – procedures should be proportionate to the bribery risks the organisation faces and the nature, scale and complexity of its business.
- Top-level commitment – as those at the head of an organisation are best-placed to foster a culture where bribery is unacceptable, their involvement in determining procedures and key decisions is encouraged.
- Risk assessment – organisations should assess the nature and extent of their exposure to potential bribery risks, both internal and external. This should be proportionate to their size, structure and the nature, scale and location of their activities.
- Due diligence – organisations are encouraged to apply due diligence procedures, taking a proportionate, risk-based approach, regarding those who perform services for or on behalf of them.
- Communication (including training) – policies and procedures should be embedded throughout the organisation through communication, proportionate to risks.
- Monitoring and review – procedures should be continually evaluated and, where necessary, improved.
Ultimately, whether an organisation will be judged to have adequate procedures will be for the courts to decide, taking into account the particular facts and circumstances of the case.
This was an area of particular concern to many, hence Kenneth Clarke’s comment in the foreword: “Rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix.”
The guidance states that it is not the intention to criminalise bona fide hospitality/promotional expenditure aimed at improved public relations, which is reasonable and proportionate given the type of business. However, where hospitality is suspected to be a cover for a bribe, factors such as the level of hospitality, the way it was provided and the degree of influence of the recipient on the particular business decision, will be considered.
Facilitation payments were another area of concern. The guidance clarifies that the Act does not allow any exemption for such payments, even if they are customary and acceptable in that locality. This means that this aspect will be stricter than under US legislation. The US Foreign Corrupt Practices Act (“FCPA”) has an exemption for facilitation payments i.e small payments for officials to expedite or secure the performance of a routine government action.
Where hospitality or facilitation payments trigger the Act, the guidance states that prosecutors will consider very carefully what is in the public interest before deciding whether to prosecute.
Organisations should ensure that they have appropriate policies in place and be able to demonstrate that such polices are suitable and sufficient in the event of challenge, so that an anti-bribery culture is in place and, if the worst happens, they can seek to rely on the section 7 defence where it is appropriate. Companies are likely to find that, at the underwriting stage, D&O insurers take a greater interest in the compliance processes and training that is in place.
The Act is wide reaching because it applies to acts or omissions of persons, companies or partnerships. An organisation commits an offence if an employee, director or even “agent” pays or receives a bribe in connection with the business of the company. The connection with the UK which is needed for this UK Act to apply may appear to many to be small, and there is no doubt that some organisations risk falling foul of the law. For companies or partnerships incorporated in the UK, acts or omissions occurring abroad could be caught. Even companies/partnerships incorporated abroad could be subject to the Act if they carry out part of their business in the UK. If you are a person who is a UK citizen or simply resident in the UK (irrespective of nationality), your acts or omissions in the UK as well as abroad could be subject to the Act.
Insurance brokers, who are increasingly having to look internationally for sales in the current economic climate, may find the lack of prescriptive guidance especially disappointing and feel the need to supplement it by reference to the FSA’s report, “Anti-bribery and corruption in commercial insurance broking”.
The Ministry of Justice’s “Guidance about commercial organisations preventing bribery” and “Quick start guide” can both be found at http://www.justice.gov.uk/guidance/making-and-reviewing-the-law/bribery.htm