Bribery is endemic in many parts of the world, so how can you conduct business in those areas without falling foul of the Bribery Act 2010?

Over 100 FTSE listed UK companies were surveyed by KPMG for their Overseas Bribery and Corruption Survey in 2009.

KPMG found that “two thirds of respondents believe there are places in the world where they cannot do business without engaging in bribery and corruption; however, over half have not taken the decision to opt out of doing business there.”

Scenario I

Company A is based in the UK but has an office in China. If one of its employees in China does something as simple as taking a gift from a service company whose contract is up for renewal, could Company A be liable under the Bribery Act?

In short, yes. Section 7 of the Bribery Act introduces a corporate offence of failure by commercial organisations to prevent bribery. This offence applies to businesses which have a UK presence and it is a ‘strict liability’ offence, meaning that the prosecution does not need to prove any knowledge on the part of the business. In this scenario, Company A has a UK base and although it was unaware of its employee’s actions, that will not be a defence to a prosecution.

Scenario II

Company B is based in the UK but has an office in Spain. It runs a party planning business working on high profile events. The catering company which it regularly contracts with in Spain has a problem getting its meat delivery for one of Company B’s parties. In order to make sure it’s able to get the meat it needs for that evening it offers a financial incentive to its supplier. Could Company B be liable under the Bribery Act?

Section 7 states that so long as the action constitutes an offence under the Act a company can commit an offence through the actions of an “associated person“. If that person, whilst performing services on its behalf, bribes another person in order to obtain or retain a business advantage for the company. An “associated person” includes employees (of course) but is further reaching, including agents, subsidiaries and others. In this scenario the action of the catering company (as an “associated person”) would result in a business advantage for Company B, even though Company B played no part in the bribe.

So how can a company protect itself before the Act comes into force?

The Act states that if a company is able to prove it had in place “adequate procedures” to prevent such conduct this will be a defence to any action. Outline guidance produced by the Ministry of Justice Guidance paper has identified six key principles that companies should follow; these include management being committed to prevention of bribery and thus the culture of the organisation reflecting this, having in place effective risk assessment procedures and regular monitoring and review of such procedures.

Final statutory guidance will be issued in January 2011, but in the meantime companies should do as much as they can to prepare. With penalties for a section 7 offence being as severe as 10 years in prison or a company’s disqualification from public sector tendering, it is clearly very important that business takes appropriate preventative measures.