In April 2011, the new Bribery Act will come into effect, and the only defence for commercial organisations to a prosecution under section 7 of the Act will be that it had adequate procedures in place to prevent bribery. As anticipated in our July 2010 update, the Ministry of Justice has now commenced its consultation process concerning guidance to be provided on bribery prevention procedures. On 14 September 2010, the Ministry published its proposed guidance.
The guidance is formulated around six general principles which are designed to be of general applicability across all business sectors and all types and sizes of business. The guidance is:
- not prescriptive or standard-setting, not seeking to impose any direct obligations on businesses;
- not a “one-size-fits-all” document, recognising that for small or medium-sized organisations, the application of the six general principles is likely to suggest procedures different to those that may be suitable for a large multinational organisation. It is specifically stated that each organisation may “tailor its policies and procedures so that they are proportionate to the nature, scale and complexity of its activities”; and
- designed to complement—not replace or supersede—other forms of guidance published by, for example, industry bodies (in particular, it does not seek to undermine the FSA’s rules for the financial services industry).
Finally, the guidance is not intended to be definitive; the question of whether an organisation had adequate procedures in place to satisfy the defence will, in the event, be resolved only by the courts taking into account the particular facts and circumstances of a case.
The Six Principles for Bribery Prevention in the Proposed Guidance
This involves knowing and keeping up-to-date with bribery risks faced in the sector and markets in which an organisation operates. Consideration will need to be given to whether those charged with carrying out a risk assessment are themselves sufficiently skilled and equipped to do so; how best to carry out a risk assessment; and specific external factors such as country risks, transaction risks and business partner risks.
Top Level Commitment
This involves top level management taking a lead role in establishing a culture across the organisation in which bribery is unacceptable and conveying the message clearly, unambiguously and regularly to all staff and business partners. Examples of effective leadership procedures may include top level management making a statement of the organisation’s commitment to countering bribery and reflecting commitment against bribery in the organisation’s management structure by appointing a senior manager to oversee the development and implementation of an anti-bribery programme.
This involves knowing with whom you do business and ensuring confidence that business relationships are transparent and ethical as well as knowing why, when and to whom funds are being released and seeking reciprocal anti-bribery agreements. Due diligence measures may include enquiries about the risk of bribery in a particular country in which an organisation is seeking a business relationship, enquiries about the risks associated with a particular business opportunity and enquiries as to the reputation of individuals or organisations involved in key decisions, such as joint venture partners.
Clear, Practical and Accessible Policies and Procedures
This involves applying anti-bribery policies and procedures to all employees and business partners under an organisation’s effective control and covering all relevant risks ranging from political and charitable contributions to gifts and hospitality, promotional expenses. This may include policies and procedures for responding to allegations of bribery when they come to light and creating an anti-bribery code of conduct to form part of employment contracts.
This involves embedding antibribery policies into the entirety of the organisation’s activities (for example internal controls, recruitment policies, communications and training) and extending far beyond mere “paper compliance”.
Monitoring and Review
This involves having auditing and financial controls in place which are sensitive to bribery and are transparent. Organisations should consider how often anti-bribery policies and procedures should be reviewed and whether external verification is required.
The consultation paper includes a number of illustrative scenarios (though expressly not part of the guidance to be issued under the Bribery Act) intended to focus on areas of business which can present real risks of bribery for many commercial organisations. The scenarios are accompanied by questions that are indicative of questions that organisations may want to ask themselves when applying the guidance to individual circumstances. The scenarios cover the use of intermediaries and agents, hospitality and promotional expenditure, political and charitable donations, facilitation payments and dealing with business partners.
The consultation process continues until 8 November 2010, after which the definitive guidance on adequate procedures will be published in the New Year in advance of the Act coming into force in April 2011. For those wishing to review the draft guidance now, along with the illustrative scenarios, or to participate in the consultation process, the full Consultation Paper can be found at http://www.justice.gov.uk/consultations/briberyactconsultation.htm. We would anticipate sending out a further update when the definitive guidance on adequate procedures is published in the New Year.