On 31 January 2011 the Ministry of Justice (“MoJ”) announced that the Bribery Act 2010 (“the Act”) will not come into force in April 2011 as planned. This is because the MoJ have not yet prepared the accompanying guidelines that will help businesses understand how they can keep on the right side of the law.
Although the Bribery Bill received all party support in Parliament, the Act is not without controversy. John Cridland, head of the CBI employers' group, recently said that the Act was "not fit for purpose", and the CBI have been particularly critical of the uncertain impact that the Act may have on corporate hospitality.
The counter argument is that British business is hampered for as long as the Bribery Act remains unimplemented. Prof Mark Pieth of the Organisation for Economic Co-operation and Development (“OECD”) has said that the OECD is disappointed at the delay in implementing the Act, as businesses that rely on bribery to generate business become weaker and less competitive than their international competitors. The OECD has previously threatened to “black-list” British companies if the UK Government doesn’t implement anti-bribery regulation of some form, and French, German and US companies appear to becoming more and more disgruntled with the apparent disparity between the anti-bribery rules that apply to them and don’t yet apply to UK companies.
Our previous edition of the Litigator looked at the operation of the Act but, as a reminder, there are four principal offences under the Act.
Offences 1 and 2: Making and Receiving Bribes
The two general bribery offences are broadly defined as:
“offering or receiving a financial or other advantage where the advantage is intended to bring about an improper performance of a relevant function or activity”.
The reference to “financial or other advantage” is deliberately wide ranging so that as well as offers of cash and payments, promises of future work, discounts, gifts, donations and offers of employment may all amount to bribes. The key message is that a bribe does not have to be a financial incentive.
In addition, “Functions and activities” now include not only those of a public nature, but any activity connected with a business and any activity performed in the course of a person’s employment.
Offence 3: Bribing Foreign Public Officials
A person is guilty of this offence if his intention is to influence the official in their capacity as a foreign public official, the definition of which is drafted broadly to reflect OECD publications. This includes any individual who holds a legislative, administrative or judicial position of any kind exercises a public function or is an official of a public international organisation.
Offence 4: Failure of Commercial Organisations to prevent Bribery
This new strict liability corporate offence is the most significant departure from the law as it currently stands, and covers bribery by persons associated with a commercial organisation who intends to obtain or retain business advantage for the organisation. It is this offence which requires you, as a business, to implement adequate procedures and processes to prevent such bribery taking place.
An organisation will commit the offence if a person associated with the organisation would be guilty of the offences of making a bribe, receiving a bribe or bribing a public official, regardless of whether those in charge of the organisation knew about the bribery.
Businesses should be aware that “associated persons” is widely defined not only to include employees, agents and subsidiaries, but also any person undertaking any function on behalf of the company, whether in the UK or overseas.
What are the penalties?
The penalties under the Act are severe. The maximum penalty for the first three offences is 10 years imprisonment and/or a fine.
A corporate conviction will mean that a company will not only face an unlimited fine, but also immediate disqualification from any public sector work within the EU. On the basis that nearly one third of small businesses describe themselves as reliant upon public sector contracts, this could have serious ramifications.
Directors may also face a director’s disqualification order, disqualifying them from holding a director position for up to 15 years.
The adequate procedures defence
An organisation will have a defence to the offence of failure to prevent bribery if it can show that adequate prevention procedures were in place. The Mo J guidelines should provide more detail of how this defence will operate. In the meantime there have been indications that the guidance will revolve around six key principles:
- Risk assessment and management.
- Top level commitment and responsibility for bribery prevention.
- Due diligence and relationships with business partners.
- Clear, practical and accessible policies and procedures.
- Effective implementation.
- Monitoring and review.
What practical steps can you take?
It will be interesting to see exactly what form the guidance on “adequate procedures” will take, and whether the competing pressures of businesses and regulators will impact on the guidelines. The guidelines will most certainly include a requirement that organisations of all sizes have a clear anti-bribery policy which is embedded into the culture and management structure of the organisation. Although a “one size fits all” approach is not appropriate, there are some practical steps that could be undertaken in preparation for the eventual implementation of the Act:
- conduct an initial risk assessment;
- introduce a global code of conduct which is implemented across the entire organisation and regularly monitored and reviewed;
- introduce a statement of values;
- implement detailed policies and procedures including, for example, policies on gifts, hospitality, facilitation payments and political contributions;
- training and guidance;
- internal controls; and
- risk management procedures.
Such measures will come at a cost to any business. However, if such measures are not implemented and an employee inadvertently commits an offence, the cost to the business could be severe and potentially disastrous. It is therefore imperative that businesses implement adequate procedures early to avoid falling foul of the new Act when it is finally implemented.