Failure by a company to prevent bribery

Few would disagree that corporate hospitality is a legitimate and necessary part of doing business worldwide; however, if not properly controlled, the risk of falling foul of the UK Bribery Act is a stark reality. A lesson recently learned by Brand-Rex Limited, a developer of Cabling Solutions, based in Scotland.

Brand-Rex Limited operated an incentive scheme for its UK distributors and installers called “Brand Breaks” between the years of 2008 and 2012. As part of this scheme, third party installers and distributors were given rewards by Brand-Rex Limited for exceeding sales targets. One of the awards available was a foreign holiday. The reward scheme itself was not necessarily unlawful: remembering that under the UK Bribery Act corporate hospitality is not unlawful unless it is provided with the intention of procuring a financial or other advantage. Brand-Rex Limited also had terms in place providing that these rewards were intended for third party suppliers: not their own end-users.

Despite having such a policy in place, an independent installer who received the travel tickets then offered the tickets to one of his own customers. That customer happened to be in a position to influence decisions regarding future purchases of cabling. This incident was discovered by Brand-Rex Limited through its own internal review. Once discovered, the company appointed external lawyers and forensic accountants to carry out an investigation. Following the conclusion of this investigation, Brand Rex Limited self-reported to the Scottish Crown Office in June 2015 on the basis that it had failed to prevent bribery under section 7 of the Bribery Act 2010. Brand-Rex Limited then agreed a civil settlement of £212,800.

It is not clear whether Brand-Rex Limited tried to argue that it had adequate procedures in place to prevent bribery since (a) the terms of the scheme provided that the rewards were intended for third party installers and developers and not its own customers, and that (b) the fact the rewards had ended up in the hands of a customer who had the ability to influence the decision making with regards to future purchases was a result of a breach of the terms of the scheme which it could not prevent. However, the outcome will be of interest to companies relying on their associated persons signing up to anti-bribery and corruption commitments in contracts regulating their dealings. If your associated person breaches such commitments, the fact those commitments were in place may not in itself remove your exposure to Bribery Act liability.