The government has announced today that the Bribery Act will now come into force on 1 July 2011 and not next week as originally proposed. Ken Clarke, Secretary of State for Justice, comments in the foreword to the guidance that "I have listened carefully to business representatives to ensure the Act is implemented in a workable way ... And, as I hope this guidance shows, combating the risks of bribery is largely about common sense, not burdensome procedures." The guidance itself together with a 'quick guide' can be found at the following link: http://www.justice.gov.uk/guidance/bribery.htm.
We will be looking at the new guidance in more detail and provide you with a thorough update in due course.
That said, we set out below some of the key points we noted at a first glance:-
- Hospitality. The guidance emphasizes that the Act does not intend to prohibit 'reasonable and proportionate' hospitality, judged by what a reasonable person in the UK thought. The more lavish the hospitality or the higher the expenditure, the greater the inference that it is intended as a bribe. The standards and norms applying in a particular sector will be taken into account. This clarification is to be welcomed. However, the guidance then states that, simply complying with such industry or sector standards or norms will not be a safe haven 'if the norms in question are extravagant', thus adding again a degree of uncertainty.
- Failure of commercial organisations to prevent bribery (section 7 offence) - what are 'relevant commercial organisations'
- Charities. The guidance clarifies that the section 7 offence applies to bodies incorporated, or partnerships formed, in the UK and engaged in commercial activity irrespective of the purpose for which profits are made. Thus, organisations that pursue primarily charitable or educational aims or purely public functions are subject to the Act.
- Foreign companies. As reported by the media even before the guidance was published, the mere fact that the securities of a foreign company (ie a company incorporated outside the UK) have been admitted to the UK Listing Authority's Official List and are admitted to trading on the London Stock Exchange does not in itself qualify the company as 'carrying on a business or part of a business in the UK'; such foreign companies will therefore not be subject to the section 7 offence.
- Subsidiaries of foreign companies. The guidance states that 'having a UK subsidiary will not, in itself, mean that a parent company is carrying on a business in the UK, since a subsidiary may act independently of its parent or other group companies'.
- Failure to prevent bribery (section 7 offence) - who are 'associated persons'
- Supply chain and contractors. A commercial organisation is liable under section 7 of the Act if a person 'associated' with it bribes another person. The term 'associated person' is defined very broadly and there has been concern that it may require conducting due diligence on the whole supply chain. The guidance puts some of these concerns to rest as it suggests that only the relationship to an organisation's contractual counterparty is relevant. If bribery risks arise as a result of a supply chain, the guidance advises organisations to employ their anti-bribery procedures in relation to their contractual counterparty and to request them to adopt a similar approach with the next party in the chain.
- Joint ventures. The guidance distinguishes between joint ventures operated through a separate legal entity and joint ventures conducted through a contractual arrangement. Where a joint venture is operated through a separate legal entity, a bribe paid by an employee or agent of the joint venture entity will not trigger liability for the members of the joint venture 'simply by virtue of them benefiting indirectly from the bribe through their investment in or ownership of the joint venture'. The prosecution will need to show that the bribe was intended to directly benefit a joint venture member. In contrast, in the case of a joint venture conducted through contractual arrangement, the participants' greater degree of control over the arrangement will be taken into account when deciding whether a person who paid a bribe in the conduct of the joint venture business is a person associated with a participant.
- Facilitation payments. Facilitation payments are prohibited under the Act and the guidance does not attempt to alter that.
- Six principles of bribery prevention. A commercial organisation will not be liable for a section 7 offence if it can show that it had adequate procedures in place to prevent bribery. The guidance's six principles governing an organisation's bribery prevention procedures are largely based on the principles published in draft form last year although the order and emphasis has changed slightly. They are:-
- Proportionate procedures - this is new and relates to both bribery prevention policies and the procedures which implement them. Former principle 1 of the draft guidance (risk assessment) is now principle 3; principle 5 of the draft guidance (effective implementation) has been removed and guidance on implementation is instead provided as part of all six principles. This new principle 1 underscores the MoJ's aim to 'ensure that everyone - from the multinational to the lone trader - can deal with the threat of bribery simply and effectively'.
- Top-level commitment
- Risk assessment
- Due diligence
- Communication (including training), and
- Monitoring and review.