The UK government announced today that the Bribery Act will come into force on 1 July 2011.

The Act creates new offences of offering or receiving a bribe, bribery of foreign public officials, and a corporate offence of failure to prevent a bribe being paid on an organisation's behalf. It also provides a defence to the last of these where the organisation can show that it had "adequate procedures" in place.

The announcement coincided with publication of the long-awaited guidance to businesses about steps they should take to prevent bribery and, if worst comes to worst and prosecution is faced, establish an adequate procedures defence. Helpfully, the guidance makes clear that such procedures need only be proportionate to the size and nature of the business; mitigating modest risks requires modest procedures.

Extra-territorial reach

There is still some uncertainty around the scope of the Act as it applies to companies incorporated outside the UK. Although no definition of "carrying on business" in the UK— which is the relevant test—has been provided, the guidance does state that a mere listing on the London Stock Exchange or just the fact of having a UK-incorporated subsidiary would not necessarily mean the Act applies. That said, these are not specific carve-outs and the extraterritorial effect of the Act remains a question for the courts.

Facilitation payments

Unlike the US Foreign Corrupt Practices Act, the Bribery Act does not provide any exemption for facilitation payments. It is argued that such exemptions create artificial distinctions which are difficult to enforce and risk confusing the anti-bribery message. The guidance does, however, recognise that the eradication of facilitation payments will be a long-term process and the Serious Fraud Office (SFO) has drawn up a list of factors that may tend against prosecution. Nonetheless, large or repeated payments are likely to attract a significant sentence, particularly where they are planned for or accepted as a standard way of conducting business.

Corporate hospitality

Usefully, the red herring of corporate hospitality, which has hogged far too many of the headlines surrounding the Act, has been addressed. The guidance makes it clear that there is no intention to criminalise bona fide business expenditure which seeks to improve the image of an organisation, better present its products or services, or establish relationships with customers. The SFO's intention was never to prevent an organisation from developing its business by means of reasonable and proportionate hospitality. This has now been made explicit and the discussion can move on.

Next steps

Combating bribery is not about bureaucracy; it is about a common sense approach to the actual risks that an organisation faces. The government has allowed businesses three months from the publication of today's guidance to the implementation of the Act. Step one for organisations seeking to establish adequate anti-bribery procedures should be a proper risk assessment, including due diligence in respect of persons who perform, or may perform, services for the organisation, and for whose acts the organisation may be liable. It is much easier—and more cost-effective— to establish effective and proportionate policies and procedures once an organisation has identified the risks specific to its business and can focus on tackling those in a meaningful way.