Bribery Act 2010

The Bribery Act 2010 came into force on 1 July 2011 and Jaan Larner urges all businesses to review their policies and ensure that they have adequate procedures.

The Bribery Act 2010 came into effect on 1 July 2011, creating four offences:

• the offering, promising or giving of a bribe;
• the requesting, agreeing to receive or accepting of a bribe;
• bribing a foreign official;
• failure by a commercial organisation to prevent a bribe being paid or received on its behalf.

Businesses and individuals need to ensure that they take adequate steps to ensure that they and their staff are aware of the provisions and comply with them in order to avoid the criminal penalties that apply.

The Act covers bribery in the UK and abroad by all businesses in both the public and private sectors. The maximum penalty jail term for an individual increases from seven to ten years. A commercial organisation could face an unlimited fine and company directors will face lengthy disqualification periods.

When deciding whether a bribe has been paid, the courts will use the test of the opinion of a reasonable person in the UK, so beware of simply following local custom when making payments abroad.

Your business can be guilty of an offence if one of its employees, agents or another person associated with your business pays or receives a bribe on your behalf.

Definitions

The definition of "associate persons" is reasonably clear, if broad, being "any person performing services for or on behalf of a commercial organisation". However, a "commercial organisation" is defined as any organisation which carries on business in the UK.

This latter definition should not catch a business with no demonstrable business presence in the UK which would include a business which merely has its shares listed on the London Stock Exchange, but no other link to the UK.However, a risk assessment (see below) should assist in verifying the status if a business is unsure about whether it is covered by the Act.

Published guidance

Businesses will be somewhat relieved that the guidance to the legislation has adopted a practical approach insofar as anti-bribery procedures should be proportionate to the bribery risks the business faces.

The guidance states that corporate hospitality of a reasonable and proportionate nature is not prohibited, for example taking a client to a football match or Wimbledon will not fall within the definition of a bribe if it is for genuine business development purposes and such entertainment is normal for the industry in which the business operates. The guidance recognises that reasonable and proportionate hospitality which promotes business is both an established principle and acceptable. If it is not lavish and normal for your industry, it should not amount to an offence and detailed examples are provided in the guidance.

Adequate procedures defence

With relation to the new offence of the failure of a commercial organisation to prevent bribery, the Act provides a defence where "adequate procedures" have been adopted by the commercial organisation designed to prevent those "associated" with it from undertaking such conduct.

While "adequate procedures" are not defined, the guidance sets out six general principles, which should be followed across all industries, adopting a risk-based approach.

• Proportionate procedures – anti-bribery procedures should be proportionate to the bribery risks facing an organisation. Commercial organisations will need to start by assessing risk across the business, for example within overseas operations or in the corporate hospitality it undertakes.

• Top level commitment – the guidance makes it clear that legislators expect owners, top-level directors and managers to be involved in setting the anti-bribery procedures and ensuring the principles are reflected across the business. It is expected that it should be a clear part of the culture of the firm that bribery is never acceptable. Top level commitment can be demonstrated by a formal statement of the business’ approach to countering bribery and the formal involvement of the senior directors and owners in developing, maintaining, monitoring and reviewing bribery prevention policies.

• Risk assessment – related to the proportionality principle,businesses will need to adopt appropriate risk assessment procedures with respect to their size and structure, including risks arising from the country or sector in which they operate, whether they participate in activities such as public procurement, the types and subject matter of transactions, as well as the participants.

• Of particular interest to businesses with a strong bonus culture, it is important to review the potential for increased and excessive risk-taking.

• Due diligence -businesses will need to review the relationships with individuals and organisations who perform services or supply goods to the business, to ensure that an appropriate approach is taken. This is designed both to highlight and mitigate risk, and will be of particular importance in company merger and acquisition activities.

• Communication and training -businesses must clearly communicate, internally and externally, that bribery is wholly unacceptable. Who this is directed at will depend on the level of risk assessed. All businesses should include training in induction procedures for new staff and when taking on new providers of goods and services, as well as part of appropriate interim training for existing staff and providers. The aim is to foster an anti-bribery culture in all businesses.

• Monitoring and review -once anti-bribery procedures are in place businesses are required to adopt monitoring and review procedures to ensure ongoing compliance. The precise format of this ongoing monitoring and review is not prescribed and will depend on the individual business, again based on the risk assessment.

Facilitation payments

There are further detailed provisions about challenges facing businesses operating in certain parts of the world and the guidance confirms that facilitation payments are illegal. More detail is provided in the prosecution guidance issued to the relevant authorities, which suggests, among other items, that single small payments, payments which are self-reported, or situations where the payer is placed in a vulnerable position are unlikely to be prosecuted.

Also if the business has clear and appropriate policies setting out what an individual should do if facilitation payments are requested and these are followed, it will count against prosecution and vice versa. Therefore such guidance should form part of the training for employees of any business, which may face such situations.

Conclusion

The legislation succeeds in recognising what might be termed Anglo-Saxon business practices, but makes no allowances for practices which do not fall within those norms. It also provides for guidance on joint ventures and several other aspects of business.