The Bribery Act 2010 and related guidance

overview

At the end of March 2011, the government announced that the delayed Bribery Act (“the Act”) would become effective on 1 July 2011.  The Act defines what amounts to bribery and the penalties when the offence takes place.

the offences

The Act sets out the following offences:

• Bribing another person;

• Being bribed;

• Bribery of a foreign public official; and

• Failure of a commercial organisation to prevent bribery.

Although the legal definitions of each type of bribery are different they all involve two features: trying to obtain an advantage, which need not be a financial one, and inducing or rewarding improper conduct.

The fourth offence above, a corporate one, occurs when a person connected to the organisation bribes another person with the intention of gaining a business advantage for the organisation. The only defence for the organisation is that it had adequate procedures in place to prevent persons associated with it from undertaking such activity. The Act also required the Secretary of State to publish guidance as to what procedures could be put in place to prevent associates engaging in bribery.

guidance on organisations preventing bribery

The Guidance comes in two forms, a “quick start guide” and the full Guidance, and sets out six principles to help organisations plan their response to the risk.

Both versions of the Guidance can be found at http://www.justice.gov.uk/guidance/making-and-reviewing-the-law/bribery.htm

 
the principles

The procedures to guard against the corporate offence which will be regarded as adequate will depend on the type of bribery risks faced and the nature of your business.  The Guidance's six principles are:

• proportionality;
  

• top level commitment;
  

• risk assessment;
  

• due diligence;

• communication; and
  

• monitoring and review

Proportionality

The Guidance recognises that the actions taken need to be proportional to the risks and size of the business.  This could mean no more than an assessment that demonstrates the risk of bribery is very low and periodic oral briefings to staff that bribery is not acceptable.  At the other end of the spectrum for large multi-national companies the procedures may require extensive written communication, policies and due diligence to be undertaken.  Equally, a small company operating in an overseas market where bribery is considered rife might find itself needing to take more active measures than a medium sized company operating solely in the UK market so size alone is not the determining factor.
 
Top level commitment

The tone from the top is important as these persons are considered to be in the best position to determine and ensure their organisations do not enter into bribery.  Top management is therefore expected to be appropriately involved in creating a culture where bribery is unacceptable, in communicating the anti-bribery message and in the development of anti-bribery procedures.
 
Risk assessment

A risk assessment should be undertaken to identify and assess the nature and extent of possible bribery whether from internal or external sources.  This needs to be updated as a business evolves and may overlap partly with the fourth principle, due diligence.  Undertaking a proper risk assessment is important as this helps assess the type of procedures that might be considered adequate in addressing a response proportional to the risks.  If a risk assessment is undertaken without proper thought, key risks could be missed which might undermine the defence against failure to prevent bribery.
 
Due diligence

The amount of due diligence required on persons who will be performing work with, or on behalf of the organisation, should be risk based; again, another reason for ensuring the risk assessment is performed properly.  This may involve understanding who the organisation is engaging with, enquiring of their background, obtaining CVs of experience and/or taking up reputable references.  In other words, go into a business relationship with eyes open and keep them opened.
 
Communication

The prevention procedures and policies against bribery need to permeate throughout the organisation and to those performing services for your organisation.  This may mean considering whether training and raising awareness through regular communications is appropriate for the size and nature of the organisation.
 
Monitoring and review

The risks and the appropriateness of procedures should be kept under review.  This might involve monitoring how effectively the anti-bribery culture is being communicated and recognising new risks that emerge.  Just because an organisation has undertaken a risk assessment and adopted adequate procedures now does not mean these procedures will still be adequate in a few years’ time and therefore regular monitoring is recommended.  Apart from a regular refresh after a period of time, organisations may also want to use certain key events, such as government changes or a reported case of bribery, to be an incentive to review the situation.

The Guidance states that there is no need for extensive written documentation or policies and existing controls may already be a proportionate response.  For instance, many organisations will already have approval and authorisation procedures in place which, after review and communication of an anti-bribery policy, may be assessed as being adequate to guard against bribery.

Two themes flow through the Guidance: proportionality and common sense. Whilst these themes are welcomed, ultimately it will be for the courts to decide whether the actions taken were adequate. Organisations would be well advised to keep their procedures under regular review in order to be able to demonstrate that they could reasonably be regarded as adequate should they find an associate has been involved in bribery on their behalf. Not taking any action could leave those involved open to no defence and the prospect of unlimited fines, debarment from public contracts and/or jail terms of up to 10 years.

hospitality
Before the Guidance was issued there was concern as to whether the provision of corporate hospitality would be considered bribery.  The Guidance makes it clear that genuine hospitality is not intended to be caught by the Act and Kenneth Clarke in his foreword to the Guidance says “Rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix.”  However, the Guidance adds a “reasonable and proportionate for your business” condition and recognises hospitality can be used as a bribe in some situations.  Nevertheless this clarification is useful after some of the recent interpretations to the Act.
 
facilitation payments
So called facilitation payments (i.e. payments to induce routine Government actions) remain illegal but the Guidance says that prosecutors will carefully consider the facts and whether the payments are a bribe and, if so, whether prosecution is in the public interest.  Interestingly the Guidance only has eradicating facilitation payments as a long term objective and recognises that international collaboration is required to make progress in this area.  There is an implication that for the moment the Government is looking for the Act to be a start on the elimination of bribery rather than an end to it.
 
prosecution
In order for a prosecution to take place there must first be sufficiency of evidence and then a decision made as to whether the prosecution will be in the general public interest.  The discretion in prosecution is designed to provide flexibility to ensure the just and fair operation of the Act.

next steps

For many organisations the Act is going to be a case of a low likelihood of being relevant but with an extremely high impact if an issue arises and therefore sgould not be ignored.

At the very least organisations need to undertake a risk assessment to consider what risks of bribery it is exposed to and what an appropriate response is. This assessment may involve some, or all, of a board discussion, researching countries of operations and assessing the local business customs, a brainstorm of operational executives, completion of risk analysis questionnaires and/or due diligence enquiries. 

Although there is no requirement for the assessment to be written, ideally it should be in order to be able to demonstrate that it was performed and the conclusions made.  The further steps to take, which may not be anything other than to continue with existing procedures, will depend on the results of this assessment.
 
conclusion
Remember the only defence to the charge of a commercial organisation failing to prevent bribery is that the organisation had in place adequate procedures designed to prevent such conduct.  Formulating a proportionate response to potential bribery now may save considerable cost in the future – whether financial and/or reputational.
 
 
 
For further information please contact:
 
Ian Daniels
020 7969 5502
idaniels@haysmacintyre.com