This article is an update of "The Bribery Bill Dealing With Bribery at Home and Abroad", as there have been several key developments since going to press.
Background
By way of brief background, the Bribery Act 2010 ("the Act"), received royal assent on 8 April 2010, however, it is not anticipated that the Act will actually become law until April 2011. This is later than originally anticipated, and is in large part due to a consultation exercise which was recently launched on 14 September 2010 by the Ministry of Justice and closes on 8 November 2010. The consultation relates to one of the defences to the offence of bribery which states that if a company had in place "adequate procedures" to prevent bribery they may not be held liable if an employee or person connected to the business carried out an act of bribery.
The consultation exercise has involved businesses of all sizes inputting into the sorts of steps that they would expect to constitute "adequate procedures", a term which this article will later review. The secretary of state will publish the results of the consultation in January 2011.
The rationale behind introducing the Act was that the UK's previous legislation was fragmented and described as having "a protracted and faltering history". So in essence the aim has been to introduce legislation which is modern and comprehensive and will enable the UK to enhance its international reputation for the highest ethical standards.
Key to prudent preparation for the implementation of the Act, will be in part, a basic understanding of its key provisions and the expectations of what constitutes good corporate governance. This article only intends to provide a brief summary of the key provisions of the Act.
Key Provisions Under the Act
The Act sets out 6 scenarios which constitute bribery. This article will not interrogate the black letter law, but simply provide a brief summary of cases 1 to 3 (as cases 4-6 are subtle variations of 3).
Cases 1 and 2 relate to the active acts of bribery and involve someone promising or actually giving a financial or other advantage (note the advantage is not necessarily pecuniary) which is intended to induce a person to perform a relevant function or activity improperly.
"A relevant function or activity" is defined under the Act and is very broad and can be any function of a public nature, any activity connected with a business, any activity performed in the course of a person's employment or any activity performed on behalf of a body of persons.
Case 3 involves the "passive" act of bribery which involves a person requesting or agreeing to receive or accept a financial or other advantage with the intent that a relevant function or activity should be performed improperly.
Who Does the Act Apply To?
The auspices of the Act are wide, and this is one controversial aspect of the legislation. It applies to any act of bribery which occurs on UK soil, irrespective of the perpetrators' nationality. Companies and partnerships which are incorporated in the UK, even if the act itself occurs abroad are also captured by the Act as are UK subsidiaries of foreign companies.
Those who are resident in the UK, irrespective of their nationality will be held liable under the Act, as will citizens of the UK and British Oversees territories.
Bribery of Foreign Public Officials
Section 6 of the Act covers the offence of bribery of foreign public officials. It outlaws the paying of bribes to oversees public officials. The purpose of the advantage must be to influence the official in their official capacity and the advantage must be made to obtain or retain a business advantage and/or business itself. In summary, facilitation payments are not lawful and even a small payment to expedite a customs clearance would be illegal, although the Serious Fraud Office has observed that such small scale acts will not be the focus of the legislation.
Failure of Commercial Organisations to Prevent Bribery
It is section 7 which establishes the offence of failure of commercial organisations to prevent bribery which has caused the most controversy and concern. The section introduces a new corporate offence of bribery and establishes that the company does not have to be "the directing mind" to be found guilty of the offence. The offence is "the bribery of another person intending to obtain or retain business for the company or obtain or retain an advantage in the conduct of business for the company".
Presently it is unclear whether an individual who has had involvement with the transaction giving rise to the corporate offence can be convicted as an accessory to the corporate offence. It has been observed that as there is no specific penalty relating to such an offence under the Act, it seems to suggest than an individual cannot be convicted of an accessory offence, however this is something of a grey area and something to review when the legislation becomes operative.
It should be noted that directors are exposed under this new corporate offence, as it could be argued that they have committed a corporate governance failure which may then expose them to separate claims as board directors and individuals. The director could also be subject to a disqualification under the Company Directors Disqualification Act 1968 for a period of up to 15 years. With this in mind, directors may want to extend their directors' and officers' liability insurance to cover the risks.
Defence to the Corporate Offence
The Act establishes a defence to the corporate offence which states that:
"it is a defence for the company to prove that it had in place adequate procedures designed to prevent persons associated with the company from undertaking such conduct".
Under the Act, the secretary of state is obligated to publish guidance as to what might be deemed to constitute adequate procedures. These guidelines were initially due to be issued in July 2010, however, the Ministry of Justice has only recently launched its consultation with business on the topic. The principles that business has been consulted on are:
- Risk assessment;
- Top level commitment;
- Due diligence;
- Clear, practical and accessible policies and procedures;
- Effective implementation; and
- Monitoring and review.
It should be noted that when the guidance is issued, it is just that, guidance. It is not binding on the courts or the enforcement agencies. Legally the question of whether a company is guilty of bribery is for the courts. Having said this, the guidance should not be ignored and indeed may be adduced as evidence of good corporate practice.
The results of the consultation will be published in January 2011, and the guidance finalised. This article does not wish to pre-empt the outcome of the consultation period, or what will be included in the secretary of state's final form of guidance, however, it will address the sorts of steps that prudent businesses will already be implementing to assist with a smooth transition when the Act comes into force.
Prudent Procedures
- Companies should have a clear statement of anti-corruption culture which is fully supported at the highest levels and accompanied by a Code of Ethics and where appropriate, should have separate policies relating to gifts/ payments/ charitable donations/ and sponsorship. The codes should be drafted in clear and unambiguous language and should be publicised internally and on the company's website.
- Any such policies should be supported with compliance infrastructure, so for example a senior officer should be directly accountable for overseeing the anti-corruption programme and should provide regular briefings on developments in the law and practice.
- Supply chain management should be at the forefront of a company's mind, and it should take steps to ensure that its partners/ suppliers/ contractors, agents and other third parties with which the company does business have in place a code of conduct which explicitly prohibits the making of corrupt payments.
Penalties
The offenses of active and passive bribery and bribing a foreign official carry with them the same penalties. These being, on summary conviction, to imprisonment (not exceeding 12 months), or to a fine not exceeding £5,000, or to both. In the event of conviction on indictment, to imprisonment (not exceeding 10 years), or to an unlimited fine, or to both.
The penalty for the corporate offence is an unlimited fine.
Conclusion
The scope and reach of the Act is wide. Those who wish to ensure that they and their company stay on the right side of it should be advised to ensure they have in place anti-corruption policies with practical processes in place to implement and review such policies.
Obviously any such policies and procedures should be reviewed after January 2011, when the consultation results are released along with the secretary of state's guidance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
