The Bribery Act received Royal Assent in April 2010. It is likely to come into force this autumn. One of the Act’s offences has provoked particular comment, namely, the failure of commercial organisations to prevent bribery.

The scope of this offence is broad and can cover activity outside the UK. There is a defence of having adequate procedures in place designed to prevent bribery. Implementing such procedures is, therefore, vital for companies to minimise their exposure.

Background

The Bribery Act has been long in the making, and its purpose is to reform the UK’s previous mixture of laws in this area. From MPs’ expenses to the BAE Systems arms deals investigations, the prevention of corruption has assumed a high profile recently. The Bribery Act should be seen in this context and it has the potential to affect all UK companies.

Offences

One offence under the Act is “bribing another person”. This includes promising or giving a financial or other advantage to another person, with the intention of inducing that person to perform improperly a relevant function.

There is also a separate offence of “being bribed”. This is where a person requests or accepts a financial or other advantage with the intention that a relevant function should be performed improperly.

A “relevant function” includes public functions, but also any activity connected with a business, and any activity in the course of employment.

Performance is “improper” if performed in breach of a relevant expectation.

The test as to “relevant expectation” is what a reasonable person in the UK would expect in relation to the conduct in question. Where the performance is not subject to the UK’s laws, it is not a defence to rely on the local custom or practice of a foreign country, unless that country has a written law allowing the activity concerned.

There is also a discrete offence of bribery of foreign public officials.

Offence of failure of commercial organisations to prevent bribery

Companies and partnerships are guilty of an offence if a person associated with them bribes another person, intending to obtain or retain business for the company or partnership.

An “associated person”, for this purpose, is one who performs services for or on behalf of a company or partnership. The capacity in which the services are performed is irrelevant, and the definition extends to people not employed by the company, such as agents and subsidiaries.

This offence covers acts both in the UK and abroad.

One element of risk, therefore, is that a UK company can be prosecuted under the Act, if its agent or subsidiary offers or gives a bribe abroad. There is no requirement that the UK company needs to know about the bribe.

This brings into focus the only defence available for this offence, which is to have in place adequate procedures designed to prevent associated persons from bribing others.

The Government is expected to publish guidance later this year about procedures which companies can adopt in this respect. What is clear is that companies will need to adopt a risk-based approach. They will have to consider measures such as the following:

• a frank risk assessment of the business: does it trade in a high-risk sector or jurisdiction(s)?
• background checks on agents and distributors;
• a review of financial processes to spot suspect payments;
• drafting and introducing appropriate compliance policies;
• implementing ongoing training on the risks, policies and procedures, with board support with the aim of ensuring top down compliance throughout the organisation; and
• establishing whistleblowing channels so staff can raise concerns effectively.  

We will revisit this area when the Government has published its guidance.

Our thoughts on this

Companies which ignore the Bribery Act could be in trouble. The UK’s anti-corruption measures have been regarded internationally as weak, in particular when compared with those of the US. Much though will depend on the level of resources the new Government will allocate to enforcement under the Act. There has been talk that a dedicated anti-corruption body may be set up. If only because the penalties for getting it wrong include unlimited fines and imprisonment, the wise move would be to take the Act extremely seriously.

For more information on these issues please contact

Sohrab Daneshku

or your usual Lewis Silkin contact