The Bribery Act 2010 comes into force on 1 July 2011. It has significant impact on employers, and on employees; it introduces a new corporate offence of failing to prevent bribery, as well as the potential of personal liability for senior officers within a organisation.

The Offences

The Act introduces four new categories of offence:

• Offering, promising or giving a bribe to another person
• Requesting, agreeing to receive or accepting a bribe from another person.
• Bribing a foreign public official.
• Failing to prevent bribery

Where does it apply?

• The offence of the failure of an organisation to prevent bribery applies wherever in the world that offence takes place
• Other offences apply if any act or omission which forms part of the offence takes place in the UK, or
• If the act or omission does not take place in the UK, but the person’s act or omission would constitute an offence if carried out in the UK and the person has a close connection with the UK.

Who does it cover?

All organisations that do business in the UK whether incorporated here or not should be aware of the issues but perhaps particularly those:

• with an international aspect to the business
• who work with foreign public officials
• who work in a sector or country with high levels of corruption

Faciliation Payments

It is an offence to pay fees, fines, compensation or contributions to foreign public officials, even when in some countries that may be the normal way of doing business. The only exceptions are if the person making the payment does so under threat of violence or if the payment is permitted by local written law.

Corporate Hospitality and Gifts

Corporate hospitality and gifts could amount to bribes in certain circumstances. The Government has issued statutory guidance which suggests that these will not amount to a bribe provided that the hospitality or gift: has a legitimate business aim (including developing relationships) which is reasonable, proportionate and appropriate in the circumstances (including with reference to what is normal in the particular industry). The guidance suggest that you could be more likely to fall foul of the Bribery Act in the following circumstances:

• Where the hospitality/gift is more lavish and is beyond that which might be reasonable;
• Where the hospitality/gift is not clearly connected with legitimiate business aims; and/or
• Where the hospitality/gift was concealed.

Corporate Offence of Failing to Prevent Bribery

This is a completely new offence and only applies to commercial organisations.

A commercial organisation will commit an offence if a person associated with it bribes with the intention of obtaining or retaining business for the commercial organisation or obtaining an advantage for the commercial organisation. An associated person is a person who performs services for or on behalf of another. This might, for example, be an employee, consultant, agent or subsidiary.

The commercial organisation has a defence to this offence if it can show that it has put in place adequate procedures to prevent bribery. What is considered adequate will depend on what was proportionate given the facts and circumstances of the organisation and the bribery risks that it faces and the Government has set out six principles to be taken into account (see below).

Procedures

The Government Guidance has set out six procedures which organisations should consider when implementing anti-bribery procedures:

Principle 1: Proportionate procedures

A commercial organisation’s procedures to prevent bribery by persons associated with it should be proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They should also be clear, practical, accessible, effectively implemented and enforced.

Principle 2: Top-level commitment

The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) should be committed to preventing bribery by persons associated with it. They should foster a culture within the organisation in which bribery is never acceptable.

Principle 3: Risk assessment

The commercial organisation should assess the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment should be periodic, informed and documented.

Principle 4: Due diligence

The commercial organisation should apply due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.

Principle 5: Communication (including training)

The commercial organisation should seek to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training that is proportionate to the risks it faces.

Principle 6: Monitoring and review

The commercial organisation should monitor and review procedures designed to prevent bribery by persons associated with it and make improvements where necessary.

Penalties

Individuals who are convicted of an offence under the Bribery Act can face imprisonment for up to ten years and/or an unlimited fine. Organisations can face an unlimited fine.

Senior officers of a company may be liable to fines or imprisonment if the organisation is guilty of making a bribe, receiving a bribe or bribing a foreign official and this is found to be with the knowledge or consent of the senior officer.

In addition it is possible that the directors of the company could be subject to other legal proceedings e.g. breach of fiduciary duties or directors or may be disqualified from directorships.

Companies guilty of bribing may also be excluded for tendering for public sector contracts.

Scully Twiss Recommendations for the Bribery Act 2010:

What we recommend employers do:

• Implement anti-bribery procedures appropriate for your organisation
• Review your corporate hospitality & gift practices and ensure you have appropriate safeguards and monitoring in place to control and prevent any abuse of this practice
• Consider an upper limit for gifts/hospitality/expenses
• Openly document the giving and receiving of gifts/hospitality/expenses as far as is reasonable
• Provide employees with training and guidance, particularly in relation to corporate hospitality
• Ensure overall responsibility for compliance is given to a senior member of the organisation
• Strengthen internal monitoring procedures

This newsletter is for general guidance only and should not be treated as a definitive guide or be regarded as legal advice.