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Following Royal Assent on 8 April 2010, the UK now has the Bribery Act 2010, which reforms the law on bribery and corruption. In particular, it creates liability for "commercial organisations" that fail to prevent bribery.
What does the new Act mean for commercial organisations?
Introduction
The Bribery Act 2010 is the culmination of widespread calls to modernise the UK's bribery laws. According to the Ministry of Justice website, it will "provide a more effective legal framework to combat bribery" and "help tackle the threat that bribery poses to economic progress and development".
Royal Assent follows a number of high-profile bribery issues in recent months (such as the Serious Fraud Office's and US Department of Justice's case against defence company BAE Systems, which settled in February 2010). The new Act is indicative of the UK's intention to take a tough stance on bribery and corruption.
It is anticipated that the Bribery Act 2010 will come into force on 1 October 2010, but a change of Government could of course impact on timings.
A summary of the main offences
There are four main offences:
- Bribing another person (section 1): It is an offence to offer, promise or give a bribe (so-called "active bribery").
- Receiving bribes (section 2): It is an offence to request, agree to receive or accept a bribe (so-called "passive bribery").
- Bribing foreign officials (section 6): It is an offence to bribe a foreign public official to obtain or retain business or a business advantage.
- Failure of commercial organisations to prevent bribery (section 7): This offence is based on the failure by a commercial organisation to prevent bribery by people acting on its behalf (the corporate offence).
A person guilty of a bribery offence is potentially liable to imprisonment for up to 10 years or to an unlimited fine (sections 11(1) and (2)). A commercial organisation guilty of the corporate offence is liable to an unlimited fine (section 11(3)).
It is this last corporate offence which has prompted the most comment and is the main focus of this Bulletin.
The corporate offence in more detail
- The offence. A relevant commercial organisation is guilty of an offence if any person associated with it bribes another person intending:
(a) to obtain or retain business for the commercial organisation; or
(b) to obtain or retain an advantage in the conduct of business for the commercial organisation.
- What is a commercial organisation? A commercial organisation is very broadly defined. It includes: (i) any body which is incorporated in the UK, (ii) any partnership formed under UK law, and (iii) any body corporate or partnership, wherever it is incorporated/formed, which carries on a business in any part of the UK.
- Who might incur liability for the commercial organisation? The corporate offence captures any instances of active bribery on the part of any person associated with the commercial organisation, meaning any person "who performs services for or on behalf of the commercial organisation" (in any capacity). Accordingly, a relevant person could be any employee (where performance of services is automatically presumed), any agent, a sub-contractor and even a subsidiary. Furthermore, the corporate offence can be committed whether the bribery takes place in the UK or abroad.
- Are there any defences? The only defence available to the commercial organisation is if it can prove that it had in place "adequate procedures" designed to prevent people associated with it from committing bribery (section 7(2)). The commercial organisation otherwise has strict liability for its failure to prevent bribes being made on its behalf.
What are the penalties for the commercial organisation?
Aside from potentially expensive reputational damage, the commercial organisation could, as noted above, be liable to an unlimited fine.
"Senior officers" (widely defined to include a director, manager or secretary) and "directors" could also be personally liable under the Bribery Act 2010 if they have consented to or connived in the commission of a bribery offence by a body corporate (section 14).
What are "adequate procedures"?
It is clearly going to be essential for commercial organisations to have in place robust procedures to combat bribery now that commercial organisations, as a matter of statute, have responsibility for the actions of people performing services for them in the bribery and corruption arena.
The Government has committed to publish guidelines on what will constitute "adequate procedures" before the corporate offence comes into force. However, the guidance will not be regulatory in nature, or create prescriptive standards – it will simply set out relevant principles, backed up by illustrative good-practice examples. 1
Each individual commercial organisation will have to establish appropriate "adequate procedures" for itself, based on its size and the particular risks to which it might be exposed.
What can you do?
Assuming that the Act will come into force on 1 October 2010, there is not much time for businesses to get their procedures in place or in order.
Some steps that commercial organisations should consider taking include:
- making sure that the directors are familiar with the new law;
- preparing a specific code of conduct or reviewing/updating existing policies and procedures to prevent bribery – some areas for focus should include policies on gifts, corporate hospitality, facilitation payments and lobbying contributions;
- organise compulsory training for employees and agents, wherever they are based;
- implementing processes to ensure that you have adequate due diligence information on agents and other business partners and are sufficiently comfortable that they will not create exposure under this bribery legislation;
- reviewing supplier contracts to see if they protect adequately against bribery issues – some areas for focus include assessing whether the supplier must provide the services in compliance with anti-bribery requirements, whether there are audit rights to assess compliance periodically (in particular, in relation to payments made under the contract) and whether there are appropriate termination rights or other remedies for breach; and
- creating appropriate internal reporting and investigation procedures.
What can we do?
We can help you ensure that you have appropriate anti-bribery procedures in place, help assess your key governance risks and make recommendations for the management of those risks, and deliver training to your staff.
If you would like more information or would like to discuss any of the issues raised here, please do contact us. We would be delighted to have an informal meeting with you to explore any concerns that you may have. Please contact Caroline Copeland or Eleanor Steyn.
1 Letter from Lord Bach, Parliamentary Under Secretary of State, Ministry of Justice to the House of Lords, December 2009.
Caroline Copeland
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Simkins' early warning bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.
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