As we previously reported here, the Government announced on 30 March 2011 that the Bribery Act 2010 (Act) will now come into force on 1 July 2011.
At the same time, two sets of guidance were published to accompany the Act:
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Ministry of Justice guidance on the Act generally (MoJ Guidance); and
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joint guidance from the Director of Public Prosecutions and the Serious Fraud Office on how the discretion to prosecute will be exercised under the Act (DPP/SFO Guidance).
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In particular, the MoJ Guidance and DPP/SFO Guidance address:
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the principles that businesses should apply in putting "adequate procedures" in place for prevention of bribery – as a defence to the criminal offence of failing to prevent payment of a bribe on behalf of a commercial organisation (the corporate offence);
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a number of identified areas of concern for businesses that arise from the Act (such as the scope of legitimate corporate hospitality and facilitation payments); and
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the factors that a prosecutor must satisfy before bringing a prosecution under the Act.
| This note focuses on the main points to note for UK businesses.
Taking each in turn:
Adequate procedures – the six principles
The MoJ Guidance emphasises that each business should adopt a proportionate and risk-based approach to implementing its own "adequate procedures". This is informed by the following six principles:
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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 its activities and the type and nature of persons associated with it. They should also be clear, practical, accessible, effectively implemented and enforced.
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Top-level commitment: The top-level management of a commercial organisation should: (a) be committed to preventing bribery by persons associated with it; and (b) establish a culture within the organisation in which bribery is never acceptable. The commitment should be to adopting and communicating the organisation’s anti-bribery stance (both internally and externally), and to developing the anti-bribery procedures themselves.
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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, properly resourced and documented and should involve management input. It should also be proportionate to the risks faced, whether country risks, sectoral risks, transaction risks, business-opportunity risks or business-partnership risks. The assessment should be monitored and updated as the business changes.
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Due diligence: To mitigate identified bribery risks, the commercial organisation should apply due-diligence procedures (taking a proportionate and risk-based approach) in relation to persons who perform or will perform services for the organisation. Monitoring should continue throughout the business relationship and should apply to employees as well as external service providers.
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Communication: The commercial organisation should try to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal communications (e.g. policies and procedures for reporting bribery) and external communication (e.g. codes of conduct), including training of employees and associated persons that is continuous, regularly monitored and evaluated, and that is proportionate to the risks faced.
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Monitoring and review: The commercial organisation should monitor and review its anti-bribery procedures (and engage external review) and make improvements when necessary.
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The MoJ Guidance stresses that these principles are neither prescriptive nor exhaustive; so the onus is very much on each relevant business to adopt its own, risk-appropriate procedures.
Some identified areas of concern for UK businesses
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Client hospitality: The MoJ Guidance notes that the intention behind the Act is not to criminalise bona fide, proportionate and reasonable client hospitality. As Ken Clarke, the Justice Secretary, puts it: "No one is going to try to stop businesses getting to know their clients by taking them to events like Wimbledon, Twickenham or the Grand Prix."
Although the acceptance by the Government of the culture of client hospitality and marketing is encouraging, businesses will still need to grapple with where to draw the line as to the level of acceptable expenditure. The MoJ Guidance is somewhat confusing on this point: while it notes that in general the more lavish the hospitality, the greater the inference that it is intended to influence the recipient, it also accepts that evidence of bribes may be elicited from relatively modest expenditure. The intention behind the hospitality will be critical, and the MoJ Guidance points to certain factors that may help in deciding whether or not particular hospitality is problematic. For example:
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Is there evidence of an intention to induce improper conduct?
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Is the hospitality clearly connected to legitimate business activity?
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Does the hospitality comply with standards or norms applicable to the industry sector generally?
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Has any attempt been made to conceal the hospitality?
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Facilitation payments: The MoJ Guidance confirms that, as is the case in current UK law, there will be no exemption or minimum threshold under the Act for facilitation payments. It does recognise, however, that there may be circumstances in which an individual has no alternative but to make a facilitation payment in order to protect "life, limb or liberty". In such cases the common-law defence of duress is very likely to be available. The DPP/SFO Guidance also notes that, among some of the factors tending in favour of prosecution, facilitation payments are more likely to be prosecuted if they are premeditated or consist of large or repeated payments (i.e. are more likely to attract a significant sentence).
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Associates: The MoJ Guidance also attempts to clarify who can be said to be "performing services" for a commercial organisation (and thereby associated with it for the purposes of the corporate offence). The relationship between the parties will not be the only factor in determining association, and the Act is intended to be broad in scope in this area.
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Suppliers: With regard to suppliers, the MoJ Guidance draws a distinction between those who perform services for a commercial organisation (who would be caught by the legislation) and those merely selling goods (who would not). Organisations are unlikely to have control over sub-contractors down a contractual chain, so such organisations should adopt anti-bribery procedures with their counterparties and request that the same approach is filtered down the chain.
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(b) |
Joint ventures: The MoJ Guidance also seeks to clarify whether or not being a member of a joint venture can create an "association" with other joint-venture parties for the purposes of the corporate offence. A bribe paid by the employee of a joint venture that is a separate legal entity will not trigger liability for its members unless the joint venture is performing services for the members. Whether a party to a contractual joint venture is liable for a bribe paid by an employee of the other party will depend on the degree of control it has over that person. In either case, however, a member or party to a joint venture will escape liability if the intention of the briber was not for that member or party to obtain an advantage, even if it indirectly benefits from the bribe.
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Discretion to prosecute
The offences under the Act are broadly drawn, so how the prosecuting bodies decide to enforce it will be extremely important if injustices are to be avoided.
Before prosecuting, prosecutors must be sure that:
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there is sufficient evidence to justify a prosecution; and
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if so, it is in the public interest to do so.
| The DPP/SFO Guidance notes, however, that there is an inherent public interest in prosecuting bribery; so, if the evidential stage is satisfied, a prosecution will usually follow.
So far as the corporate offence is concerned, it is a defence if a relevant commercial organisation can show that it had "adequate procedures" in place to prevent persons associated with it from bribing. The DPP/SFO Guidance makes it clear that the standard of proof that the commercial organisation will need to discharge to prove the defence is “on the balance of probabilities". The DPP/SFO Guidance gives some comfort to organisations by specifically stating that a single instance of bribery will not necessarily mean that an organisation's procedures are inadequate; but equally, there are no guarantees.
Factors that prosecutors will take into account in this context include the commercial organisation’s willingness to co-operate with an investigation by the SFO and to make a full disclosure, self-reporting, post-investigation improvement and monitoring measures.
So where does this leave UK businesses?
As Ken Clarke's foreword to the MoJ Guidance states: "Combating the risks of bribery is largely about common sense, not burdensome procedures. The core principle ... is proportionality."
While it is positive to hear that common sense and proportionality are expected to prevail, this does not create much certainty for businesses in practice. The MoJ Guidance and DPP/SFO Guidance do not give any clear-cut answers as to what, exactly, they can do to protect themselves from liability under the Act. Instead, it is up to businesses, following the guidance, to take the opportunity between now and 1 July 2011 to ensure that they assess their own bribery risks and update and implement their own, proportionate "adequate procedures", based on their own particular bribery challenges.
If you require any assistance in putting "adequate procedures" in place, developing appropriate policies or delivering training on the Act, please contact Nicole Globe.
Nicole Globe
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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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