The Bribery Act is going live at last - three months to get your house in order

01/05/2011

By Henar Dyson, Senior Associate in Corporate and Commercial. Featured in New Business magazine.

The Ministry of Justice has confirmed that the Bribery Act 2010 will come into force on 1 July 2011.  This gives all businesses operating in the United Kingdom three months to put anti-bribery procedures in place.

The penalties for offences under the Act are severe.  For individuals involved in bribery, the maximum jail term is ten years and they can also be fined.  Offences can be committed by an individual at any level within a business or by the business itself.  Fines for businesses convicted of failing to prevent bribery are unlimited. 

Scope of the Act

The Act will apply to all 'commercial organisations' carrying on business in the UK.  In practice, this means any UK business and all foreign businesses with a business operation in the UK.

The four offences

• Bribing another person;
• Accepting a bribe;
• Bribing a foreign public official;
• Failure by a commercial organisation to prevent bribery.

Under the fourth 'corporate offence', a business can be guilty of failing to prevent a party associated with it from engaging in bribery.  This raises questions about how a business can control the actions of such a broad spectrum of people, including its employees, agents, subsidiaries and contractors. 

It is a defence for the business to show that it had adequate procedures in place to prevent bribery.  The Ministry of Justice has issued final Guidance intended to help businesses to develop such procedures.

The Guidance

The Guidance provides considerable assistance to businesses as they look to update or create anti-bribery policies.  It also helps to clarify some concerns raised by the Act generally.

The Guidance makes clear that:

• reasonable corporate hospitality, with no intention to influence the recipient improperly, is acceptable;
• businesses are permitted to take a proportionate and risk-based approach to managing bribery risks.  In particular, the Ministry of Justice has published a 'quick start' guide for smaller organisations.  Smaller businesses should not assume that this is a green light to ignore the Act.  It simply means that the anti-bribery policies that the business has in place must reflect the risk to that business;
• a party associated with a business will engage in bribery if it is representing that business and the bribery is intended to benefit that business rather than the party itself;
• a parent company will not automatically be deemed to have a UK business operation simply because it has a UK subsidiary, as the subsidiary may be wholly independent from the parent.

Facilitation payments (usually small monetary payments) are prohibited, whatever their size or purpose.  This does leave uncertainty for businesses operating in certain jurisdictions, where facilitation payments are expected.  The Serious Fraud Office has, however, indicated that it will not pursue trivial payments and that a prosecution is more likely where there are large or repeated payments.

Steps to take

It is essential for all businesses to assess the impact of the Act on them.  The Guidance sets out six broad principles of good anti-bribery management to be followed:

• proportionate procedures - businesses must create policies that allow all levels of staff to implement them properly.  The Guidance suggests including particular areas for consideration, such as gifts and hospitality, whistle-blowing, political and charitable contributions;
• top level commitment - high level management should understand the implications of the Act in the light of the Guidance.  They should fostering a culture of zero tolerance;
• risk assessment - a high level risk assessment should be carried out, by people with relevant knowledge and skills.  It is likely that finance directors will be involved in this process;
• due diligence - all parties with which the business works must be vetted.  For example, consider whether a potential business partner in a new jurisdiction has a legitimate objective and a zero tolerance approach to bribery;
• communication - the anti-bribery policies must be implemented throughout the business.  Its principles should also be written into the employee handbook, employment contracts and all contracts with associated parties;
• monitoring and review - this is necessary to ensure ongoing compliance and policy modifications if improvements are identified.