The Long (and Sometimes Surprising) Tentacles of the Bribery Act 2010

The Basics

In introducing the Bribery Act 2010, the UK Government is making a serious attempt to eradicate bribery which it describes as a ‘scourge’ which ‘blights lives’.

For the purposes of the Act, bribery means giving someone a financial or other advantage to encourage that person to perform his or its functions or activities improperly or to reward him or it for having already done so.

In general, bona fide, proportionate and reasonable corporate hospitality and promotional expenditure on gifts to clients should not be caught by the Act, but if the level of hospitality or expenditure is excessive and really a cover for bribery it will be caught.

Under the Bribery Act ‘facilitation payments’ made to induce officials to perform or expedite a function or duty which they are obliged to perform anyway are bribes, even if they are small. Contrast the exception for payments to ‘expedite or secure …… routine governmental action’ under the US Foreign Corrupt Practices Act 1977 (FCPA).

Traditionally bribery has been something to guard against when dealing with public officials and the agents of government, but the Bribery Act 2010 also applies, potentially, to any private sector transaction.

The Bribery Act 2010 comes into force on 1 July 2011.

There are four offences under the Act:

• offering, promising or giving a bribe;
• requesting, agreeing to receive or accepting a bribe;
• bribing a foreign public official to obtain or retain business; and
• failing to prevent a person associated with your business from bribing someone for the benefit of that business.

International Application

The requirement for a close connection with the UK does not apply to the fourth offence. A business which is incorporated or formed in the UK or which carries on business in the UK (wherever it may be incorporated or formed) can be liable for bribery by a person who is neither a UK national nor resident in the UK, nor a body incorporated or formed in the UK, regardless of where the failure to prevent the bribery takes place.

Failing to Prevent a Person Associated with your Business from Bribing Someone for the Benefit of that Business

A person is ‘associated’ with your business if that person performs services for or on behalf of the business. That applies regardless of the capacity in which that person performs services for you or acts on your behalf. This is broad enough to cover your agents, distributors, employees, contract staff, consultants, subsidiaries, intermediaries, joint venture partners, delivery partners and suppliers of services.

You will not have a defence to this offence unless you can show that you have ‘adequate procedures’ in place to prevent bribery. What is adequate will depend on the risks your business faces and the nature, size and complexity of that business.

That guide provides that:

• what you do to prevent bribery should be proportionate – if you are doing business in a country where bribery is widespread you will need to do more than if you are not subject to that risk
•  there should be top level commitment, so that those people who are in the best position to do so, show staff and business associates that the business does not tolerate bribery
• there should be a risk assessment – an investigation, amongst other things, of the markets in which you do business
• you carry out due diligence before employing staff or engaging people to represent your business
• you communicate your policies and procedures to staff and to others who perform services for you, and perhaps provide training
• you monitor and review to take account of changing circumstances and risks

You may find useful materials on the Business Anti-Corruption Portal at:

 http://www.business-anti-corruption.com/?L=0. This is designed to help SMEs doing business in emerging markets and developing countries. It provides country profiles, due diligence tools, advice on carrying out risk assessments and a model anti-corruption policy and code of conduct.

The Consequences of Committing an Offence

The consequences of committing an offence can be serious.  Not only may the company commit an offence, but its senior officers (such as directors) who have given their consent or connived in giving or receiving a bribe or bribing a foreign public official may also commit an offence.  Even failing to act might be regarded as consent or connivance.

The company may be fined (and there is no limit on the amount of that fine) and senior officers may be fined (again to an unlimited extent), face a prison sentence of up to 10 years, and be disqualified from acting as directors.  We can expect the level of fines to be high.

If convicted of failing to prevent bribery, the business could face exclusion from public contracts.

Practical Steps

• Carry out a risk assessment consider:

               - whether the business operates in a high risk sector;
               - whether the business operates in any high risk country;
               - whether the business often deals with public officials;
               - whether the business uses agents or representatives and the role of those people;
               - whether the business has paid or received bribes in the past;

               - the exposure of employees and officers to bribery; and
               - the business’s policy on corporate hospitality and gifts,

• Review (or prepare) and publish an anti-corruption policy, especially in the context of corporate hospitality, donations and facilitation payments
• Adopt a code of conduct setting out how employees and other associated persons should behave
• Carry out due diligence on ‘associated persons’, including a review of their contract terms – can the contract be terminated in the event of any bribery - their roles and remuneration, especially where they operate in high risk countries or sectors
• Appoint a compliance officer
• Make a public statement of the business’s zero tolerance of corruption
• Consider providing training for staff and associated persons 
• Monitor staff and associated persons operating in risk areas 
• Establish disciplinary mechanisms to deal with cases of bribery