The Bribery Act 2010 (the “Act”) received Royal Assent on 8 April 2010 and came into force 1 July 2011 in the United Kingdom. It has been a long time coming and quite controversial in that some countries, particularly the USA, wanted to see a strong regulation to match its own Foreign Corrupt Practices Act, whereas other countries and businesses in the UK were concerned that it might put them at a competitive disadvantage in the global economy at a time of economic downturn. I do not believe this is the case, writes Phil Walton, Partner in Mundays LLP. This article will explore the new law, the new offences, the guidance issued by the Ministry of Justice and consider its effect on day to day business in this country
The Act abolished previous bribery offences that previously existed both under common law and statute and completely overhauled the law relating to bribery, an altogether welcome change. Bribery offences are no longer confined to transactions involving public officials and their agents but now extend to cover all private sector or commercial transactions.
The new position under the Act is:
- It is an offence to offer, promise or give a bribe to another person;
- It is an offence to request, agree to receive or accept a bribe;
- It is an offence to bribe a foreign public official to obtain or retain business;
And of particular interest to those conducting business in the UK;
- It is an offence where a commercial organisation fails to prevent bribery by a person acting on its behalf (an “associated person”), where the bribery was intended to obtain or retain a business advantage for the commercial organisation.
It is high time such measures were brought in, especially in the current economic climate where bribery and corruption ultimately hinder the recovery on the economy and disadvantage businesses who comply with the law. It does mean however, that there will be some noticeable changes in the way business transactions may be conducted.
Failure of commercial organisations to prevent bribery
Only a “relevant commercial organisation” can commit an offence under section 7. For the purposes of this section, a relevant commercial organisation can include a body incorporated in the UK or a partnership formed under the law of the UK that carries on business (regardless of where such business is carried on) or any other body corporate or partnership that carries on business, or part of a business in the UK. A trade or profession is included in the definition of “business”.
Under section 8 an “associated person” is interpreted widely. A person is associated with a relevant commercial organisation if that person performs services on or behalf of the commercial organisation. A person could therefore be an employee, agent or a subsidiary. This is determined by reference to all the relevant circumstances although if the person is an employee of organisation is it presumed that the employee is an associated person.
Interpreted widely an associated person may also be another party to a collaboration, outsourcing or a confidentiality agreement, a consultant, a distributor, a franchisee, potentially a supplier or a manufacturer in a white label agreement. Commercial organisations are clearly open to the risk of being liable for a section 7 offence from a number of sources and it is therefore critical that adequate protective measures are put in place.
Importantly, a commercial organisation can be guilty of an offence under section 7 even if the associated person is not convicted of an offence and regardless of whether the commercial organisation was aware of the corrupt conduct or not. However, the associated person must intend to obtain or retain business, or an advantage in the conduct of business.
If a commercial organisation is convicted of a section 7 offence, they can be fined an unlimited amount. In addition they may be barred from public contracts, a debarment that may result in the permanent exclusion of that company from public procurement contract opportunities.
It is a defence under section 7(2) for the commercial organisation to prove that they had in place adequate procedures designed to prevent its associated persons from bribery. As a result of section 9, the Ministry of Justice has now published guidance about such procedures.
These are not prescriptive guidelines and the procedures put in place should be tailored to the size of and the level of risk faced by each commercial organisation. The Guidance sets out six principles intended to provide commercial organisations with a starting point for the planning and implementation of the procedures.
- Proportionate procedures – the commercial organisation’s procedures should reflect the nature, scale and complexity of its activities, as well as the level of bribery risk faced
- Top-level commitment – the highest levels of management within the organisation should create an environment in which bribery is not acceptable
- Risk assessment – the commercial organisation should periodically review and assess the level of its exposure to internal and external risks of bribery
- Due diligence – a proportionate a risk-based approach to due diligence should be carried out on all those who would be categorised “associated persons”
- Communication (including training) – the commercial organisation needs to make everyone within the business fully aware of its bribery prevention policies and procedures
- Monitoring and review – consistent monitoring to ensure the procedures and prevention measures are working and improving them if necessary
Whilst it took a while to come out, the Guidance is accessible, it is in plain English and it is very useful for commercial organisations who wish to ensure compliance. It should not be a complete substitute for taking appropriate advice, depending upon the circumstances.
Commercial organisations will start to see standard anti-bribery clauses appearing in contracts for the supply of goods and services to ensure anyone that may be classed as an “associated person”, is aware of the Act and the organisation’s own policies and contracts to comply with the Act. These types of clause are in the interests of all parties involved but should be reviewed carefully by legal advisors to ensure a fair balance of risk in compliance.
Commercial organisations should focus first and foremost on ensuring that their internal procedures are effective, that they have weighed up the potential risks and that all “associated persons” whether these are employees, agents or subcontractors are fully aware of the regulations. They will need to have put in place an anti-bribery policy for all employees and will need to update their “whistle-blowing” policies to ensure that people are not afraid to come forward if they suspect wrongdoing. Further, all standard commercial contracts, from service level agreements to ground handling agreements, from supply of goods to supply of services should be reviewed and updated to comply with the new law.
The Bribery Act is a welcome addition to the UK’s anti-corruption regime but commercial organisations will need to adapt to ensure compliance. The penalties for failing to do so are high but necessary to ensure a fairer, more transparent commercial economy.