Lawyers Briefing Notes

Mon, 21 Feb 2011

Implementation of the Bribery Act 2010 delayed

The Ministry of Justice has decided to delay the implementation of the Bribery Act amid the unresolved uncertainties in the new offence of ‘corporate bribery’ and the associated section 7 defence.

The current rules on anti-corruption in the UK are fragmented and unclear. Although, at the expense of the tax payer, the Serious Fraud Office will readily investigate allegations of corruption, take the case against BAE Systems for the alleged unlawful sale of arms for example, it is not surprising to learn that prosecutions by the Serious Fraud Office are rare. In 2003 the Law Commission described the UK anti-corruption laws as ‘obscure, complex, inconsistent and insufficiently complex’.

In abolishing the common law offence of bribery, the new Bribery Act creates 4 new offences: the offence of bribing another (s.1), the offence of accepting a bribe (s.2), bribery relating to foreign public officials (s.6) and controversially, also known as ‘corporate bribery’ the offence of commercial organisations failing to prevent bribery (s.7).

The offence of bribing another under section 1 will apply, in short, where a person gives, promises or offers a financial or other advantage intending that the advantage will induce a person to perform improperly a relevant activity or function.

Conversely, under section 2, a person will be guilty of an offence in requesting, agreeing to receive or accepting a financial advantage to perform or intending to perform improperly a relevant activity or function.

A relevant function or activity is defined, among others, as an activity connected with a business where the person performing it is expected to do so with, among others, good faith and/or impartiality. A failure to meet the expectation of good faith or impartiality will amount to improper performance.

The difficulty here lies in the context of corporate hospitality. Entertaining a client, customer or member with a view to generating business is an everyday occurrence but commercial organisations would be well advised to ensure that any hospitality is proportionate to that which might be reasonably expected.

Disproportionate, lavish hospitality taking place around the time when business decisions are made such as tenders etc could be considered a cause for investigation by the SFO. Leaving aside foreign officials and turning to the controversial corporate offence, a commercial organisation will be guilty of an offence if a person associated with it bribes another intending to obtain or retain business or advantage in the conduct of the business.

For the directors and/or officers of the organisation, an offence under this section, carries an unlimited fine and up to 10 years imprisonment. This may also lead to offences under the proceeds of crime and money laundering legislation.

Liability is strict meaning that the SFO will not need to prove guilt and the effects are far reaching because it will apply to any trade or profession incorporated in the UK, regardless of where the business is conducted. It will also bite if the organisation is not so incorporated but conducts at least part of its business in the UK. In practical terms, for example, the SFO could commence proceedings against a French company whose employee intended to bribe a person whilst on business in, say, Germany, if that company has an operational branch office in the UK.

However, section 7(2) provides a defence if the commercial organisation can prove that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct.

Section 9 of the Act imposes an obligation on the Secretary of State to publish guidance to assist commercial organisations in preventing bribery. The draft guidance comprises 6 principles including risk assessments, due diligence, effective implementation and monitoring and review.

Undoubtedly, it will be a costly and time consuming process for commercial organisations to ensure that they meet this threshold of ‘adequate’ by reference to the guidance. It could be argued that this should be a positive obligation under the Act rather than a defence because there will be some organisations who will decide against reviewing their own policies and procedures because of the time and expense or trust they have but given the wide ambit of what amounts to an offence, this decision could backfire with serious implications.