Bribery - it's your business

Published 26th Jan 2011

The 2010 Bribery Act is to be implemented in April 2011. It brings about sweeping changes that will affect companies of all sizes, especially those that trade overseas.

Undoubtedly, many businesses will be questioning the relevance of this legislation to their operation. But the fact is that many honest businesses could inadvertently break the new law if they are not careful.

The Act creates four key offences: bribing another person, receiving a bribe, bribing a foreign public official, and failing to prevent bribery.

Within this framework, there are two areas in particular where companies could easily come unstuck.

Overseas trading

Firstly, it does not matter where in the world the bribe takes place. For instance, the law will have been broken if anyone representing your company pays an official in India to speed up a delivery.

If your business is incorporated in the UK, or carries on a business - or even part of a business - in the UK, you can be liable for the "failure to prevent bribery" offence.

"The Act has extra-territorial effect," explains Peter Laskey, partner at solicitors, Bowling & Co. "Even if the conduct giving rise to the offence is not committed here, the UK courts will have jurisdiction if the person concerned has a close association with the UK."

What's more, an offence could be carried out by anyone associated with your business - even a third party such as an agent.

For companies that trade overseas, "faciliation payments" are often a way of life just to get things done - getting goods through customs, for instance, or speeding things up with local authorities. It remains to be seen whether companies can easily "just say no" in some parts of the world.

Corporate hospitality

Secondly, the scope of the Bribery Act covers more than just cash payments. Hospitality, gifts, the giving of samples - all of these could be classed as bribes under the new Act. The crucial distinctions are whether they were given with the intention of gaining an improper advantage and secondly whether the hospitality was excessive.

At present the Government has indicated that "routine and inexpensive hospitality" will be allowed and "lavish or extraordinary hospitality" will not be allowed. The question is, where will they draw the line? A bottle of wine? A day out at the races? A weekend break at an exclusive spa?

"As the Act is new, there is no case law to look at to see how the Courts will interpret the legislation, but we must assume that it will be enforced strictly," says Peter Laskey. "However, prosecutions can only be brought with the consent of the DPP or similar senior legal officer."

Wake-up call for UK businesses

Neill Blundell, head of the Fraud Group at law firm Eversheds, has called the legislation "a wake-up call for corporate Britain." Eversheds' Corruption Clampdown report published in 2010 reveals that 60 per cent of respondents are unaware that failing to prevent bribery will be a new corporate offence.

And these offences carry tough penalties too - individuals (including employees and directors) could face a maximum penalty of ten years' imprisonment and/or an unlimited fine if found guilty.
Adequate procedures

So what can businesses do to stay on the right side of the new law?

Every firm needs a clear code of conduct - or what the legislation calls "adequate procedures" - for preventing bribery.

"Companies have a defence to a prosecution if they can show that they had adequate procedures in place designed to prevent illegal conduct," reveals Peter Laskey. "Businesses need to study the guidelines issued by the Secretary of State, which are intended to assist in putting procedures in place to prevent offences being committed. If they have adhered to these guidelines then they are likely to be OK."

Businesses, then, are advised to draw up procedures to deal with everything from bribes and gifts to political contributions, charitable donations, sponsorship and corporate hospitality. This code of conduct must be widely circulated to anyone who operates on behalf of your business. Training should be given where necessary and it would be sensible to appoint a member of staff to take specific responsibility for this.

The impact of the Act

Understandably, bribery is a sensitive subject and businesses are reluctant to comment on the upcoming Act. One UK manufacturer that operates globally says, "One thing that concerns us is the jurisdiction - the new Act applies anywhere in the world. We are an ethical business but we operate in a lot of territories and they all have different local customs and practices. That can put you in a difficult situation sometimes."

This company is well-prepared though. "A lot of our international trade is done through agents so we already have policies on how we expect our agents to act on our behalf, not just in response to this Act. If there are any grey areas then we have to say sorry but we can't do that. That's the view we will have to take."

So will the Act be bad for businesses that trade abroad? "The last thing we need is legislation that's going to hold us back," adds the manufacturer. "But the Bribery Act shouldn't do that. We don't tolerate any kind of unethical behaviour. But we do have to be mindful that we might be approached and think about how we are going to decline."

So will we see a sharp rise in prosecutions in the future? "The Act goes further than previous legislation," says Peter Laskey. "In practice I suspect there will not be many prosecutions, but the message is clear - the authorities will crack down on improper conduct and now have the tools to do so clearly set out in the Act."

Source: ' Connections '

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