The Bribery Act 2010 is one of the most significant pieces of legislation to affect businesses for a decade and reforms the law on bribery and corruption in the UK. The Act was passed in April 2010 and was expected to come into force in April 2011. The Act has now suffered a further delay following the Government’s decision to review it in light of business and industry chiefs’ public backlash over the adverse impact it could have on UK business.
The new corporate offence of failing to prevent bribery
The principal change introduced by the Act is the new corporate offence which imposes criminal liability on businesses in the event that they fail to prevent bribes being paid on their behalf.
The offence is widely drawn and catches a bribe paid by another person who performs services on behalf of the UK organisation, whether the wrongdoing was committed in a foreign jurisdiction or in the UK. This includes agents, distributors, employees, sub-contractors and subsidiaries. Bribes in foreign jurisdictions involving private parties as well as foreign officials will be caught.
This is a strict liability offence. It is no defence for a company to argue that it was unaware of the bribery, nor is there a need for the associated person to be prosecuted.
The ‘adequate procedures’ defence
The only defence that is available in respect of the corporate offence is to prove that the organisation had “adequate procedures” in place designed to prevent bribery and corruption being committed by people associated with it.
The six guiding principles
In September 2010, the Ministry of Justice published for consultation its draft principles [and outline guidance] on the procedures which commercial organisations can put in place to prevent bribery by persons associated with them. The final form of guidance as to what constitutes adequate procedures was due to be finalised during January 2011. However, this has been delayed pending the Government’s review of the Act. Given the recent public criticism of the Act by the commercial sector and the swift attention the Government has paid to those concerns, the publication of the final guidelines has been delayed indefinitely. All that is known now is that once the guidelines have been published in their final form, the Act will not come into effect for at least three months until after that date.
The six key principles set out in the draft guidance are as follows:
1. Risk assessment
Organisations will need regularly and comprehensively to assess the nature and extent of the risks relating to bribery to which they are exposed. As an initial assessment, organisations should consider whether those undertaking the assessment are adequately skilled and equiped to do so or whether using external professionals may be more appropriate.
As bribery and corruption risks may evolve over time, it is also imperative that risk assessment procedures take account of any new risks which may be posed by a particular country, transaction or business partner of the organisation. Transactions involving charitable or political contributions, licences and permits, public procurement or involving agents or intermediaries are likely to pose a greater risk.
2. Top-level commitment
There must be a clear commitment to counter bribery in the management structure of an organisation and this must be embedded to establish a culture in which bribery is never accepted. This commitment against bribery should be clearly communicated from the top to all levels of an organisation and to any relevant external parties. Businesses should also consider publishing a statement of their commitment to counter bribery.
Adopting a zero tolerance policy towards bribery and corruption and extending this to all business partners by including a mechanism for termination in the event that bribery is suspected would also be a means of demonstrating top-level commitment to counter bribery, as would the appointment of a senior manager to oversee the development of anti-corruption programmes.
3. Due diligence
Organisations need to ascertain exactly who they are doing business with if their risk assessment and mitigation processes are to be effective. As such, businesses are required to have in place suitable due diligence policies and procedures to help identify bribery risks and to enable organisations to take appropriate preventative measures.
Due diligence enquiries should cover all parties to a business relationship, including the organisation’s supply chain, agents, intermediaries, joint venture partners and all markets in which the organisation does business. Enquiries should also be made about the risk of bribery in a particular country, the types of bribery most commonly encountered and the preventative measures which are most effective.
4. Clear, practical and accessible policies and procedures
Organisations are required to have in place clear, practical and accessible policies and procedures to counter bribery and should consider incorporating such policies into employment and service contracts.
The draft guidance makes clear that appropriate anti-bribery and anti-corruption policies will vary enormously depending on the nature of the business, the assessment of risk and the nature of support functions. However, issues to be covered can include a clear prohibition on bribery; guidance on making political and charitable contributions; gifts and hospitality; guidance on what action should be taken when faced with blackmail or extortion; and a commitment to protection for whistle-blowers.
5. Effective implementation
Organisations are required to implement effectively their anti-bribery policies and procedures and ensure that they are embedded in the culture of the organisation. Having anti-bribery policies in place will not be enough if such policies have not been properly implemented.
Businesses should ensure that they have a realistic plan for implementation and appropriate provisions for delivery and review of the policy, as well as a training plan and effective processes by which the company policy is conveyed to employees, agents and other third parties carrying out services for the company.
6. Monitoring and review
Anti-bribery and anti-corruption policies must be viewed as dynamic and not static. To ensure compliance with the relevant policies and procedures and to identify any issues as they arise, organisations need to institute mechanisms for reviewing those policies and procedures.
Transparency is key. Organisations may wish to consider getting external verification of their policies and procedures from an independent source to enhance their credibility with business partners or restore market confidence following the discovery of a bribery incident. Each company will need to tailor its policies and procedures so that they are proportionate to the nature, scale and complexity of its activities. This seems to be a sensible approach given that small and medium sized businesses will generally face different challenges to large, multi-national organisations.
Donna Goldsworthy is a Partner and Deepak Arora is an Associate in the Dispute Resolution department at Fox Williams LLP. For more information about this article, Donna can be contacted at firstname.lastname@example.org and Deepak at email@example.com.