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No such thing as a free lunch? The Bribery Act 2010

June 1, 2011

This is outside of my normal area of expertise (employment law), but it is relevant to HR professionals and is important to everyone doing business in the UK.

It is now less than a month until the Bribery Act 2010 comes in to force.

From 1 July 2011 all commercial organisations (which includes UK incorporated companies/partnerships, and overseas companies/partnerships which carry on part of their business in the UK) could be criminally liable if persons ‘associated’ with them commit acts of bribery. Sounds scary, and to many organisations it is.

This subject is highly topical at the moment, not just because of the Bribery Act itself, but also because of the recent and continued accusations of bribery and corruption levelled at FIFA in particular over recent months.

Now, I am not going to make any comment on the veracity or otherwise of the accusations levelled at FIFA (I shall leave it to others to cast their judgment), but there is one thing that I will say about the existence of bribery.

That is…

… Not only does bribery exist, but it is an established and accepted method of doing business in many cultures and regions outside of our own.

In practice, that creates a problem for UK businesses and organisations working overseas, because your competitors are often playing by different rules. This is a problem, and although the UK Government recognises that it will not be possible to eradicate bribery over night, there does not seem to be a solution for UK businesses trading internationally in what we might consider to be “corrupt” regions.

International trade disadvantage aside, the Bribery Act represents a piece of new legislation that really cannot and should not be ignored. The biggest impact will no doubt be on the private sector, but public sector organisations should not be complacent. While public sector organisations are likely to already have anti-corruption policies (of some description) in place, such policies often only cover the activities of that organisation itself. The Bribery Act goes further than this so that public sector organisations (and officers) can be held liable for the bribes made by private sector contractors on their behalf (whether or not they have enticed such conduct). This is because corporate liability extends beyond the actions of the organisation’s employees to those more widely ‘associated’ with it. ‘Associated’ can include agents, suppliers, contractors and joint ventures etc…

It is also worth pointing out that “third sector” organisations (charities, social enterprises, etc…) will also be covered if “carrying on a business”, irrespective of whether profits are actually made or intended.

What is bribery?

Most of us have an idea of what bribery is, but when asked to define it and draw the parameters of what constitutes a bribe, we might struggle.

Without wanting to get too legal, my own view of what the Bribery Act defines as a bribe is basically this:

A bribe occurs when one person gives something to another person, in return for (or with a view to) that person improperly performing a function or activity for which they are responsible.

(nb. This is not the legal definition, but my attempt to condense the legal definition into something that actually makes sense)

Of course there are huge grey areas that are created in the legislation and in the definition of bribery. For example, at what stage can someone be described as “improperly” performing a function?

The Government recognises that routine corporate hospitality is “an established and important part of doing business” and goes on to say that “it is not the intention of the Act to criminalise such behaviour”…. whatever that means???

To be fair, the guidance does go on to provide an explanation as to the circumstances in which corporate gifts and hospitality are acceptable, and when they might stray over the line into bribery. The problem is that the line is grey and blurred with moving fluffy edges, depending upon a number of factors such as proportionality and industry sector etc…

What should you do?

The only defence available when an organisation is apparently guilty of bribery is if it had in place “adequate procedures” designed to prevent bribery. The overriding principle is proportionality determined on a risk assessment basis. If bribery risks are deemed small, overly elaborate policies and procedures may not be necessary.

The official guidance (available online) is formulated around six key principles, about which I am not going to go into any detail at this stage (other than to list them below). It states that these six principles are “not prescriptive”, but instead are “intended to be flexible and outcome focussed, allowing for the huge variety of circumstances that commercial organisations find themselves in”.

The six principles are:

1. proportionate procedures

2. top-level commitment

3. risk assessment

4. due diligence

5. communication (including training)

6. monitoring and review

Conclusion

So, there are many grey areas, and many unanswered questions: What constitutes improperly performing a function? what are adequate procedures? and what is proportionate? Who will decide these issues? Well, ultimately these are questions for the courts, having taken account all of the factors relevant to the case. But it is also worth noting that the SFO has issued prosecutorial guidelines (i.e. guidance as to when to prosecute or not) that mirror the ‘common sense’ approach advocated in the general guidance. Consequently prosecution will only take place if it is in the interests of justice to do so.

Clear as mud then!

What is clear though is that an organisation (and its executives) that grasps the nettle and applies its mind to these issues; puts in place and enforces policies designed to prevent bribery; and cascades the anti-bribery message from top level all the way through the ranks of employees, is in a much stronger and safer position than an organisation (and executives) that doesn’t.

What steps is your organisation taking to address the issues raised above, and what do you think of the Bribery Act 2010? Please share your thoughts by leaving a comment.

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