Businesses should take note of new legislation in the form of the Bribery Act, which will come into force on 1 July 2011. This is one of the most sweeping anti-corruption measures in English history.
On 30 March 2011 the Ministry of Justice announced that the Bribery Act 2010 would come into force on 1 July 2011. On the same day, guidance was published detailing the procedures that a commercial organisation can put into place to prevent it from being found guilty of an offence under the Act. The Government has confirmed that if an organisation can prove that adequate anti-bribery procedures are in place, this can be a defence under the Act.
The Act will replace, update and extend the existing law against corruption which dates back to 1889. The Act extends the crime of bribery to cover all private sector transactions (previously bribery offences were confined to transactions involving public officials and agents) and its scope is extensive. The offences established by the Act are very broadly defined and it has significant extra-territorial reach (and extends to acts or omissions which occur outside of the UK).
Under the Act there will be three criminal offences;
- a general offence covering offering, promising or giving a financial or other advantage to another person which in itself is an improper performance of a relevant function or activity or will influence the person's behaviour to improperly perform a relevant function or activity;
- bribery of Foreign Public Officials to obtain or retain business; and
- new offence for commercial organisations where they fail to prevent bribery by those acting on their behalf.
This is likely to be the most common offence.
'Improper performance' is a key element of the Act. It means a failure to perform duties in accordance with the 'expectations' of a reasonable person in the UK. The relevant expectations are that the function will be performed in good faith and impartially or in accordance with a position of trust attaching to a function.
A 'relevant function or activity' includes those:
- 1. of a public nature;
- 2. connected with a business trade or profession;
- 3. performed in the course of employment; or
- 4. performed on behalf of a body of persons.
The person must, in relation to the relevant function or activity, either be:
- expected to perform it in good faith;
- expected to perform it impartially; or
- in a position of trust
These general offences require intent and therefore the briber must intend that the person being bribed improperly perform his or her duties.
There is no requirement for intent on the part of an organisation for the new offence of failing to prevent bribery. A commercial organisation commits an offence if a person associated with it bribes another person for that organisation's benefit.
A person is "associated" with a commercial organisation if it performs services for or on behalf of the organisation, regardless of the capacity in which it does so. This term will therefore be construed broadly and could cover agents, employees, subsidiaries, intermediaries, joint venture partners, contractors and suppliers, all of whom could render the organisation guilty of this offence.
The organisation has a defence if it can prove it had "adequate procedures" in place to prevent bribery.
Section 7 recognises that the Act is not there to impose the full force of criminal law upon well run commercial businesses for an isolated incident of bribery. The Act also recognises that no commercial organisation is capable of preventing bribery at all times.
If an organisation is found to have fallen foul of the Act, co-operation with the Serious Fraud Office ("SFO") and full disclosure of all relevant facts will be taken into account when criminal proceedings against the organisation are considered.
The Ministry of Justice has identified six principles which should be the starting point for adequate bribery prevention in all commercial organisations. The guidance strongly advises a risk based approach to adopting satisfactory procedures based on the size, nature and complexity of the organisation in question.
The six principles are as follows:
1. Proportionate Procedures
The guidance makes it clear that there should be two procedures implemented, one through the organisations policies and the other through relevant procedures.
In relation to policies, organisations are advised to:
- include a statement of the organisation's commitment to bribery prevention;
- set out the general approach to reducing bribery risks; and
- give an overview of an implementation strategy for the Act.
The guidance also sets out a non-exhaustive list of topics that bribery prevention procedures may cover:
- risk assessment ;
- the involvement of top-level management;
- gifts and corporate hospitality;
- pre and post contractual business relationships;
- financial controls including auditing and the approval of expenditure;
- transparency of business transactions;
- avoidance of conflicts of interest;
- breaches of anti-bribery rules;
- reporting of bribery (including whistle blowing);
- communication and training of the organisation's anti-bribery policy; and
- review of anti-bribery policies.
2. Top Level Commitment
The guidance states that there should be commitment from top level employees in relation anti-bribery procedures, raising awareness of such issues and encouraging transparent business procedures. The guidance also states that its hopes top level commitment will establish a culture within organisations that promotes bribery as being unacceptable.
3. Risk Assessment
Bribery risk assessment may be part of the organisation's general policy or may be bribery specific. This will be dependent on the business size and the relevance of bribery to the organisation. All organisations should be aware that their risk of infringing the Act may increase or decrease as the nature of their business changes. The guidance has highlighted situations where the risk may increase:
- location - countries where there are high levels of corruption;
- sector - large scale infrastructure;
- transactional - transactions relating to public procurement may involve charitable or political contributions;
- business opportunity - transactions of high value where the objective is unclear; and
- business partnership - business relationships with foreign officials and politically exposed officials.
4. Due Diligence
Due diligence should be carried out on a proportionate basis with organisations making extra checks if appointing employees who will be dealing with the public in a capacity where bribery may occur.
Bribery policies should be embedded and understood throughout the organisation. By effective communication, all employees should be made aware of the potential risks of being guilty of a bribery offence. All bribery training should be continuous and regularly monitored.
Organisations are encouraged to establish a code of conduct for external communications.
6. Monitoring and Review
Periodic reviews of anti-bribery policies should be carried out. All organisations should:
- monitor and review compliance with the anti-bribery policy; and
- appoint a compliance officer.
The SFO will be responsible for enforcing the Act. As the Act is broadly drafted, the SFO will need to exercise its prosecutorial discretion in determining what sanction to issue upon those who fall foul of the Act.
If an individual is found guilty of an offence under the Act they could be sent to prison for up to 10 years, face an unlimited fine or both.
Senior officers of an organisation could be liable to a prison sentence if bribery was perpetrated with their consent or connivance and they could be disqualified from acting as a director for up to 15 years.
Organisations could receive unlimited fines. In addition, any contract formed as a result of bribery is likely to be void on public policy grounds.
The guidance has stated that the SFO would be more likely to favour prosecution against an organisation in cases where:
- the organisation has a history of similar corrupt conduct;
- this conduct has become part of the organisation's normal business conduct;
- the organisation has failed to implement an effective corporate compliance programme;
- the organisation has received previous warnings for similar conduct; and
- the organisation has failed to report the full extent of the incident within a reasonable time.
The SFO have indicated that they are less likely to prosecute where:
- the organisation's management has been genuinely pro active in introducing policies and procedures for bribery prevention;
- the organisation has no history of similar offences;
- the offence is isolated; and
- the offence is not recent, and since the offence the organisation has taken preventative steps to stop it reoccurring.