What is the Bribery Act?
The Bribery Act 2010, which became law in the United Kingdom on 8 April 2010 and will be in force from April 2011, is a new piece of legislation designed to combat the rising threat of bribery and corruption in international business. It is far-reaching and will be relevant to most UK and many foreign businesses.
It is important that all affected businesses take time to consider how the new laws will impact on their business and to review their systems and procedures to ensure that they are fully compliant. Penalties for non-compliance include unlimited fines, contracts being rendered unenforceable, severe damage to reputation and imprisonment for up to ten years.
What are the new offences?
The Act creates four new offences:
- Active bribery: giving, promising or offering a bribe or other advantage to another person to induce them to perform a function improperly.
- Passive bribery: requesting, agreeing to or accepting a bribe or other advantage from another person as an inducement to perform a function improperly.
- Bribing a Foreign Public Official: committing an active or passive act of bribery involving public officials outside the United Kingdom’s jurisdiction.
- A corporate offence: a corporate or partnership failing to prevent those performing services on their behalf from paying bribes. However, a company that is able to show that it had in place “adequate procedures” to prevent bribery from occurring will have a complete defence.
How does the Corporate Offence work?
The corporate offence will be of interest to senior management of companies, particularly those that engage the services of agents. The offence applies to companies, wherever incorporated, that carry on business or part of their business in any part of the United Kingdom. Therefore, an agent or principal that is located abroad, or that is located in the UK but has part of its operations abroad, can be liable for prosecution. A company’s connection with the United Kingdom can be fairly tenuous (merely using an internet server located in the United Kingdom may be sufficient), whilst the act of bribery can take place anywhere in the world.
For principals and agents, it is important to bear in mind that the corporate offence covers acts of an “associated person”. This is defined in wide terms to include “any person who performs services for or on behalf of” the company. It is therefore likely to include agents and distributors, as well as subsidiaries, intermediaries and joint venture partners.
Other key features of the corporate offence are:
- It extends to bribes in foreign jurisdictions involving private parties. In other words, it is not restricted to foreign public officials. This means a principal could be held criminally liable, for example, where one of its agents bribes and customer in a foreign country to make a substantial purchase of goods or services.
- There is no exception for ‘facilitation payments’. These are also known as ‘grease payments’ and are small amounts paid, usually to governmental officials, in order to expedite or secure their performing a non-discretionary duty. They have been excluded in US legislation on the basis that they merely accelerate a decision that would have occurred anyway – as opposed to altering the decision itself.
The defence to the corporate offence of failing to prevent bribery is that the company put in place “adequate procedures” to prevent such acts of bribery from occurring. What constitutes “adequate procedures” will differ from one business to another. Businesses that operate in industry sectors where bribery is known to take place, such as energy, pharmaceuticals and financial services, will be particularly exposed and will therefore be expected to go to greater lengths to prevent bribery from occurring in any part of their business structure. The same applies to businesses that pay commission or that remunerate or incentivise according to sales figures, and those that procure sales abroad. Principals/agent relationships should therefore be regarded as potentially high risk.
A government consultation paper on draft statutory guidance governing what constitutes “adequate procedures” is expected in September 2010 with the final guidance expected to be published early in 2011, thus providing companies with a few months in which to prepare and implement “adequate procedures” before the Act is brought into force in April 2011. In most cases it will not be enough for companies simply to discuss the issue with their employees or agents. They will have to be much more proactive. For example, agreements and policy documents should be reviewed and amended to ensure that bribery is clearly prohibited, and in many cases it may be appropriate to provide specific training.
Senior managers who for fail to prevent an ‘associated person’ from engaging in an act of bribery on the company‘s behalf will face strict criminal liability on prosecution. In other words, it will not be necessary show that the manager concerned actually knew about or was party to the bribery. The penalty for individuals convicted of the corporate offence is a fine. Therefore, unlike the other offences listed above, offenders will not face the prospect of a prison sentence.
What about the other criminal bribery offences?
The general offences of giving and receiving bribes also extend to private commercial bribery and, again, facilitation payments are not exempt. However, these provisions do require a stronger nexus with the United Kingdom: either the payer or recipient of the bribe must have “a close connection with the United Kingdom” (i.e. they must be a British citizen, a British corporation, or an individual ordinarily resident in the United Kingdom), or the act or omission in question – or any part of it – must have taken place in the United Kingdom.
These offences can be committed by an individual or a company. If by a company then liability can extend to its senior officers if the offence was committed with their “consent or connivance”. An individual who is convicted of any of these offences may face a prison sentence of up to ten years.
When will the laws come into force?
Although the Act became law on 8 April this year, all of the offences will only be in force from April 2011, three months after the government is due to publish its finalised guidelines on “adequate procedures”.
What steps should agents and principals be taking?
Businesses that have even a slight connection with the United Kingdom should review and, where appropriate, modify their compliance documents and programs to ensure that they comply with the Bribery Act. Businesses should not wait for the guidelines on adequate procedures to be published. Steps should be taken now to determine where they might be vulnerable and what steps will need to be taken, bearing in mind the various risk factors identified above.
This article was written by Roderick Dykins, an associate in the dispute resolution team at Fox Williams LLP. For further information Roderick can be contacted on 020 7614 2634 or email: firstname.lastname@example.org
Written by Agentlaw Team