Bribery
Media comment on the Bribery Act 2010 has focussed primarily on employees.  There has been barely any thought given to agents and none to distributors.  But if your agent intended his bribe to obtain or retain business from a customer, then an offence will have been committed.

A company which commits the offence faces unlimited fines.  Individuals (for example, a sales director) who commits the offence face unlimited fines or ten years imprisonment (or both).

What’s to be done?

The good news is that guidance for principals and suppliers can be obtained free from the Ministry of Justice (www.justice.gov.uk).  The guidance highlights the procedures which principals should introduce to prevent bribery occurring within their organisations, including by their agents.

The better news is that the guidance provides greater clarity than the draft guidelines issued by the Ministry of Justice in September 2010.

The even better news is that the guidance introduces a small degree of realism.  For example, in principle, small payments made to facilitate routine actions by overseas government officials are bribes.  The Act provides no exception.  In contrast, the guidance acknowledges that there should be considered whether such payments are one-off, small or made by a party in a vulnerable position and, if they are, this may result in non-prosecution.

There has also been considerable media comment about corporate hospitality.  The Government has made it clear that hospitality is “an important part of doing business and it is not the intention of the Act to criminalise such behaviour”.  The reason for this is that it is now recognised by the Government that improving a commercial organisation’s image or establishing good relations is important.  Ultimately, the test is what a reasonable person would expect taking into account what is normal for the business sector in which the company operates.  If it is proportionate to what is normal and there is no further evidence demonstrating that the hospitality was intended to have a direct impact on decision making, it is likely that an offence has not been committed.

Indeed, it was made clear by the guidance that the fact that one act of bribery has occurred does not itself mean that the procedures in place are “inadequate”.  Instead, it is recognised that the “actions of an agent or an employee may be wilfully contrary to very robust corporate contractual requirements, instructions or guidance.”

But, bear in mind that even with this degree of realism:

  • there are no safe harbours;
  • the guidance does not have the force of law;
  • acts of bribery will result in prosecution whether they are committed in the UK or overseas by UK businesses.

Adequate procedures

The Government has published six principles to guide the procedures businesses need to put in place to prevent bribery.  The underlying theme is that businesses need to understand and respond to the risks which are particular to their businesses.  Consequently, these may have practical consequences in the way in which businesses undertake due diligence in respect of their relationships with their agents and the transactions which they enter into with distributors.

The six principles are

1) Proportionate procedures
“A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities.  They are also clear, practical, accessible, effectively implemented and enforced.”

2) Top-level commitment
“The top-level management of a commercial organisation…….are committed to preventing bribery by persons associated with it.  They foster a culture within the organisation in which bribery is never acceptable.”

3) Risk assessment
“The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it.  The assessment is periodic, informed and documented.”

4) Due diligence
“The commercial organisation provides due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.”

5) Communication (including training)
“The commercial organisation seeks to ensure that its bribery prevention policy and procedures are embedded throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.”

6) Monitoring and review
“The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.”

Practical tips for principals and suppliers

In light of the guidance issued by the Government, top tips for principals and suppliers to reduce the risk of prosecution as a result of agents or distributors engaging in bribery are:

  • Inform agents and distributors of your commitment to complying with the Bribery Act 2010.
  • Put in place policies and procedures to counter bribery, and communicate these to agents and distributors.  This will enhance awareness and help to deter bribery by making clear the basis on which the business does business.
  • Monitor such policies regularly.
  • Put in place compulsory training on your anti-bribery procedures.  If you feel that only a few agents or distributors operate in a high risk area, ensure the training is targeted accordingly.
  • Establish reporting lines of communication and whistle blowing procedures and communicate these to agents and distributors so that thy can report corruption safely and in confidence.
  • Introduce reviews of agents and distributors to take into account their knowledge of anti-corruption policies, and introduce incentives for exemplary behaviour and knowledge.
  • Amend existing agency and distributorship agreements to include an undertaking by agents and distributors to comply with your policies and procedures to counter bribery.
  • Revise agency and distributorship agreements so that breach of the anti-bribery provisions is a ground for immediate termination without payment of compensation under the Commercial Agents Regulations or damages respectively.
  • Bear in mind that the UK is not alone in having anti-bribery and corruption laws.  Both you, your employees, agents and distributors need to comply with all local laws in which you or they are doing business.

______________________________________________________________________________

This briefing note is for general information.  For advice in applying this general information to your specific circumstances, please contact Stephen Sidkin or any member of the Fox Williams’ agentlaw team (www.agentlaw.co.uk).

© Fox Williams LLP 2011

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