Glasgow Chamber Of Commerce

The Ministry of Justice issued its final guidance on the Bribery Act on 30 March 2011 and confirmed that the Act will come into force in on 1 July 2011. 

Background

Bribery has, of course, been illegal in the UK for a long time - going back to the Sale of Offices Act 1551, the Public Bodies Corrupt Practices Act 1889 and the Prevention of Corruption Acts of 1906 and 1916.

However the UK has faced criticism internationally for appearing to have weak enforcement against bribery (e.g. over allegations relating to BAE Systems sales to Saudi Arabia) the new law was introduced to clarify and extend the prevention of bribery and corruption by:

• Replacing and updating the earlier legislation
• Creating general offences of offering, promising or giving of an advantage, and requesting, agreeing to receive or accepting of an advantage
• Creating an offence of bribery of a foreign public official
• Creating a new offence of "corporate bribery"
• Creating a new offence of failure by a commercial organisation to prevent a bribe being paid for or on its behalf (the only defence being if the organisation has adequate procedures in place to prevent bribery).

Requirement to prevent bribery by anyone acting on your behalf

Being honest and fair in your own dealings will no longer be enough…you will now need to assess and monitor your organisation and also agents and others outside it who work on your behalf.

The most significant impact of the new Act is the requirement to have "adequate procedures in place to prevent bribery".  The consequence being that if someone acting on behalf of the organisation (including an agent in a far flung part of the world) is found to have either bribed someone else or has been bribed, then the organisation is automatically guilty of failing to prevent the bribery unless it can demonstrate that it has adequate procedures to prevent bribery.

The penalty for failing to prevent bribery can be an unlimited fine on the organisation or individual senior managers.

The penalties for bribing or being bribed can be an unlimited fine or up to 10 years in jail.

Gifts and Hospitality

The scope of the new law and guidance includes gifts and hospitality.  The guidance states that "bona fide hospitality and promotional expenditure which seeks to improve the image of a commercial organisation, better to present its products and services or establish cordial relations is recognised as an established and important part of doing business".

In order to amount to a bribe, "there must be an intention to influence the official".

Key questions to ask when giving or receiving gifts or hospitality are:
• Does the event involve providing information about the product or service (better if it does)
• Who benefits? - the inclusion of other family members will require greater justification
• Is the level of expenditure appropriate? (lavish expenditure will be harder to justify)
The implications of the new act are that businesses will need systems and records to demonstrate that such gifts and hospitality are appropriate and proportionate.
 
Facilitation Payments

The OECD defines "facilitation payments" as "a payment to a government employee to speed up an administrative process where the outcome is already pre-determined".  (Ie the payment has not changed the outcome).  Anti-bribery legislation in some countries permits facilitation payments (eg the Foreign Corrupt Practices Act in the US and similar legislation in Canada, Australia, New Zealand and South Korea).

However the new UK legislation criminalises the act of "influencing the performance of a foreign public official's function, which includes any omission to exercise those functions", so "facilitation payments" are illegal under the new Act. 

UK businesses will therefore need to have systems to prevent such payments, and to identify and address any such payments that do occur.

Guidance on policy and procedures

The Ministry of Justice issued guidance on the implementation of the act on 30 March 2011, which describes what adequate procedures might look like.

The guidance (at http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf ) sets out six key principles for  organisations to consider when preparing policies and procedures to prevent bribery:

1. Proportionate procedures

The procedures should be proportionate to the bribery risks that it faces and to the nature, scale and complexity of the organisation's operations.

2. Top level commitment

The top level management are committed to preventing bribery and foster a culture within the organisation in which bribery is never acceptable.

3. Risk assessment

Assessing the nature and extent of exposure to bribery risk, which is informed, documented and periodically reviewed and updated.

4. Due diligence

The organisation applies proportionate, risk based due diligence procedures on those who perform of will perform services on its behalf. 

5. Communication (including training)

Bribery prevention policies and procedures are embedded and understood throughout the organisation through communication and training, proportionate to the risks faced.

6. Monitoring and review

The organisation monitors and reviews procedures and makes improvements where necessary. 

Every commercial organisation needs to prepare and put in place an appropriate anti-bribery policy and procedures in time for the Bribery Act coming into force on 1 July 2011.

The first and most important step is to assess the exposure to bribery risk and determine the extent of procedures required.

Graham Scrimgeour can be contacted by email - graham.scrimgeour@scott-moncrieff.com or telephone - 0131 473 3500.