Since 1 July 2011 the Bribery Act 2010 (the Act) has been in force, creating a significant new legal risk for many companies.

The Offences

Several new offences are created by the Act which carry a maximum penalty of 10 years’ imprisonment or an unlimited fine for individuals and commercial organisations. These offences are:

Active bribery, which involves offering, promising or giving a bribe;

Passive bribery, which involves requesting, accepting or agreeing to accept a bribe;

Bribing a foreign public official; and

The ‘corporate offence’ of failing to prevent bribery. The effect of this offence is that an organisation will automatically be guilty of an offence if an “associated person” bribes for the organisation’s benefit unless that organisation can establish that it had adequate procedures in place designed to prevent bribery.

Extended jurisdictional reach

Importantly, the active and passive bribery offences, as well as the offence of bribing foreign public officials, apply to the acts of UK-incorporated companies committed throughout the world, as well as to acts done in the UK. Interestingly, the corporate offence applies to the overseas acts of non-UK incorporated companies provided that those companies carry on part of their business in the UK.

Guidance on the Act

The Act provides for an organisation having a defence when a person associated with it is found to have committed an offence under the Act. This defence is available if the organisation can show that it has “adequate procedures” in place to prevent bribery.

On 30 March 2011 the government published guidance on the Act (the Guidance) which included an explanation of the procedures that commercial organisations can put into place to prevent persons associated with them from committing offences under the Act 

Adequate Procedures: The Six Principles

The Guidance sets out six principles intended to guide organisations in determining what bribery prevention measures should be put in place. These principles are:  

1. Proportionate procedures

A commercial organisation should have procedures to prevent bribery by persons associated with it which are proportionate to the bribery risks it faces. This involves assessing the particular bribery risks faced by the organisation. Depending on these risks, an organisation may wish to cover issues such as whistle-blowing and corporate hospitality in its procedures. The procedures themselves shoulder be clear, practical, accessible, effectively implemented and enforced.

2. Top level commitment

The top level management of a commercial organisation are to be committed to preventing bribery by persons associated with it. This is likely to include directors and senior managers being involved in developing the procedures.

3. Risk assessment

A commercial organisation should assess the extent and nature of its exposure to risks of bribery on its behalf by persons associated with it. These assessments should be periodic and documented. This principle should borne in mind when an organisation’s operations change for example, moving into a new market.

4. Due diligence

A commercial organisation should apply proportionate due diligence procedures, in respect of individuals who perform perform services for or on behalf of the organisation with the aim of mitigating identified bribery risks.

5. Communication (including training)

A commercial organisation should seek to ensure that its bribery prevention policies and procedures are solidly understood throughout the organisation by means of  internal and external communication, including proportionate training.

6. Monitoring and review

A commercial organisation should monitor and review its procedures designed to prevent bribery and make necessary  improvements as inadequacies come to light. An example of a simple monitoring and review procedure would be to use  staff surveys periodically and using the date collected to produce reports that may lead to reports.

Corporate Hospitality

The Guidance states that there is no intention for the Act to prohibit “reasonable and proportionate” hospitality which is intended to improve the image of a commercial organisation, better present products and/or services or establish cordial relations. However, the Guidance does make it clear that hospitality can be used as a bribe.

Factors which should be considered in this regard include the type and level of the advantage offered, the manner and form in which it is provided and the level of influence the recipient has over awarding business. In this context, generally the more “lavish” the hospitality, the greater the possibility that an inference will be drawn that it is intended to influence the official. The Guidance suggests that you could consider implementing procedures such as:

Conducting a risk assessment on your dealings with business partners;

Publishing a policy statement committing your organisation to “transparent, proportionate, reasonable and bona fide hospitality and promotional expenditure”;

Issuing internal guidance on procedures including that expenditure over certain limits be authorised by senior management;

Monitoring and reviewing internal procedures; and

Training staff.

Given that the Act is now in force, it would be prudent for organisations to review their existing policies and procedures ensuring that these are adequate for the purposes of the Act. Amendments to existing policies and related staff training are potentially a cost effective way of demonstrating how anti-bribery measures are in place. When reviewing policies, it may be a good idea to ensure that contracts of employment contain a specific clause obliging all employees, including those based abroad, to comply with the organisations anti-bribery practices and policies.

Although the Act does not impose a positive obligation on a organisations, failing to implement adequate procedures designed to prevent bribery would be an undoubtedly a risky strategy.