WSG Article: The Bribery Act: First thoughts on Government’s adequate procedures guidance to commercial organisations

The Bribery Act: First thoughts on Government’s adequate procedures guidance to commercial organisations

September, 2010 - Ron Reid and Andrew Picken

The Bribery Act 2010 is due to come into force in April 2011, with significant implications for organisations incorporated or formed in the UK.

It also affects those carrying out their business or part of their business in the UK wherever in the world they were incorporated or formed.

The Act goes much further than the existing legislation and similar foreign legislation, such as the US Foreign and Corrupt Practices Act.

It incorporates both public sector and private sector bribery, and creates a new corporate offence whereby a commercial organisation will be liable to prosecution if a person associated with it bribes another person intending to obtain or retain business or an advantage in the conduct of business for that organisation.

The only defence available to an organisation is that they are able to prove they had in place adequate procedures designed to prevent persons associated with the organisation from bribing on its behalf. The legal burden of proving that defence falls upon the organisation.

We have already briefed clients on this topic:

The legislation requires the Government to publish guidance about procedures that commercial organisations can put in place. A consultation document was published on 14 September:

http://www.justice.gov.uk/consultations/briberyactconsultation.htm

This note is not intended to restate the content of the consultation document, but to respond to it, provoke discussion and invite comments on the draft by providing reflections on the Government’s paper.

Having read it, our initial thoughts are:

The ‘front end’ of the consultation document reminds businesses that at the end of the day, establishing adequate procedures under the Bribery Act 2010 is a matter for the business concerned. Although the document provides general guidance, there is an emphasis on the fact that the guidance is ‘not prescriptive’ and that ‘no one size fits all’. This point is repeated again and again through the document. Businesses will understand this, but will also potentially find it rather frustrating because they will find it difficult to know with certainty in a given situation whether they have in fact done enough.
The guidance is, as many have expected, consistent with much of what has gone before. Publication of notes by organisations such as Transparency, GIACC and the GC100 Group, for example, have all focused on common themes. The six principles for bribery prevention stated clearly by the Ministry of Justice contain no surprises. They are very much, as the paper says, outcome focused and goal setting in terms of their character.
A more interesting aspect of the consultation note is the light which some of the comments start to throw on one or two issues which have been the subject of recent debate. Businesses will be interested to read the comments on the following:
‘Off-set’ arrangements
These are arrangements whereby some kind of additional investment is offered or required as part of an organisation’s tender for business. The paper states that in looking at Section 6 (Bribery of Foreign Public Officials) off-set arrangements are unlikely to give rise to any difficulties where such arrangements are subject to legislative or regulatory provision. This is likely to be of assistance to businesses working in regimes where such arrangements are commonplace.

Hospitality and promotional expenditure
In the context of main bribery provisions, there is a useful reminder that in order to amount to a bribe under Section 1, hospitality or promotional expenditure must be intended to induce a person to perform a function improperly. If the hospitality or expenditure is not so intended then there is not a problem. This principle will be important in enabling businesses to start to frame their hospitality codes in a way that ensures that any hospitality is reasonable and proportionate.

In the context of public officials, there is also some interesting guidance. The notes make reference to the fact that ‘a routine and incidental business courtesy where the advantage involved is of small value or where hospitality is standard’ is unlikely to be a problem. In contrast, where hospitality is lavish there is more likely to be an issue.

More on facilitation payments
The paper reiterates the Government’s zero tolerance of facilitation payments and is unlikely to provide much comfort to businesses, and they are reminded that the UK regime on such payments will be tougher than the US approach embodied in the FCPA.

Prosecutorial discretion
The paper reminds readers of the two stage test that prosecutors will adopt. In order for there to be a prosecution for bribery there must be:
- sufficient evidence to provide a realistic prospect of a conviction
- the prosecution must be in the public interest
The more serious the offence, the more likely it is that a prosecution will be required in the public interest.

Other thoughts
At the end of the consultation paper the Government has provided six scenarios in which it seeks to demonstrate how in a given situation businesses should think through a particular problem using the six principles as a guide.

Though of interest, in practice one is left feeling that in reality every situation must simply be considered on its merits. There are, however, a number of factors which come out quite strongly through the scenario section, including:

the absolute importance of risk assessment and ongoing risk assessment is stressed time and time again
the notes bring out the importance for businesses of ensuring that compliance policies set out clearly the burden of expectation on the top people in a given organisation
the content and effectiveness of training is stressed
the danger of delegating compliance is stressed
self reporting – businesses are asked to consider whether they are in a position to self-report if they discover a problem
there is a focus on businesses asking whether they are in a position themselves to objectively conduct DD or whether they need third party help to assist with that
in terms of information gathering, it is open to question about how diligent businesses should be; it seems the more obscure the environment in which they trade, the more likely they are to have to make more and more enquiries

Next steps
It is our intention to respond to the consultation not only with our views, but preferably with those of clients. This will be done anonymously.

To help us with this, please take part in a survey by clicking the button below.

Also, if you would like to let us have your views on the document, or any part of it you do not wish to communicate directly to the Ministry of Justice, then please let us know and we will be happy to include that view as part of our response.