The Ministry of Justice has finally published its guidance on the provisions of the Bribery Act. This is both good and bad news for businesses.
The key points are that ‘hospitality’ can be considered bribery in some circumstances, responsibility for ensuring that bribery doesn’t occur rests with the organisation and extends to many of its connections, and all businesses must assess their bribery risks and put appropriate safeguards in place.
What action do you need to you take?
All commercial organisations in the UK are affected to a greater or lesser extent. It follows that anyone involved in running, acquiring or disposing of a business is bound by this law. Although your response should be proportionate to your risks, doing nothing is not an option. The following steps are recommended:
- Review the Ministry of Justice guidance and ‘Quick start guide’
- Attend a seminar or training course
- Perform a risk assessment of your own bribery risks and the bribery risk of any enterprise with which you have dealings, especially where you are involved in a corporate deal.
- Develop a proportionate anti-bribery implementation plan
The Act comes into force on the 1 July 2011 and includes 3 key bribery offences:
- Bribing another person
- Bribing of a foreign official
- Failure of a commercial organisation to prevent bribery
Hospitality and promotional expenditure
There have been two generally accepted conventions about corporate largesse. The first was that the level of hospitality and accommodation afforded to someone should be broadly in line with that which he or she might enjoy in their own home.
The second was that when doing business in foreign territories, the practices and customs considered acceptable in that culture should be taken into account. In short, ‘When in Rome…’
That’s all changed. Under the strict rules of the Act, hospitality and promotional expenditure could be deemed to be bribery offences. The definition of what constitutes bribery is now extremely broad.
Making bona fide, proportionate and reasonable hospitality and promotional expenditure will not be offences. However, it makes clear that these and “other similar business expenditure can be employed as bribes”.
Failure to prevent bribary
The Act introduces a new offence of a failure to prevent bribery by a commercial organisation. A company will be liable if a person associated with it or acting on its behalf commits a bribery offence, even if the offence is committed without the knowledge or agreement of the company. This includes employees, agents, subsidiaries and may also include contractors and suppliers if they are performing services rather than merely acting as the seller of goods.
The only defence available to companies if a bribery offence is committed on their behalf is that they have ‘adequate procedures’ in place. This is an area still untried in Court and open to interpretation.
It suggests that a formal policy document should be available to all those connected with the organisation, with clear evidence that this has been brought to the attention of relevant connections and, where appropriate, training has been given.
The draft Ministry of Justice guidance sets out a principle-based approach to adequate procedures and identifies 6 key principles. The 6 key principles are:
- Proportionate procedures
- Top-level commitment to implementation of the Act
- Risk assessment
- Due diligence
- Communication (including training)
- Monitoring and review
Due diligence does not have to be undertaken on all organisations along the supply chain.
The presence of a joint venture entity does not automatically make that joint venture an associated party. However, a risk assessment is required.