Anticorruption law delayed but business still on countdown

19 March 2012

Business needs to buckle up its processes to protect against the forthcoming Bribery Act which will create the toughest anti-corruption regime in the world The Bribery Act 2010 became law in April 2010, and was due to come into force in April 2011 but following lobbying from business organisations and others, has been set back for a second time. The Act is intended to up-date and rationalise Britain's law on the subject. Britain's track record for tackling corruption is poor, and the decision not to prosecute British Aerospace over alleged bribery in the Middle East was called a scandal by the Organisation for Economic Cooperation and Development. The country is bound by international treaty to tighten its anti-corruption laws and the Bribery Act will introduce one of the toughest regimes in the world. The Government has now said it expects to defer implementation until later in the year, but companies are being urged to act to get procedures in place as, according to experts, the legislation is unlikely to be significantly amended at this stage. The Act creates four offences. The first three are committed by individuals, the fourth can only be committed by a business, whether a company or partnership: • Paying bribes: it will be an offence to give or offer someone an incentive with a view to inducing them to act improperly • Receiving bribes: it will be an offence to receive an incentive with the intention of acting improperly as a result • Bribery of foreign officials: it will be an offence to give a foreign public official an incentive with the intention of influencing the official and obtaining business as a result • Failure to prevent bribery: a commercial organisation will be guilty of an offence if a person connected with that organisation (including employees, subsidiaries, and agents) commits one of the individual bribery offences above; unless the organisation can show that it has adequate procedures in place to prevent bribes being paid. The legislation is controversial in that it might make a company criminally liable for actions it knew nothing about. However, in those circumstances, it is not the bribery that would give rise to guilt, but rather the lack of adequate anti-bribery procedures. The Department of Justice has issued draft guidance on the expected procedures, and recommends a six-step approach by companies: • Risk assessment: every business should undertake a review of all its activities in order to identify where a risk of bribery may arise • Top level commitment to eradicating a culture of bribery: the board of directors, or its equivalent, should take responsibility for establishing a culture within which corruption is eradicated; a senior officer should be directly responsible for overseeing the anti-corruption programme • Due diligence: an assessment should be carried out before entering into any major business relationship or project • Clear policies and procedures: procurement and contract management procedures should be put in place to minimise the opportunity for corruption and to clarify the approach that those responsible should take when negotiating contracts. There should also be a clear policy on gifts and entertainment • Effective implementation: the anti bribery and corruption policy must publicise to all employees and it must be spelt out in contracts of employment and when new employees are inducted into the company. Financial controls should be put in place to minimise the risk of bribery. Disciplinary measures must be spelt out • Monitoring and review: there must be a whistle-blowing procedure to enable employees to report suspicions of corruption in confidence. Whistle blowing should be encouraged as part of the anti-corruption culture. Another area of controversy is how the new legislation applies to corporate hospitality. There has been much speculation in the press about sponsors leaving Formula One and that corporate golf days may no longer be legal. Business organisations have challenged the Government to clarify on when corporate hospitality will cease to be legitimate and become bribery. The matter was discussed in Parliament, but nothing conclusive came out of it. In a letter clarifying the Government's intentions Lord Tunnicliffe, the spokesperson for the Ministry of Justice, commented that corporate hospitality is an accepted part of modern business practice but that lavish hospitality could amount to bribery. He quotes the director of the Serious Fraud Office as saying that "most routine and inexpensive hospitality" would be unlikely to cause the recipient to act improperly and so would not be an offence. Said Peter Butterfield, corporate / white collar crime expert with Chelmsford solicitors Gepp & Sons: "This legislation is certainly needed; the OECD have been complaining about our reluctance to bring in proper anti-corruption legislation since 1997. But we also desperately need clarification on areas like corporate hospitality. Terms such as "routine" and "reasonable" and "inexpensive" are all relative. "And if anyone thinks that the Act only concerns multi-nationals like BAE, they should remember that just about every business in the country, from the new start-up to the largest plc, provides clients with entertainment or gifts from biros to boxes at Old Trafford. From the work we're doing to develop processes with clients, it's clear that many smaller business clients simply hadn't realised it will affect them." Following the change of Government last year, the original October 2010 implementation was deferred by Justice Secretary Ken Clarke. This was to allow for a further period of consultation following the publication of the draft guidance and the results were due to be published in January 2011, although nothing has been published and implementation is expected to be deferred. But although the Bribery Act was passed in the dying days of the last Government, it had the full support of both the Conservatives and the Lib Dems, so the Act itself is unlikely to be amended. • For additional information or comment please contact: Peter Butterfield of Gepp & Sons. The above is not legal advice; it is intended to provide information of general interest about current legal issues.