The Bribery Act 2010 comes in to force in April 2011 and creates four new offences of paying bribes, receiving bribes, bribing a foreign public official and the corporate offence of failing to prevent bribery.

The Act is extremely far reaching and applies to all UK companies and foreign companies doing business in the UK and all multi-national companies and UK businesses trading overseas. It criminalises the paying and receiving of bribes (however small) anywhere in the world in both public and private sectors. 

Paying or receiving bribes

It will be an offence to offer, give, request, agree to receive or receive a financial or other advantage intending that “a relevant function or activity” should be performed “improperly” as a result.

What is a “relevant function or activity”?

Relevant functions or activities are of a public nature, connected with a business, performed in the course of a person’s employment, or performed by or on behalf of a body or persons. And relevant expectations are that it is to be performed in good faith, performed impartially or performed by a person in a position of trust by virtue of performing it.

These widely drawn definitions of relevant expectations and improper performance are judged by UK standards, irrespective of where in the world an activity is being carried out, and regardless of what local connections may be.

What does improper performance mean?

This is a function or activity which is performed in breach of a “relevant expectation” or a failure to perform a function or activity which in itself is a breach of a relevant expectation.

What is a relevant expectation in this context?

It is important to keep in mind that what is deemed ‘normal’ business conduct elsewhere in the world may be considered improper by UK standards. 

The relevant standard is that which is expected by a reasonable person in the UK, irrespective of where in the world the payment was made.  The only exception is where local law refers to the making or receipt of a payment in such circumstances.

So, performance of the function may not be regarded as proper even though it is entirely consistent with local customer expectation.  It does not matter whether the payer knows or believes that the performance of the function or activity is improper.

It also needs to be borne in mind that a bribe need not actually be for the law to have effect.  If it is merely offered or promised with the intention of inducing improper conduct, or if a person agrees to accept something with the intention of acting improperly, that is sufficient.  The legislation therefore covers a situation where a company attempts to pay a bribe, receives nothing for it, but would still be caught by the Act.

How to deal with the Act

It is a defence for a company to prove that it had in place ‘adequate procedures’ designed to prevent the commission of Bribery Act offences.

What are adequate procedures?

Government guidance as to what amounts to ‘adequate procedures’ is due to be published in the New Year.  The essence of ‘adequate procedures’ is likely to involve:

• A statement of intent from the CEO
• An internal code of ethics
• A senior officer to oversee an anti-corruption programme
• An internal anti-corruption programme
• A whistle-blowing system
• Policies on gifts, corporate hospitality and facilitation payments.

Consider the following key points when setting policies on internal ethics:

• A company’s corporate culture will be of great relevance trying to demonstrate adequate procedures.
• Employees must not be rewarded simply for winning business – this encourages a risk of corruption.
• Instead employees should be rewarded for ethical behaviour, even if this in practice means turning away business from time to time.
• The company must have the right to audit a business agent’s practices to ensure that it cannot be guilty as a result of its agents actions.
• The company needs to be able to terminate its contract with an agent if the latter is found to be non-compliant.
• Maintain a register of all gifts made and received and entertainment given.
• Robust auditing to detect corrupt payments and ensure compliance with anti-corruption procedures.

Transparency International has produced business principles for countering bribery and Government guidelines are likely to be similar to these when they are finally produced.  A copy of the Transparency International principles can be downloaded at www.transparency.org

Corporate entertaining

There is a blurred distinction between bribery and lavish corporate entertaining which has caused some consternation in the business community.  Practices which are likely to fall the wrong side of the line include “marketing” trips and activities which have no technical content or element of business discussions and paying cash allowances or making gifts to those attending marketing functions.

Government minister Lord Tunnicliffe provided a letter of clarification about the treatment of corporate hospitality under the Bill following the debate on January 7, 2010.  In it he said “We recognise that corporate hospitality is an accepted part of modern business practice and the Government is not seeking to penalise expenditure on corporate hospitality for legitimate commercial purposes. But lavish corporate hospitality can also be used as a bribe to secure advantages and the offences in the Bill must therefore be capable of penalising those who use it for such purposes.”

The potential scope of these offences under the Act is extremely wide but will only impact on corporate hospitality where the intention is to induce the recipient of that hospitality to “perform improperly” their role within their business.

Corporate hospitality spread more widely amongst contacts is therefore less likely to be the subject of scrutiny.  The director of the Serious Fraud Office has stated that: “The most routine and inexpensive hospitality would be unlikely to lead to a reasonable expectation of improper conduct”.

However the implication therefore is that lavish or extraordinary hospitality might lead a jury to reach the conclusion that it was intended to induce the recipient to act improperly.

The general rule of thumb is that a business, as part of its compliance procedures, should have a policy that offering or receiving gifts for hospitality which could be perceived to affect the outcome of a business transaction - and are not reasonable or bona fide - should be prohibited.  As with all internal procedures, measures should be put in place to monitor the policy.

If you have any questions about the Bribery Act contact Katherine Southby on 0113 227 0394 or email katherine.southby@gordonsllp.com.