The Bribery Act 2010
In April 2010, the new Bribery Act received Royal Assent. The provisions under this Act will now come into force on 1 July 2011 this year.
The legislation represents a substantial overhaul of the UK’s bribery laws. Amongst other offences, it introduces a corporate offence if a commercial organisation has failed to prevent bribery by an associated person (including third parties), whether in the UK or overseas.
There can be no doubt that the legislation demonstrates a commitment to eliminate bribery, but the burden on commercial organisations has been subject to much criticism, especially in drawing the line between legitimate corporate hospitality and illegitimate greasing of palms. It may be true that a lot of business is done on the golf course, but will a free round of golf now be out of bounds?
Rather than make it clear, or give any sort of financial indication, the guidance sets out six key principles which commercial organisations are required to consider; proportionality, top-level commitment, risk assessment, due diligence, communication and monitoring and review. The guidance also states that commercial organisations should introduce or develop proportionate anti-corruption policies and procedures. How this all sits with the proposed bonfire on red tape is not easy to reconcile, but this certainly adds some fuel for the fire.
Whilst it is tempting to dismiss this scenario as being one which would not apply to your organisation, consider the following example: Company (‘X Ltd’) is bidding for work from Y Ltd in a public tender. During the course of the bidding process, X Ltd’s sales director takes Y Ltd’s Chief Executive on a night out. The sales director pays for food, drink and entertainment. Is that a bribe?
Under the new law, consideration would have to be given as to the desired effect of the hospitality. If, for example, it is to try and get Y Ltd to prefer X Ltd’s bid over its competitors even if, for example, its competitors are offering a better deal, the sales director is trying to get the managing director of Y Ltd to perform his duties improperly, and may have committed an offence. The managing director of Y Ltd may have committed an offence by accepting the bribe.
In 99% of cases, it will be difficult if not impossible for the prosecuting authorities to know or prove any intention to persuade Y Ltd to act improperly. Unless the services of X Ltd were so manifestly inferior that no sane (or sober) customer would prefer them, a court cannot sensibly enter into the commercial arena and impose its view of whether Y Ltd’s MD made a good choice for his business.
Cases do however occur from time to time in which, for example, a company places an order for double-glazing and the MD ends up with a nice, free conservatory at home. In cases of that sort, it is likely to come to the attention of the company first, who may well take a dim view, and dismiss the manager in question. It would seem rather harsh in the circumstances to fine the company who exposed the wrongdoing.
It could be however that the authorities hear about it first, especially where a disgruntled fellow executive (with no conservatory) reports it as a “whistleblower“. The company could still take disciplinary action, and in fact both the buying and selling companies could be guilty of an offence of failing to prevent bribery if they cannot show that they have taken adequate measures to prevent it. They could face unlimited fines, and the directors could face imprisonment.
The government has now produced the long-awaited guidance to commercial organisations. This states that “reasonable and proportionate hospitality” will not amount to bribery under the legislation, although facilitation payments of any kind are prohibited. However what constitutes “reasonable and proportionate hospitality” is still the subject of much debate, on and off the golf course.
If you would like us to draw up a policy which meets these new requirements, call Jen Tear on 01752 292308.