EveryMonth (Sept 2011): The new Bribery Act and ‘The Free Lunch’

The new Bribery Act finally came into force on 1st July 2011 after much concern from businesses worried that the Act would be too vague and might even outlaw corporate hospitality. Their fears were based on the original guidance provided by the Government about the Act’s operation. So were they founded? The impact of the new Act is considered here.

The new Act in brief

The new Act makes it a criminal offence to offer or receive a bribe.  This is defined as a financial or other advantage offered in the course of business, employment, governmental or corporate activity and which is designed to induce what the Act calls ‘improper’ activity. That means activity which would put you in breach of a position of trust, or a duty of impartiality or to act in good faith.

How does the new Act affect corporate hospitality?

The new Bribery Act Guidance from the Government should reassure you about corporate hospitality. It states;

‘Bona fide hospitality and promotional, or other business expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations, is recognised as an established and important part of business and it is not the intention of the Act to criminalise such behaviour.’

It is clear that the Government does not intend the Act to prevent you taking your clients to lunch or to dinner, or to major sporting events. The key is that it is reasonable and proportionate. In a suspicious case, the authorities will look at the level of hospitality offered, the manner of its provision and the influence of the person receiving it on the business decision in question.

What do you need to do to comply?

The main concern for your business is the offence of failing to prevent a bribe taking place – but with a reasonable and proportionate response to the Act, you will have little difficulty in complying.  The key is that you ensure that you establish ‘adequate procedures’ to prevent bribery taking place.

Of course every corporate entity is different and what constitutes ‘adequate procedures’ will vary between organisations. It is also clear that as a general rule, but not taking account of the special bribery risks that any one organisation may face, the larger the organisation, the greater the measures that will need to be taken to fulfil the ‘adequate procedures’ defence, essentially one of due diligence.

The Government’s Guidance sets out six key principles that an organisation should follow and tailor to its own business, its employees, customers and suppliers. Following these will go a long way to protecting you against corporate liability:

 1. Proportionality. The measures taken should be proportionate to the size of the organisation and the risks it faces.

2. Top Level Commitment. The organisation’s directors and senior management must demonstrate a clear commitment to operate within the law.

3. Risk assessment. The specific bribery risks the organisation faces must be assessed and control measures put in place. It should be remembered that risk assessment requires practical action and not simply documentation.

4. Due Diligence. An organisation must take steps to assess the bribery risks from those with whom it does business. This includes customers, suppliers, and particularly any overseas connections.

5. Communication. Anti-bribery policies and procedures must be communicated to staff, who must be made aware of the basis upon which the organisation does business. Additional training or awareness-raising may be appropriate.

6. Monitoring and Review. The risks of bribery taking place and the effectiveness of procedures to counteract it will inevitably change over time, and it is essential that any organisation monitors and reviews its anti-bribery compliance on a regular basis, making appropriate changes when necessary.

 There are no hard and fast rules for any individual organisation, and for most companies, there is no need to spend hours of valuable time and huge expense upon measures that are not required in the first place. The key is to assess what your individual organisation needs and ensure that the above basic principles are followed.