UK: The Bribery Act 2010: Are Your Measures Adequate?

The Bribery Act 2010, which comes into force in April 2011, aims to provide an effective legal framework to address an issue which is an increasing problem, in both the public and private sector, at both a domestic and international level.

The World Bank estimates that over $1 trillion is paid annually in bribes, adding over 10 per cent to the cost of doing business in certain countries. The Bribery Act 2010 aims to help address this problem in the UK.

The Act is of particular significance to construction companies who, particularly when operating abroad, are often exposed to corrupt practices, as illustrated by the well publicised Serious Fraud Office investigations into projects involving a number of well known UK construction firms.

The major change for UK businesses will be the need to have in place an adequate anti-bribery policy which for many will represent a dramatic change in culture. In advance of the Act coming in to force the Ministry of Justice has consulted on draft guidance for commercial organisations on how to prevent bribery.

The Bribery Act 2010

Four new offences

The four new offences can be summarised as follows:

1. Bribing another person: offering or giving a financial or other advantage to a person (i) intending to induce them, or another, improperly to perform a public function or business activity or as a reward for the same or (ii) knowing or believing the acceptance in itself would constitute improper performance.
2. Offences relating to being bribed: (i) requesting or accepting an advantage intending personally or through another improperly to perform a public function or business activity or as a reward for the same; (ii) requesting or accepting such advantage when the request or acceptance would constitute improper performance of a public function or business activity; or (iii) improperly performing such a function or activity in anticipation of receiving such an advantage.
3. Bribery of foreign public officials: offering or giving to (or with the assent of) a foreign public official an advantage that is neither permitted nor required by the written law applicable to that official intending (i) to influence them in their capacity as a pubic official and (ii) to obtain or retain business or business advantage.
4. Failure of commercial organisations to prevent bribery: a commercial organisation will be guilty of an offence (also known as "the Corporate Offence") if a person with whom it is associated bribes another person intending (i) to obtain or retain business for the organisation, or (ii) to obtain or retain an advantage in the conduct of business for the organisation. "Associated with" is defined broadly to mean a person who performs services for or on behalf of the organisation and will therefore encompass employees, contractors and agents.

Grease payments

The Bribery Act, unlike the US Foreign Corrupt Practices Act, does not contain a carve-out in relation to facilitation or "grease" payments. These payments usually take the form of small payments made to advance the performance of administrative functions for which the payer is entitled. Although it may make it difficult for British firms to compete in certain countries relative to their less regulated foreign counterparts, the Act makes clear that no matter how small, and regardless of the requirements of local culture abroad, payments of this kind will not be tolerated.

Jurisdiction

The first three offences listed above will be committed (and can be prosecuted in UK courts) if any act or omission which forms part of the offence takes place in the UK or if, although committed entirely outside the UK, it would have been an offence if committed within the UK and the person involved has a close connection with the UK.

The Corporate Offence is committed "irrespective of whether the acts or omissions which form part of the offence take place in the United Kingdom or elsewhere".

The extra territorial scope of the Act is important, particularly as regards the Corporate Offence. A corporation, even if based entirely in the UK, may be held responsible for the acts of their foreign agents (who may only have a remote connection to them). This only serves to emphasise the many ways in which "bribery" can be perpetrated and the breadth of exposure for all commercial entities, but especially those who trade internationally.

The adequate procedures defence

If it is determined that a commercial organisation has failed to prevent bribery, and therefore the Corporate Offence has been committed, it will be a defence for the organisation to show that it had in place adequate procedures to prevent their associates from paying bribes.

On 14 September 2010 the Government published, for consultation, guidance on what commercial organisations wishing to prevent bribery being committed on their behalf should take into account. The guidance is structured around six key principles:

1. Risk assessment: a commercial organisation will be expected to regularly and comprehensively assess the nature and extent of the risks relating to bribery to which it is exposed.
2. Top level commitment: commitment to a business' anti-bribery culture must be displayed from the factory floor to the boardroom, but the guidance places particular emphasis on active steps being taken by management to operate and implement anti-bribery policies. This will include senior management personnel being integral to the development of codes of conduct and anti-bribery programmes.
3. Due diligence: if risk assessment and mitigation of bribery is to be effective, a business must undertake due diligence of all parties to the business relationship, including their supply chain, their agents and their intermediaries.
4. Clear practical and accessible policies and procedures: policies must be clear, so that they can be understood at all levels of the business; practical, in order that they can be effectively implemented; and accessible, in order that everyone involved with the business understands how the policy impacts upon them and how it should be applied.
5. Effective implementation: it will be necessary for businesses to ensure that anti-bribery policies and procedures are embedded, through effective implementation, in the culture of the firm. In particular, businesses will have to ensure that the message is communicated externally, to people they work with, as well as internally.
6. Monitoring and review: monitoring and review mechanisms are seen as crucial to the effectiveness of an anti-bribery strategy. The message is that the process is not static, but will involve regular updates and assessment.

The difficulty with the guidance is that, by making clear that the requirements of one company may differ dramatically from the needs of another, they do not give any guidance as to what will be deemed "adequate".

Prior to issuing the guidance the Ministry of Justice indicated that a defendant should be able to "adduce evidence which shows that ... given the size of the organisation, the particular sector or country in which it operated and the foreseeable risks, its procedures employed to prevent bribery being committed on its behalf were adequate despite the fact of the bribe". This may be as much assistance as is given on what is adequate.

In order to satisfy the standard there is likely to be a considerable amount of work to be done for most firms. Firms are well advised to begin devising appropriate strategies now, rather than find their procedures are inadequate when the act comes into force in April 2011.

Penalties

An individual guilty of one of the first three offences is liable to a maximum of ten years' imprisonment and/or an unlimited fine. The maximum penalty for a commercial organisation committing the Corporate Offence is an unlimited fine. A person guilty of the Corporate Offence is also liable for a fine.

Again, the message is clear. Bribery will no longer be tolerated, either in the UK or abroad. Those who do not pay heed to this message can, by reason of the Act, expect to be subject to the most severe penalties.

Conclusion

Bribery is a particularly significant problem for the construction industry. In a recent survey of 226 construction companies across 43 countries by PriceWaterhouseCooper, 47 per cent of those surveyed had experienced some form of bribery or economic corruption in the preceding year, nearly double the level reported in other sectors such as retail and insurance.

In light of that, construction companies, particularly those which operate on the international stage, are going to have to recognise the heightened level of risk to which they are exposed and reflect that in the policies and procedures that they adopt.

Good anti-corruption policies will involve tailored risk analysis, clear and cogent strategies, a culture of responsibility and training to combat specific risk, and evidence of careful and committed monitoring with rigorous enforcement at all levels of the business. As the Act will come in to force in a matter of months, the sooner these policies are in place, the better.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.