UK: The Bribery Act 2010

The Bribery Act 2010 will come into force later this year and will have a significant impact on the shipping industry.

Whilst bribery is a crime at common law and also under various statues from the late nineteenth century the Bribery Act 2010 substantially widens the range of UK offences.

Its effect is to be deemed a culture change, in which no UK business any longer regards the payment of bribes in certain jurisdictions as a regrettable fact of life, but would forgo business rather than pay a bribe. If effectively compels the company to become self-policing.

The shipping industry is regarded as a high-risk sector for corruption. This is due to considerable activity in corrupt environments; interactions with public officials; provision of services to high risk sectors such as defence and natural resources sectors and use of agents, joint venture partners and counterparties.

The risk of corruption often stems from a company's foreign subsidiaries that act as intermediaries, chartering ships for specific jobs, financing trade or buying and selling small amounts of commodities.

The Act introduces a new set of criminal offences for bribery, which are much wider than the existing regime. There are two general offences - bribing another person and being bribed, and the two specific offences - bribing of a foreign public official and the failure of a commercial organisation to prevent bribery by an associated person, the latter being of particular importance to organisations connected with the UK.

The only defence – apart from contesting the facts – is for the organisation to show that it had "adequate procedures" in place designated to prevent associated persons committing the bribery.

Consequently it is important to be clear on what a "bribe" is; the new Act provides an upto date definition. It is a financial or other advantage intended to induce or reward the improper performance of a person's function or activity where, very broadly, any personal benefit to the recipient could create a conflict between his own interests an the interests of those he is supposed to be serving. Improper performance is defined as any activity performed in breach of the expectations of good faith and impartiality.

One of the major benefits to the Act is that it provides the UK Courts jurisdiction over bribery committed elsewhere in the world, save for the alleged offender having a "close connection" with the UK. The Act expressly excludes any appeal to local custom or practice by way of defence.

The Act gives companies no statutory defences, save for that of having "adequate procedures". As such it will be incredibly important that these are cautiously drafted and implemented. All employees should be specifically advised that no benefit will be given, or offered to third parties (or received from third parties) if such advantages could be classed as bribery.

The effect of this means that many normal business practices in the shipping industry which have not been considered as corrupt to date (and indeed are normal business practice in certain cultures, for instance 'grease payments') may now be interpreted as offences under the Act.

Over arching everything else is the requirement to install adequate procedures as a protection against corporate liability. The procedures will have to deal with matters such as hospitality, gifts and facilitation payments, as well as due diligence on third party agents and others, and will need to be implemented from the top down.

Failure to take these steps will place businesses at severe risk, as the penalty for a corporate offence is an unlimited fine. The indications are that the courts will be prepared to consider fining a guilty company into extinction if it is viewed as representing a continuing corruption risk.

What you can do now...

1. Assess potential risk

Carry out a risk assessment. You will need to consider the countries and industry sectors your company is involved with. The risk of corruption will be greater in some than others – and the types of transactions in which you engage. Areas to watch out for include the use of political donations or charitable contributions.

2. From the Top Down

It is vital to promote top down responsibility for installing a zero tolerance in relation to bribery.

3. Due Diligence

It is very important to know who your company is dealing with. There are so many third parties and agents working on your behalf or your customers behalf it could invaluable to carry out due diligence. When carrying our such investoagtions it may also be very worth while trying to establish their track record and also whether they too maintain acceptable anti-bribery procedures.

There must also be a certain amount of internal due diligence. All money held by a company should be accounted for; bribery is typically paid out of 'slush funds' which are not accounted for in a firm's books and records.

4. Adequate procedures

All companies should launch and maintain "Anti-bribery policies" and procedures to be followed by all employees. Such a policy will need training – more than an employee reading and signing the policy!

There also needs to be a clear policy noting that employees will not suffer if they miss out on a business deal because they followed the established procedures. There must also be clear guidance on employees who whistle blow.

There also needs to be a response plan in place for when bribery is reported. There should be an internal procedure for employees to follow.

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.