On March 30, 2011, the U.K. Ministry of Justice issued long-awaited finalized guidance (Guidance) on what constitutes "adequate procedures," that is, compliance policies and procedures, under the U.K. Bribery Act 2010 (U.K. Bribery Act). The publication of the Guidance means that the U.K. Bribery Act will, in fact, go into effect on July 1, 2011.
Passed in 2010, the U.K. Bribery Act created a new strict liability criminal corporate offense of failing to prevent bribery by a person associated with it, including employees, agents, and intermediaries. In order to establish a defense to such a charge, organizations will need to be able to demonstrate they have adequate anti-bribery procedures in place. The Guidance is aimed at assisting organizations in better understanding what constitutes "adequate procedures."
Reach and Jurisdiction
The U.K. Bribery Act contains two general offenses of (i) offering, promising, or giving of a bribe (active bribery) and (ii) the requesting, agreeing to receive, or accepting of a bribe (passive bribery). Broader than its U.S. counterpart, which makes it illegal to offer or pay bribes to foreign officials, the U.K. Bribery Act prohibits bribes to any person to induce them to act "improperly." In other words, it reaches both governmental and commercial bribery.
The U.K. Bribery Act purports to assert broad extraterritorial jurisdiction; among other things, it applies to any company that "carries on a business" in the United Kingdom. The Guidance explains that "the courts will be the final arbiter as to whether an organisation 'carries on a business' in the U.K. taking into account the particular facts in individual cases," and such questions will be "answered by applying a common sense approach." The same "common sense approach" will be used to determine whether "bodies incorporated, or partnerships formed, outside of the United Kingdom ... can be properly regarded as carrying on a business 'in any part of the United Kingdom.'"
Gifts and Entertainment
Since the U.K. Bribery Act was drafted, businesses located in and outside of the United Kingdom have had serious concerns about its application to corporate gifts and entertainment in order to avoid the appearance that such items would be viewed later as bribery. The Guidance carries a clear message that in order for hospitality to be considered bribery, the prosecution will need to show that it was given with the intention of influencing the person to obtain or retain business, or gain a business advantage. Notably, gifts and hospitality are not criminal if provided simply to improve a relationship and/or network. The Guidance tries to make clear that bona fide hospitality, promotion, or expenditures aimed at improving a company's image or to establish relationships are legitimate and an important part of doing business and, as such, that behavior is not intended to be criminalized under the U.K. Bribery Act. However, the Guidance states that the more lavish the hospitality or expenditure, the greater the inference that it was intended to improperly influence the person. The Guidance recommends that organizations may wish to review their policies on hospitality and promotion as part of their implementation of anti-bribery prevention measures.
Facilitating Payments
Under the Act, facilitating payments remains illegal and the Guidance does not seek to minimize this fact.
Associated Persons
The Guidance also addresses businesses' fears that they could be liable for persons associated with them, whom they cannot control. It refers to a supply chain involving several entities and states that a party is only likely to be liable for acts of its contractual counterparty and not for the activities of sub-contractors further down the chain. The Guidance tries to make clear that bribes paid on behalf of a joint venture will not necessarily trigger liability for the member simply by virtue of the member benefiting indirectly from the bribe through his or her investment in, or ownership of, the joint venture.
The Guidance states that businesses may wish to use anti-bribery terms and conditions in relationships with contractual counterparties and request that the counterparty adopt a similar approach with any sub-contractors.
Prosecutorial Discretion
The Guidance also states that in cases where bribery does appear to have taken place as a result of hospitality, promotional expenditure, or facilitating payments, prosecutors are to carefully consider the public interest before deciding whether to prosecute. The directors of the United Kingdom's Serious Fraud Office (SFO) and Director of Public Prosecution (DPP) are to issue joint guidance for prosecutors setting out the approach that will be taken when deciding whether to prosecute under the Act.
The Guiding Principles
The Guidance remains non-prescriptive and indicates that "adequate procedures" should be built around the six principles outlined below.
- Proportionality. Organizations should take action appropriate to the risks they face and the size of the business.
- Top-level commitment to bribery prevention. Senior management should take personal responsibility for the organization's anti-corruption program, maintaining oversight of its progress and implementation, and the board should regularly consider anti-corruption issues.
- Risk assessment. Organizations should review and monitor the bribery risks they face in their market, sector, and location. If operating in different countries, each country should be assessed individually. Large, high-risk operations should consider using external professionals to assist the risk assessment.
- Due diligence. The U.K. Bribery Act introduces criminal liability for a company that "fails to prevent bribery" where an "associated person" bribes another person. Companies should conduct adequate due diligence on agents, intermediaries, joint venture partners, and other third parties before entering into business with these entities, as well as regularly monitor these third parties during the course of the business relationship.
- Communication. Anti-bribery policies and procedures should be integrated and visible throughout the organization. They should be imbedded in the organization and understood by employees, intermediaries, and agents. Many companies will need to roll out new training on anti-bribery, and it is likely that online training tools will become commonplace for larger organizations.
- Monitoring and review. An organization must be able to prove that it regularly monitors and reviews the adequacy and suitability of policies and procedures and adapts them to reflect any changes in the organization.
Ensuring compliance with the above principles will assist companies in showing that they have taken a serious approach toward bribery risk as contemplated by the U.K. Bribery Act. For many U.K. and international companies, this will mean implementing new corporate compliance policies and improving overall compliance training throughout the company, including policies and training tools for both employees and intermediaries. These measures should be overseen and approved at the board level.
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.
