The Bribery Act 2010: avoid criminal conviction for "failing to prevent bribery"

The Bribery Act ("the Act") has received Royal Assent, and is likely to come into force in October this year. The Act consolidates previous bribery laws, and creates a new criminaloffence which will be of concern to many: "Failure of commercial organisations to prevent bribery". We have written a short article on the new offence, the defence of having "adequate procedures" in place, and guidance on adequate procedures.

06/05/2010

Andrew Tobin

Andrew Tobin

Partner

The Bribery Act ("the Act") has received Royal Assent, and is likely to come into force in October this year.  The Act consolidates previous bribery laws and, among other things, creates a new criminal offence which will be of concern to many: "Failure of commercial organisations to prevent bribery". 

The new offence

Under the new offence, a commercial organisation ("C") is guilty of an offence if an "associated person" ("A") bribes another person intending to obtain or retain business, or an advantage in the conduct of business, for C.

If the offence is proved to have been committed with the consent or connivance of a "senior officer" (which includes a director, manager, secretary or similar officer) of a body corporate the senior officer is liable to be convicted as well as the body corporate.

The offence carries an unlimited fine.

The new offence is committed irrespective of whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

The Act defines an "associated person" as a "person who perfoms services for or on behalf of C".  The capacity in which A performs services for or on behalf of C does not matter, and so A may be C's employee, agent or subsidiary.  Employees are presumed to perform services unless the contrary is shown.  Further, whether or not A is a person who performs services for or on behalf of C is to be determined "by reference to all the relevant circumstances" and not merely by the relationship between A and C.  "Associated persons" could therefore include others over whom the organisation has no direct control.  On the face of it you could therefore be convicted in circumstances where you did not know that, say, your agent had bribed others.

The defence - "adequate procedures"

It is a defence for the organisation to prove that it had in place "adequate procedures" to prevent associated persons from undertaking such conduct.

Guidance on "adequate procedures"

The Act requires the Secretary of State to publish guidance about procedures that relevant organisations can put in place to prevent persons associated with them from bribing.  It is thought that such guidance will be published this summer. 

It is not known exactly what will be in the guidance.  However, in the course of the Bribery Bill passing through the House of Lords the Government, through Lord Tunnicliffe, indicated that it would undoubtedly wish to reflect the Organisation for Economic Co-operation and Development ("OECD") good practice on ethics and controls, and referred to the "impressive anti-bribery strategies" organisations such as Transparency International and the Global Infrastructure Anti-Corruption Centre have published on their websites. Lord Tunnicliffe said he anticipated that issues to be addressed included the responsibilities of an organisation's board of directors; the identification of a named senior officer with particular responsibility for combating bribery; risk management procedures; gifts and hospitality policy; facilitation payments; staff training; financial controls; and reporting and investigation procedures

In view of the limited time before the Act comes into force, organisations should be reviewing their risk assessment, procedures and policies on bribery and corruption now and making sure that they have appropriate procedures and systems in place.  These can then be reviewed when the Secretary of State's guidance is eventually published.

The OECD Good Practice Guidance for Companies:

The OECD has now published its "Good Practice Guidance on Internal Controls, Ethics and Compliance".

This OECD Guidance is flexible, and intended to be adapted by companies, in particular small and medium sized enterprises ("SMEs"), according to their individual circumstances, including their size, type, legal structure and geographical and industrial sector of operation, as well as the jurisdictional and other basic legal principles under which they operate.  The OECD Good Practice Guidance for Companies is set out below.

"Effective internal controls, ethics, and compliance programmes or measures for preventing and detecting foreign bribery should be developed on the basis of a risk assessment addressing the individual circumstances of a company, in particular the foreign bribery risks facing the company (such as its geographical and industrial sector of operation). Such circumstances and risks should be regularly monitored, re-assessed, and adapted as necessary to ensure the continued effectiveness of the company’s internal controls, ethics, and compliance programme or measures.

Companies should consider, inter alia, the following good practices for ensuring effective internal controls, ethics, and compliance programmes or measures for the purpose of preventing and detecting foreign bribery:

1. strong, explicit and visible support and commitment from senior management to the company's internal controls, ethics and compliance programmes or measures for preventing and detecting foreign bribery;

2. a clearly articulated and visible corporate policy prohibiting foreign bribery;

3. compliance with this prohibition and the related internal controls, ethics, and compliance programmes or measures is the duty of individuals at all levels of the company;

4. oversight of ethics and compliance programmes or measures regarding foreign bribery, including the authority to report matters directly to independent monitoring bodies such as internal audit committees of boards of directors or of supervisory boards, is the duty of one or more senior corporate officers, with an adequate level of autonomy from management, resources, and authority;

5. ethics and compliance programmes or measures designed to prevent and detect foreign bribery, applicable to all directors, officers, and employees, and applicable to all entities over which a company has effective control, including subsidiaries, on, inter alia, the following areas:

i) gifts;

ii) hospitality, entertainment and expenses;

iii) customer travel;

iv) political contributions;

v) charitable donations and sponsorships;

vi) facilitation payments; and

vii) solicitation and extortion;

6. ethics and compliance programmes or measures designed to prevent and detect foreign bribery applicable, where appropriate and subject to contractual arrangements, to third parties such as agents and other intermediaries, consultants, representatives, distributors, contractors and suppliers, consortia, and joint venture partners (hereinafter "business partners"), including, inter alia, the following essential elements:

i) properly documented risk-based due diligence pertaining to the hiring, as well as the appropriate and regular oversight of business partners;

ii) informing business partners of the company’s commitment to abiding by laws on the prohibitions against foreign bribery, and of the company’s ethics and compliance programme or measures for preventing and detecting such bribery; and

iii) seeking a reciprocal commitment from business partners.

7. a system of financial and accounting procedures, including a system of internal controls, reasonably designed to ensure the maintenance of fair and accurate books, records, and accounts, to ensure that they cannot be used for the purpose of foreign bribery or hiding such bribery;

8. measures designed to ensure periodic communication, and documented training for all levels of the company, on the company’s ethics and compliance programme or measures regarding foreign bribery, as well as, where appropriate, for subsidiaries;

9. appropriate measures to encourage and provide positive support for the observance of ethics and compliance programmes or measures against foreign bribery, at all levels of the company;

10. appropriate disciplinary procedures to address, among other things, violations, at all levels of the company, of laws against foreign bribery, and the company’s ethics and compliance programme or measures regarding foreign bribery;

11. effective measures for:

i) providing guidance and advice to directors, officers, employees, and, where appropriate, business partners, on complying with the company's ethics and compliance programme or measures, including when they need urgent advice on difficult situations in foreign jurisdictions;

ii) internal and where possible confidential reporting by, and protection of, directors, officers, employees, and, where appropriate, business partners, not willing to violate professional standards or ethics under instructions or pressure from hierarchical superiors, as well as for directors, officers, employees, and, where appropriate, business partners, willing to report breaches of the law or professional standards or ethics occurring within the company, in good faith and on reasonable grounds; and

iii) undertaking appropriate action in response to such reports;

12. periodic reviews of the ethics and compliance programmes or measures, designed to evaluate and improve their effectiveness in preventing and detecting foreign bribery, taking into account relevant developments in the field, and evolving international and industry standards.

If you require any further information about this article, please contact David Kirkpatrick, Associate Solicitor and Professional Support Lawyer for the Construction & Engineering Department (0370 194 1663. email david.kirkpatrick@bevanbrittan.com).

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