The dos and don ts of the Bribery Act

The dos and don’ts of the Bribery Act 2010 Cris Ley In-house Solicitor The Guild Please note that the content of this presentation is for guidance only. You should seek one-to-one advice if you or your business has a legal issue.

Background to the Bribery Act 2010 • Incidents of public sector corruption in the 1990 s • e. g. Gordon Foxley and arms manufacturers • 2006 survey of corruption in UK construction industry by Chartered Institute of Building • Law Commission prepared draft legislation under previous Labour government. That government created approximately 3, 000 new offences during its tenure • A short piece of legislation ultimately brought in by current government, ratified by Kenneth Clarke

The Bribery Act offences: overview • 6 different “cases” • Section 1 deals with active offences – i. e. bribing another • Section 2 deals with passive offences – i. e. being bribed • Section 7 deals with the corporate offence • Section 14 deals with consenting and conniving

What is bribery under the Bribery Act 2010? A. Bribing another: • Case 1: payer offers, promises or gives a financial or other advantage to another where he intends the advantage to induce a person to perform improperly a relevant function or activity or reward a person for the improper performance of such a function or activity (prosecution has to prove intent) • Case 2: as case 1 but the payer knows or believes that the acceptance of the advantage would itself constitute the improper performance of the activity (prosecution does not have to prove intent)

What is bribery under the Bribery Act 2010? cont. Examining some elements: • “Financial” = self-explanatory • “Advantage” – intentionally not defined by legislator • • “Improper performance” – performance which amounts to a breach of an expectation that a person will act in good faith or impartially • • Common sense meaning will prevail Reasonable person test “Relevant activity” = connected with a business; in course of employment; performed on behalf of a body of persons (e. g. a company or partnership)

What is bribery under the Bribery Act 2010? cont. B. Being bribed: • Case 3: recipient requests, agrees to receive or accepts a financial or other advantage intending that, in consequence, a relevant function or activity will be performed improperly • Case 4: as case 3 but the very receipt constitutes the improper performance (e. g. such a large sum that simply receiving it is improper) • Case 5: as case 3 but the financial or other advantage is a reward for the improper performance (i. e. the bribe takes place after the impropriety has occurred) • Case 6: in anticipation of or in consequence of recipient requesting, agreeing to receive or accepting a financial or other advantage, a relevant function or activity is performed improperly

What is bribery under the Bribery Act 2010? cont. Section 14 offences: • A person can be guilty of consenting or conniving in relation to a bribe • In a company context applies to “senior officers”, meaning: • Directors • Shareholders (in small companies) • Company secretaries • Managers • Holders of key positions

What is bribery under the Bribery Act 2010? cont. Failure of commercial organisations to prevent bribery • This is new corporate offence (section 7) – which has caused quite a stir • The offence creates vicarious liability for commercial organisations based upon actions of associated persons • “Associated persons” (section 8) = acting on behalf of. Includes director, employees and agents. A question of fact • In order for company to be liable under failure offence, prosecution must still prove that associated person made bribe with intention of obtaining or retaining business or some other advantage

What is bribery under the Bribery Act 2010? cont. What does the Act mean for corporate hospitality? • Government’s Bribery Act guidance – para 26: bona fide hospitality or other business expenditure is recognised as an established and important part of doing business and it is not the intention of the Act to criminalise such behaviour • Only where the payment, gift or form of hospitality is extraordinary or lavish, or has the ability to influence or reward improper performance by the recipient, will the payment be considered under the Act • Still, even small gesture given at particularly poignant time may constitute bribery – e. g. something given or offered to a person deciding a tender outcome just before tender result is due

What is bribery under the Bribery Act 2010? cont. A few points on facilitation payments • Facilitation payments – or ‘grease’ payments – are common in certain industries • By nature capable of becoming bribes because about speeding up provision of services or government function • Facilitation payments not made unlawful by the Bribery Act 2010 but companies who pay facilitation payments in order to gain a business advantage run risk of prosecution • Hansard , HL, 9 December 2009: it may not be in the public interest to prosecute where payments are small; much will depend on the particular circumstances

The ‘adequate procedures defence’ Introduction • As above, section 7 offence creates vicarious liability for commercial organisations based upon actions of associated persons • Defence available to defendant company is ‘adequate procedures defence’ • Adequacy difficult to define • Government’s guidance sets forth six principles which organisations should adhere to and which will help to satisfy adequate procedures defence if prosecuted under section 7

The ‘adequate procedures defence’ The six principles • Proportionate procedures • Top-level commitment • Risk assessment – focus on sectoral risk • Due diligence • Communication • Monitoring and review

The ‘adequate procedures defence’ In practice • Top-level commitment is achievable • Within SMEs, there is usually not the resource to engage in lengthy monitoring processes or risk assessments. Marks & Spencer Plc will have to do more than John Smith Limited – and will be judged accordingly • Law Commission stated when preparing pre-legislation report that mere paper trail won’t cut it … • But paper trail is a good start!

The ‘adequate procedures defence’ In practice cont. • Anti-bribery policy – publish on intranet and make sure MD understands it! • Gifts registers can be handy Gift/hospitality given by Client recipient Nature of gift/hospitality Claire Jones XYZ Limited (Barbara Smith and Joan Bloggs) Day out at Ascot Ladies Day Box price: £ 7, 200 inc VAT Bob Evans GHI Limited Bottle of wine to thank client for custom in 2010 Price: £ 45

The ‘adequate procedures defence’ In practice cont. • Within The Guild, two managers run the register in order to ensure transparency • Making employees aware is important – see example Dear all The Bribery Act 2010 came into force in July and places a number of new legislative burdens on employers. In order for The Guild to comply with the Act, as from today you need to take note of: 1) the attached anti-bribery policy; and 2) The Guild's gifts register. The anti-bribery policy sets out general guidance on avoiding bribery and corruption. You should take time to read it and, in particular, familiarise yourself with the prohibited acts. The policy will be kept in the "Policies" section of the intranet where it may be accessed at any time. The gifts register is something which The Guild will from now on maintain in order to record gifts or forms of hospitality which are offered or received by The Guild's employees. The register is maintained by **** and the Legal Department jointly. From today, details of any gift or form of hospitality which you give or receive must be communicated to ***** and the Legal Department in order that it can be recorded. This should be done via email with a description of the gift or form of hospitality. Thanks ****

Consequences of bribery If you’ve been busted or think you are about to be busted • Self-reporting – Balfour Beatty • Penalties - fines • Fines made against commercial organisations can be unlimited • Fines made against persons: • • • on indictment: up to 10 years imprisonment and/or a fine summary conviction: up to 12 months’ imprisonment and/or a fine N. B. current authorities on sentencing – e. g. R v Anderson: 6 months in prison

Investigation and compliance What are the realities of day-to-day enforcement? • Serious Fraud Office presides over anti-corruption enforcement • Anti-Corruption Domain has only 100 staff • Criminal cases must meet public interest criteria • Are SMEs and their jollies really in the crosshairs? • Final thoughts

Questions?