The Ministry of Justice has just published long-awaited guidance for companies developing anti-bribery policies and procedures in line with the new UK Bribery Act. At the same time, guidance was published by the prosecuting authorities indicating the considerations they will take into account in deciding when to prosecute.
The Act will take effect on 1 July 2011, and will for the first time impose liability on businesses that fail to prevent bribes being paid on their behalf by their employees or others performing services for them (the new corporate offence). The consequences of involvement in bribery or corruption are huge, including investigation, prosecution and unlimited fines for companies, and fines and possible imprisonment for individuals.
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The "Adequate Procedures" Defence
The new corporate offence will make it much easier for prosecutions to be brought against UK companies and partnerships, and foreign companies and partnerships which carry on all or part of their business in the UK, if a bribe is paid on their behalf here or abroad.
A business will have a defence if it is able to demonstrate that it had adequate anti-bribery and corruption procedures in place. The fact that a bribe has been paid will not of itself show that its procedures were inadequate, but conversely the defence will not be available unless it can show that it has considered the risks of bribery occurring in its particular circumstances and established procedures to address those risks.
A Proportionate Approach
The guidance makes clear that taking a risk-based approach will allow businesses to develop procedures proportionate to the risks faced by their individual organisation and to the nature, scale and complexity of their activities.
Key areas of external risk affecting businesses are categorised into five broad categories: country, sectoral, transaction, business opportunity and business partnership. An organisation's internal structures or procedures may add to the level of risk faced, for example, where there is a lack of adequate training for employees, or where the company's remuneration structure encourages excessive risk-taking. A lack of clarity in its policy on gifts, entertaining and travel expenses, or a lack of clear financial controls or clear communication from top-level management, may also be factors that add to the level of risk faced.
The guidance has offered some helpful clarification on significant areas of uncertainty which had raised concerns amongst businesses:
- While facilitation payments remain illegal, the guidance recognises that they are part of a global problem that cannot be eradicated overnight. The prosecutorial guidance assists by indicating factors, such as the payer being in a vulnerable position, that will tend against prosecution.
- The guidance spells out that corporate hospitality is not prohibited under the Act. Again, the prosecutorial guidance describes the factors involved in assessing whether a prosecution might actually be brought.
- The mere fact that a foreign company's securities are traded on the London Stock Exchange is unlikely to constitute carrying on business or part of a business in the UK. Likewise, having a UK subsidiary will not, in itself, mean that a foreign parent company is carrying on business in the UK, since a subsidiary may act independently of its parent or other group companies. Such companies may not, therefore, be caught by the new corporate offence.
- A bribe paid by an "associated person" will result in liability for a business only if the bribe was intended to obtain or retain an advantage for the business. The fact that the business benefits indirectly from a bribe is very unlikely, in itself, to amount to proof of the specific intention required by the new corporate offence.
- Where a supply chain involves several entities or a project is to be performed by a prime contractor with a series of sub-contractors, businesses may approach bribery risks by carrying out due diligence and imposing anti-bribery terms and conditions in the relationship with the end supplier or prime contractor, and by requesting that they in turn adopt a similar approach with the next party in the chain.
However, not every question that business has been asking has been addressed. For instance, whilst the indication that simply having a UK subsidiary will not necessarily bring a foreign parent company within the new corporate offence is welcome, other questions remain on how "adequate procedures" apply in a group situation. Can compliance programmes be limited to UK incorporated companies within larger groups? Or would a twin track approach, with one standard of conduct, training and due diligence applying to UK companies within the group and another, lower, standard to non UK companies, leave them vulnerable to the accusation that their procedures as a whole did not meet the "adequacy" hurdle?
The guidance also outlines six principles, each followed by commentary and explanation, for companies to use as a guide when developing their anti-bribery policies and procedures. Although they are generally applicable, the principles do not propose any particular procedures in themselves and it is emphasised that it is for each company to decide what bribery prevention measures best suit their particular circumstances; there is no "one size fits all". You should:
- Develop clear, practical, accessible procedures that are proportionate to the bribery risks faced by your organisation and to the nature, scale and complexity of the activities you undertake. Ensure that these procedures are effectively implemented and enforced.
- Take steps to ensure that a strong anti-bribery culture is established throughout your organisation, from the top down.
- Periodically assess the nature and extent of your organisation's exposure to potential external and internal risks of bribery, and ensure that this process is informed and documented.
- Develop and apply due diligence procedures to business relationships with persons who perform or will perform services for or on behalf of your organisation.
- Ensure through internal and external communication, including training, that your anti-bribery policies and procedures are embedded and understood throughout your organisation.
- Monitor and review your anti-bribery policies with internal checks and balances. External trigger-events which should prompt a review, like government changes, corruption convictions, or negative press reports, should also be identified.
Companies should be carrying out a risk assessment, developing or reviewing their policies and procedures and rolling out training before the Act comes into force on 1 July. For further practical guidance on what your business should be doing to prepare for the Bribery Act coming into force, please contact Catriona Munro. You may also be interested to know that MMS has developed an innovative online anti-bribery compliance system to help companies to stay within the law. We can also provide bespoke face-to-face training for clients.
For further information, please contact:
EU, Competition & Regulatory
0141 303 2385
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This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.