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2 September 2011

New Bribery Rules – don’t get caught by the Act

The long awaited revised guidance on the Bribery Act 2010 was published by the Ministry of Justice on 30 March 2011 (the “guidance”). The Act itself came into force on 1 July 2011.

In addition to creating offences of offering and receiving bribes and of bribing a foreign public official, the Bribery Act creates a totally new offence which can be committed by commercial organizations which fail to prevent persons “associated” with them from bribing another person on their behalf. An organisation that can prove it has adequate procedures in place to prevent bribery by persons associated with it may well have a defence to a prosecution on these grounds. Commercial organisations must, therefore, now have in place “adequate procedures” to ensure that all persons “associated” with them are aware of the requirements under the Act and what constitutes bribery.

It is worth noting that the Bribery Act applies not only to UK commercial organisations but also to entities carrying on business within the UK, whether through a branch, subsidiary or even directly. An organisation which carries on business in the UK will also be liable for the acts of anyone “associated” with it who bribes another person intending to obtain or retain business or a business advantage for that organisation, wherever in the world that person is and wherever the bribery takes place. A person will be “associated” with an organisation if he/she/it performs services for it and it does not matter whether that person is an employee, agent, consultant or even a subsidiary.

The Guidance refers to six founding principles. These are: proportionality, top level commitment, risk assessment, due diligence, communication (including training), monitoring and review. A small organisation which only does business in the UK is likely to need far less rigorous procedures than a multinational operating throughout the world. Similarly, a business employing two or three people may not need written procedures at all, although it will need to be able to prove that all its staff members and associates have been made aware of the Act and its implications and received firm guidance on the unacceptability of giving or taking bribes in any context. A larger organisation should have written guidance for employees and other associated people and there should be a strong lead from the top level of management about the eradication of bribery within the organisation.

The first step for each commercial organisation will be a proportionate risk assessment that should identify and prioritise the risks the organisation faces, as regards bribery in the markets in which it operates and amongst the customers and suppliers with whom it does business.

Facilitation payments are likely to be treated as bribery under the Act. This has caused some heartache for British business because facilitation payments are a normal acceptable part of doing business in many parts of the world. Even the US Corrupt Practises Act 1997 excludes certain types of facilitation payments from its ambit

Happily, the Guidance is more proportionate and pragmatic than originally feared and it is now clear that bona fide hospitality, promotional and other business expenditure of a like nature, which is reasonable and proportionate, is unlikely to fall foul of the Bribery Act.

Source: Suzanne Eva, Cumberland Ellis

*Article for guidance only. Professional advice should be obtained to ensure that all circumstances are assessed in providing a complete answer.