The Bribery Act 2010

29th June 2010 in Articles

The Bribery Act 2010 has had Royal Assent but does not become law until October this year. It replaces antiquated law which was complex, and, until recently, rarely enforced. The new legislation is significant in a number of respects, not least because it includes a new corporate criminal offence of failing to prevent bribery, wherever the bribery takes place in the world. The consequences are stringent with a fine or up to 10years imprisonment.

The Act follows years of international criticism of the UK’s failure to adequately address corruption. In 2007, after the Serious Fraud Office (the SFO) dropped its investigation into BAE Systems’ arms deals in Saudi Arabia, the OECD expressed its serious concern over “the deficiencies in UK law on foreign bribery.”

However, in the last year, the SFO has stepped up a gear in enforcement action. It has entered into a number of civil settlements with businesses accused of bribery, and also obtained its first corporate criminal conviction in proceedings against Mabey & Johnson. The SFO’s recently released performance statistics reveal that the conviction rate in cases brought before the courts has significantly increased in the past year.  The conviction rate, measured as defendants convicted over the number tried, has risen from 78% the previous year to 91%. Fines against companies amounted to nearly £12 million pounds this year, having risen from zero the year before.

A person will be guilty of bribery if he, directly or indirectly, offers, promises or gives an advantage to another, intending to induce another person to do something improper or to reward someone for behaving improperly. The key elements are that there must be a financial or other advantage linked to improper performance of a relevant function or activity. A person will also be guilty of bribery if he, directly or indirectly, offers, promises or gives a financial advantage to another person and he knows or believes that the acceptance of the advantage would itself constitute improper performance of a relevant function or activity. Financial or other advantage is not defined in the Act but it will include items of value other than money such as a contract.

There are four types of offence in the Act which are:

  • A general offence targeting the payer of a bribe.
  • A general offence targeting the recipient of a bribe.
  • A specific offence prohibiting the bribery of foreign public officials.
  • A corporate offence of failing to prevent bribery.

The Act defines relevant functions or activities to include any function of a public nature, any activity connected with a business, trade or profession, any activity performed in the course of a person’s employment and any activity performed by or on behalf of a body of persons whether corporate or unincorporated. However not every defective performance of one of these functions for financial advantage engages the law of bribery. There must be an expectation that the functions are to be carried out in good faith, or impartially, or the person performing it must be in a position of trust. Improper performance is then defined as the performance which breaches that expectation or that trust.

The Act prohibits bribery of a foreign public official. To be guilty of an offence under this section, the giver of the bribe must intend to influence the recipient acting in his capacity as a foreign public official and must intend to obtain or retain a business advantage. The foreign public official must be neither permitted nor required by the written law applicable to him (not merely custom) to be influenced in his capacity as a foreign public official by the offer, promise or gift. This is a strict liability offence which puts the onus firmly on the individual making the payment to ensure that it is legitimate.

A controversial area of the Act is the introduction of a new corporate offence of failing to prevent bribery. The penalty for an offence under this part of the Act is an unlimited fine. An offence would be committed by a commercial organisation when:

  1. a person associated with the commercial organisation bribes another person
  2. that person intends to:
    (i)  obtain or retain business for the commercial organisation; or
    (ii)  to obtain or retain an advantage in the conduct of business for the commercial     organisation

Commercial organisations conducting business in the United Kingdom will be strictly liable for bribery carried out by associated persons. A person performing services on behalf of the organisation will be an associated person. Whether a person is performing services will be determined by reference to all of the relevant circumstances and not merely by reference to the nature of the relationship between the person and the organisation. The Act gives examples of someone likely to be performing services as an employee, agent or subsidiary.

The corporate offence applies wherever the commercial organisation is incorporated provided it carries on business in the United Kingdom. Commercial organisations include both companies and partnerships. Crucially, for the corporate offence, it does not matter where in the world the bribe takes place.

The Act provides that it is a defence to the corporate offence to prove that the commercial organisation had in place adequate procedures designed to prevent associated persons from committing bribery. Under the Act, the government is required to publish guidance about procedures that relevant commercial organisations can put in place to prevent persons associated with them from bribing. Guidance is likely to be published later this year. It is essential that businesses operating in the UK take steps to protect themselves from liability by implementing adequate procedures to prevent bribery.

Companies that are compliant with the US Foreign Corrupt Practices Act 1977 (FCPA) cannot ignore the provisions of the Act. The UK legislation is more stringent than the FCPA in a number of respects. In particular, the legislation is not limited to bribery of foreign public officials, there is no carve out to permit facilitation payments and the act of bribery does not have to have a connection to the jurisdiction. The UK corporate offence will apply to all corrupt payments, whether in the public or private sector, anywhere in the world.

The Act provides some defence against accusations of bribery by having adequate procedures in place. For example some simple areas for consideration are to:-

  • have policies on gifts, hospitality and lobbying in place.
  • have vetting procedures for outside agents and partners on this issue
  • train any individual who could commit a breach.
  • update employment contracts and policies to reflect the anti bribery ethos of the company and agree bribery as gross misconduct.
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