"Team GB: World police....?” - THE LAW SOCIETY GAZETTE
It is said that it is far better to give than to receive. That may be so but under the Bribery Act 2010 both may equally be an offence so “receiving” may now have the edge!
After more false starts than last years’ Grand National we are told that the Act will finally come into force on 1 July this year. Seldom has an act had such mixed press, and the decision in January to delay to rewrite the accompanying “Guidance” document did little to help. Chanrashekhar Krishnan, Executive director of Transparency International (a non-governmental anti-corruption organisation) described the decision to delay as “disastrous news” and after the publication of the new Guidance commented that “parts of it read more like a guide on how to evade the Act”. Not a fan then. Conversely the CBI described the initial Act/Guidance combo as not “fit for purpose” (for entirely opposite reasons) - though its reaction has been warmer after the new Guidance was published. So who is right? As Harry Hill might say - there's only one way to find out...? Instead we chose debate and the passage of time.
The Justice Minister tells us that “everyone agrees bribery is wrong” (except presumably for those who engage in it) – and certainly no-one would wish to be seen arguing with the Act’s objectives - ensuring free and fair competition. But with the debate raging, was the Act/Guidance the right way forward? Well, it would have been pushing it (as some newspapers have) to suggest that our existing laws (yes there are some) could instead have been brought up to date, founded as it is in Acts of 1889 and 1906. But having ratified the OECD Anti-Bribery Convention in 1998 (and committed to certain standards) we had little choice and it is easy to see Mr Krishnan’s point about delay given that whilst the US has “enjoyed” the Foreign Corrupt Practices Act (“FCPA”) since 1977 it took the BAE debacle of 2006-8 to really galvanise the UK into action (and of course over 2 years after the OECD draft bill for one to be passed into law).
The Act itself has been around (albeit “not in force”) for just over a year now and is of itself relatively straightforward. In essence it creates four new offences to replace those of the old law (which turned on proving “corruption”). First there is a “Section 1” offence of what might be called “active bribery” (giving promising or offering a bribe). Secondly, we have a “Section 2” offence of “passive bribery” (requesting, agreeing to receive or accepting a bribe – which sounds much more fun), and thirdly a “Section 6” offence (bribing public officials). The Act covers both public and private sectors. The key will be “intention”. Standard for what was “intended”? – what would a reasonable person in the UK have thought? Not easy to prove. Penalty for non compliance? A maximum of 7 to 10 years in “chokey”.
So far so good, but what has created a storm for business has not only been the broad description of “relevant activity” (which includes acts during employment that are expected to be performed in good faith, impartially or under a position of trust) but in particular the fourth offence.
This latter “Section 7” offence is a major focus of the Act and relates to a commercial organisation failing to put in place “adequate procedures” to prevent persons associated with them from “bribing” or “being bribed”. Given the possibility of an unlimited fine this has been a matter of much concern for the CBI and others and as the new Guidance was required under the Act to illustrate the “Section 7” offence there must have been much lobbying before the final version was produced.
How is Section 7 engaged? Confusingly the new Guidance tells us that an individual conviction for bribery will not be required but goes on to state that unless the prosecution can prove beyond “reasonable doubt” that a Section 1-6 offence has been committed, the Corporate offence in Section 7 will not be triggered – which suggests that they need not prosecute the individual but must still be able to do so successfully. Hmm.
This is not the only concern with the Guidance. Whilst some have described the Act as the toughest in the world, many have seen the Guidance itself as a bit of a cop out (especially when placed next to the original draft). Whilst the first attempt led to PWC and others expressing fear that simple Xmas gifts to clients may be caught the final version has led others to even suggest that Mr Clarke has “been gotten at” by the employer’s lobby.
Either way, employers still have the problem that the Guidance is not prescriptive and compliance will ensure safety no more than a departure from its “6 Principles” will spell disaster. In short it is just what it says on the tin, “guidance”. In fairness the new version is also readable and does grasp a key nettle, being the question of corporate hospitality - at the heart of CBI concerns. Arranged in three sections the Guidance explains the Act, sets out the 6 principles and then ends with a rather jolly set of examples of each of the principles as operated in practice (e.g. a large Employer “A” offers a potential customer “B” the use of a domestic elf...etc.).
Of course even if a Section 1-6 offence has been committed the commercial organisation can provide a defence of having adopted “adequate procedures” which is where the 6 principles come in. These are straightforward ranging from “top level commitment” through “risk assessment”, “due diligence”, “communication” to monitoring and review”.
For many though it is the first principle of “proportionate” procedures that will strike fear since whilst the Guidance relates this to the level of “risk” most will appreciate that in practice it could also relate to size and resources (indeed the Guidance itself hints at this).
What this means in practice is that for commercial organisations (including solicitors) there will be a short window until the end of June to review procedures to ensure that they at least fit within the principles, with larger organisations being more likely to be in the initial firing line for CPS attention should “bribes” be discovered (with others waiting for real guidance from the courts as the prosecution games begin). It is imperative though that organisation remember the territorial extent of the Act and the fact that it covers not just employees but others associated with them (which would include individual or corporate consultants, contractors, agents etc.).
Whilst the Act is a major concern for those who enjoy a bit of light bribery of a weekend, for most the concern will remain that of hospitality and business expenditure. Here, the Guidance cheered business by clarifying that it is not intended that “bona fide hospitality ...which seeks. to improve [your] image...present [your] products and services, or establish cordial relations” should be caught by the Act. This is not limitless though and the question becomes what is reasonable and proportionate hospitality since anything more is suspect and the Guidance states clearly that that disproportionate hospitality could still become a bribe. For most law firms they can rest assured that the client lunch at Nando’s will be safe but what of Formula One teams where hospitality is traditionally lavish? Still there is always the question of intention behind the “gift” and in certain contexts this will prove challenging.
What is particularly bracing though is that the Act will cover not only offences in the UK but also those committed outside where the person committing them (or the organisation in the case of Section 7) has a suitably close connection to the UK. This will cover British nationals and those ordinarily resident in the UK as well as a body incorporated in the UK. It will also cover organisations which carry on a business or part of one in the UK wherever it is incorporated! In short we shall police the world.
We can therefore expect fun with US Corporations whose UK subsidiary companies have problems with an overzealous agent in say the Far East. Will it be the FCPA or the Act? Again there’s only one way to find out....? Perhaps we can look forward to Trey Parker directing “Team GB: World Police”. Coming to a Court near you from 1 July!
Darren Clayton, Partner
This article first appeared in The Law Society Gazette on 28 April 2011
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