The Bribery Act 2010 (the Act) will come into force on 1 July 2011. The Act is so widely drafted that it is possible that corporate hospitality could be caught. As a result, many companies have expressed concern that they will be unable to provide corporate hospitality as they would like, and that in turn this will be detrimental to their businesses.
What Offences does the Act create?
The Bribery Act creates four separate offences:
- Bribery of another person;
- Being bribed by another;
- Bribery of foreign public officials; and
- Failure of a commercial organisation to prevent bribery.
What is bribery?
Bribery” is defined broadly to cover any financial “or other” advantage offered, promised or given by one person to another, where the intention is to induce or reward someone to perform improperly a “relevant function or activity”. This means any activity connected with a business or performed in the course of a person’s employment. Furthermore the bribery need not take place in the UK.
What are the penalties?
Individuals convicted of bribery offences could face up to ten years’ imprisonment and/or an unlimited fine (a director may also be subject to the Company Directors Disqualification Act 1986). Companies convicted under the Act are exposed to an unlimited fine.
Failure to prevent bribery
The Act criminalises a commercial organisation’s failure to prevent bribery. The organisation is guilty of an offence if an associated person bribes another person intending to obtain or retain business or a business advantage (with no requirement to prove that the organisation either knew that bribery was occurring or condoned their representatives’ actions). An organisation will have a defence if it can show that it had “adequate procedures” in place designed to prevent bribery.
What does this mean for corporate hospitality?
The potential scope of these offences under the Act is extremely wide. However, The Director of the Serious Fraud Office has stated that “most routine and inexpensive hospitality would be unlikely to lead to a reasonable expectation of improper conduct”. However, lavish or extraordinary hospitality may lead a jury to reach the conclusion that it was intended to induce the recipient to act improperly.
What companies can do?
Guidance from the Serious Fraud Office and Ministry of Justice suggests that while an organisation is reviewing policies and procedures for the purposes of a defence under the Act, they should also establish proper standards for hospitality and other similar expenditure.
- Companies should publish clear written policies prohibiting gifts, expenses or hospitality which may influence or be seen to influence a contractual or material matter.
- Guidance on an upper limit for gifts, hospitality and/or expenses should be provided.
- Policy and procedures and guidance should be communicated to employees, business partners and suppliers.
- Most importantly, gifts, hospitality and expenses, whether given or received (or refused) should be fully documented: transparency is the key to avoiding suspicion.
If you have any questions on the points raised in this article, please speak to your regular contact at Godloves. Alternatively, please contact Michael Cantwell on 0113 225 8801 or michael.cantwell@godloves.co.uk
