Publication of the guidance means that the Bribery Act 2010 will come into force on 1 July 2011
UPDATE 1 July 2011: The Bribery Act is now in force – see this post.
The Ministry of Justice (the MoJ) has today published its much-anticipated guidance (the Guidance) on the “adequate procedures” defence to the new criminal offence of “failure of commercial organisations to prevent bribery”. This offence is contained in section 7 of the Bribery Act 2010 (the Act). The MoJ has today also published “quick start” guidance for smaller companies.
The Act, which was passed by Parliament in the final days of the last Government, reforms the law on bribery. The commencement of the Act was delayed in January 2011 because the Government had not yet published the Guidance. We discuss the section 7 offence and the purpose of the Guidance in this post from January 2011.
The MoJ has confirmed today that the Act will come into force in its entirety on 1 July 2011.
The Guidance is useful for companies and partnerships in assessing whether they are at risk of committing the section 7 offence (and other offences in the Act), and in establishing or reviewing their anti-bribery procedures. However, the Guidance is not binding on either the prosecuting authorities or on the courts – see “Prosecutorial discretion, the seriousness of the offence and the public interest” below – and the SFO today re-iterated its stance that there ”is an inherent public interest in bribery being prosecuted”.
Commercial organisations, the section 7 offence and the “adequate procedures” defence
Under section 7 of the Act, “a relevant commercial organisation (C) is guilty of an offence…if a person associated with C bribes another person intending (a) to obtain or retain business for C, or (b) to obtain or retain an advantage in the conduct of business for C”. A “commercial organisation” includes companies, other bodies corporate, partnerships and limited partnerships.
There is an important defence to this offence; it is a defence for the commercial organisation to prove that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct.
Section 9 of the Act requires the Secretary of State to publish guidance about these “adequate procedures” that commercial organisations can put in place to prevent persons associated with them from using bribery. It is this Guidance that has been published today.
Ministry of Justice guidance: The six principles to inform procedures to prevent bribery
The Guidance contains discussions of the Government’s approach to the section 7 offence and of the offence itself, but at the core of the Guidance is that “procedures put in place by commercial organisations wishing to prevent bribery being committed on their behalf should be informed by six principles”. These six principles are, in the wording of the Guidance:
- “Proportionate procedures: A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.”
- “Top-level commitment: The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.”
- “Risk Assessment: The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.”
- “Due diligence: The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.”
- “Communication (including training): The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.”
- “Monitoring and review: The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.”
Each principle is accompanied by commentary. The Guidance contains 11 case studies illustrating the operation of the six principles. These principles will now be the foundation of most companies’ anti-bribery procedures.
The Guidance also discusses the offence in section 1 of the Act of bribing another person, and the section 6 offence of bribery of a foreign public official.
Review of procedures
The “adequate procedures” defence will mean that companies with existing anti-bribery procedures will need to review those procedures against the Guidance and against the SFO/DPP guidance discussed later in this post. Companies without existing anti-bribery procedures will need to conduct an assessment as to whether there is a risk of committing an offence under the Act, and then if thought necessary put in place necessary and proportionate procedures, drawing on the six principles in the Guidance.
Joint ventures; corporate hospitality; promotions; agents; and facilitation payments
The case studies contained in the Guidance cover some of the difficult issues around bribery and the application of the Act, including joint ventures and JV partners, corporate hospitality, promotional expenditure and due diligence on agents.
Regarding corporate hospitality, the Secretary of State says in his introduction to the Guidance that ”rest assured – no one wants to stop firms getting to know their clients by taking their clients to Wimbledon or the Grand Prix”. The SFO/DPP guidance discussed later in this post nuances this statement, saying that “the more lavish the hospitality or expenditure (beyond what may be reasonable standards in the particular circumstances) the greater the inference that it is intended to encourage or reward improper performance or influence an official”.
The Guidance confirms that facilitation payments – unofficial payments made to public officials in order to secure or expedite the performance of a routine or necessary action – are not exempt from the application of the Act.
Extra-territorial nature of the section 7 offence
Applies to UK companies and partnerships, and to commercial organisations carrying on business in the UK: The section 7 offence applies to commercial organisations incorporated or formed in the UK, and also to overseas commercial organisations which carry on a business or part of a business in the UK. It will be for the courts to decide what carrying on a business in the UK actually means.
For overseas companies listed in London, the Guidance states that the Government does not expect the “mere fact” of a company’s securities being admitted to the Official List and traded on the London Stock Exchange to be enough to satisfy the carrying on business test. Ultimately, this will be for the courts to decide.
Location of the offence is irrelevant: An offence is committed under section 7 irrespective of whether the acts or omissions which form part of the offence take place in the United Kingdom or elsewhere.
Prosecutorial discretion, the seriousness of the offence and the public interest
The Guidance is non-prescriptive, and it is also not binding on prosecutors. As the Guidance states: “Whether to prosecute an offence under the Act is a matter for the prosecuting authorities. In deciding whether to proceed, prosecutors must first decide if there is a sufficiency of evidence, and, if so, whether a prosecution is in the public interest. If the evidential test has been met, prosecutors will consider the general public interest in ensuring that bribery is effectively dealt with. The more serious the offence, the more likely it is that a prosecution will be required in the public interest.”
“Quick start” guidance for smaller companies
The MoJ has also today published what it terms “quick start” guidance for smaller companies, which can be read here. This guidance contains the six principles set out above, and also discusses key issues of concern to smaller companies, such as corporate hospitality, facilitation payments and whether it is necessary to employ lawyers or consultants to advise on the Act.
Guidance from the Serious Fraud Office and Director of Public Prosecutions
The Serious Fraud Office (the SFO) and the Director of Public Prosecutions (the DPP) have today also published joint guidance on the Act, which can be read here. The SFO announced in February 2011 that it would be publishing this guidance, and at the same time set out some of its thinking on the Act; see this post and this post from February 2011 for more on the SFO’s approach to the Act.
This guidance, which states that there “is an inherent public interest in bribery being prosecuted”, sets out the SFO and DPP’s approach to prosecutorial decision-making under the Act, and also discusses how the prosecuting authorities will address facilitation payments and corporate hospitality
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