Guest Blog: The Bribery Act – Should we cancel the golf day?

Post by Ian Hargreaves, Litigation Partner, Addleshaw Goddard

The media has generated a lot of heat, but precious little light, regarding the impact of the 2010 Bribery Act.  Ken Clarke’s Guidance, as required by statute, intended to soothe the concerns of UK plc and the media hysteria – but has it? 

Parallels may be drawn with the ill-conceived attack on the Judiciary regarding “Super Injunctions”.  In that case, it is not as some have reported, one or more Judges going off on a frolic.  As with privacy law, where the judiciary have quite properly applied the Human Rights Act, notwithstanding Mr Clarke’s Guidance, the Courts will have to apply (and interpret) the Bribery Act 2010 within the constraints of that piece of legislation (introduced by Parliament) and subsequent case law.

It must be said, even before the Bribery Act 2010, we had legislation which outlaws bribery and corruption.  In many respects, the new Act is more evolutionary than revolutionary.  The Government is replacing long-standing but fragmented legislation (going back to 1889) and what are known as common law principles. 

Essentially, the Bribery Act has one overriding objective – to simplify and make it easier to bring a successful prosecution regarding bribery and corruption.  It is Section 7 of the Act which, potentially, could trip up businesses.  The actions of ‘associated persons’ to an organisation – e.g. its distributors, suppliers, consultants or employees – could result in the company being liable for prosecution.  Organisations will need to undertake more rigorous risk assessment of their relationships – contractual or otherwise – with third parties.

But what about good old fashioned schmoozing?  Will companies have to cancel the Golf Day or sell off the box at Lords?  When does ‘hospitality’ become bribery?  Well, there are grey areas, notwithstanding Mr Clarke’s best efforts.  The SFO (which is soon to enter the history books – alongside the various 19^th and early 20^th century bribery and corruption statutes) recognises that hospitality is an ‘established and important part of doing business’.  To be honest, nothing much has changed, schmoozing will continue to be acceptable provided it is reasonable and proportionate.  You can carry on wining and dining (within reason and to build on relationships/cordial relations) but cash gifts, or valuable presents which are lavish or disproportionate to the relationship/reasons for making the gift in the first place, are out.  

Whether the Act will actually do what it is meant to do – i.e. ensure the prosecution (whether UK or foreign companies with some presence in the UK) of companies paying large inducements (bribes!) to secure lucrative contracts – is open to debate.  With little or no extra funding to prosecute matters of this nature, it is difficult to see how the SFO or its successor will have the resources to investigate these cases.  Further, if it is the CPS which is left to prosecute these cases following the ongoing Government review into economic crime, many doubt that it will have the competency to bring and succeed with these cases.  

Most of the recent press attention has related to alleged bribes concerning UK companies’ business activities in foreign jurisdictions.  Conducting business in some jurisdictions is not easy at the best of times.  In some countries, what could constitute bribes or facilitation payments have always been culturally, socially and politically acceptable.  The Ministry of Justice recognises this issue.  However, this will not absolve an individual or company of liability.

One of the main focuses of the Act relates to preventing payments or gifts to foreign officials or private contractors – payments that could be deemed to be harmful to the social welfare of a particular country.  So, for example, it may be acceptable for the CEO of company X to give the highly paid Chairman of investment bank Y an expensive watch (depending on the reason for giving such a gift), but it would probably be inappropriate for the former to give a valuable present to a lowly paid official; i.e. where the gift may be worth more than the official’s annual salary.

The SFO claims it is keen for companies to approach it to seek clarification, particularly with regard to joint ventures, and, if the SFO can’t help, a company can seek advice from its lawyers. 

There are numerous steps commercial organisations should be implementing immediately to be ready for the enforcement of the Act on 1 July 2011.  But companies would be wise to begin (if they have not done so already) logging all hospitality activity, e.g. the nature and purpose of the hospitality, the value of the gift/hospitality, who is receiving it, and whether the giver is attending the hospitality event (and, if not, why not).