Guidance on ''Adequate Procedures" under the Bribery Act 2010
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The long-awaited guidance (the Guidance) to the Bribery Act 2010 (the Act) was published by the Government on 30 March 2011, in accordance with section 9 of the Act, together with guidance on when prosecutions may be undertaken.
The Act creates four new bribery offences and replace the existing legislation (see our note on the Act). The key change it introduces is the creation of a criminal offence by commercial organisations of failing to prevent bribery on their behalf. Organisations will not, however, be liable for bribes paid on their behalf where they have "adequate procedures" in place to prevent them. The Guidance is intended to focus on what businesses would need to demonstrate to mount a successful "adequate procedures" defence under section 7 of the Act. However it's not just about having the defence. It will also be useful for commercial organisations that want to prevent incidents of bribery in the first place. Most organisations will not want to be arguing in court about whether their procedures were or were not adequate.
The Guidance has four principal elements to it:
- a 'Quick Start Guide', which provides an overview of the Act and short form answers to frequently asked questions;
- commentary on the Government's view of the implications of the Act;
- the principles that underlie and form the basis of adequate procedures; and
- case studies to illustrate, by reference to the Principles, how the Act will operate in practice. The case studies focus particularly on situations, such as certain sectors and foreign markets, where businesses typically encounter greater bribery risks and are a significant improvement on those which accompanied the previous draft of the Guidance.
The Government's commentary on the Act addresses particular issues that have been the subject of particular debate since the Act was passed, in particular corporate hospitality, the nature of an "associated person" in the context of an organisation's joint ventures and / or suppliers, and facilitation payments. It also indicates the Government's view that foreign entities should not automatically be caught by the corporate offence under the Act merely by having a UK listing or a UK incorporated subsidiary. However, while this commentary may be reassuring to businesses from a practical perspective, it is important to note that it does not change the Act and will perhaps have only limited influence on the Courts. It's worth bearing in mind that the Courts are likely to consider that as a matter of constitutional principle it is for them to interpret statutes and not the Government. It will be a matter for the Courts to determine based on well established rules of statutory interpretation in the criminal context how to apply the Act in any particular case. One rule of interpretation that may be relevant is that in the case of uncertainty criminal statutes are generally interpreted narrowly in favour of the defendant.
The six principles (the Principles), which should be considered when implementing procedures to prevent bribery being committed are:
- Proportionate procedures – this is a welcome recognition that any procedures must be proportionate, both to the business in question and to the activities that it engages in;
- Top-level commitment – this emphasises that engagement by senior management is essential in setting the tone of an organisation;
- Risk assessment – in order to design appropriate anti-bribery procedures, businesses must assess the risks they face from time to time;
- Due diligence – businesses are expected to conduct due diligence on those who might perform services on their behalf;
- Communication (including training) – business must ensure that its policies are clearly communicated, both internally and, where appropriate, externally; and
- Monitoring and review – business are expected to engage in a process of continuous improvement, whereby existing procedures are periodically assessed to ensure that they are fit for purpose. This is likely to be a key principle as an argument about whether an organisation's procedures were adequate will only take place if a bribe has been paid. It will be important to show that there was a robust system of monitoring, even though one slipped through the net.
The Government stresses that the Principles are not intended to be prescriptive, but instead are flexible and outcomes focussed, allowing for the huge variety of circumstances that commercial organisations find themselves in. This in some respects increases the risks for businesses, as organisations cannot follow a set process or rule book that will guarantee that their procedures are adequate. However, given the wide variety of risks different organisations face the considerable scope under the Guidelines for organisations to tailor an approach to their specific circumstances is clearly preferable to a prescriptive set of rules. It is particularly welcome that the Government has made clear that isolated incidents of bribery on behalf of an organisation should not give rise to liability. Businesses should adopt a risk-based approach to managing bribery risks and the procedures adopted by each organisation should be proportionate to the risks it faces.
Three of the key practical steps to take are:
- due diligence on sales and marketing agents, consultants and distributors etc
- maintaining controls over and records of gifts and hospitality
- maintaining controls over and records of all other voluntary payments e.g. charitable contributions and political donations
In relation to the Joint Prosecution Guidance the most noteworthy section is on Facilitation Payments which suggests that large or repeated payments which are a standard way of conducting business are more likely to attract the attention of the prosecutors. However, one off payments made in difficult circumstances and which are dealt with in accordance with an appropriate corporate policy on how to deal with requests for facilitation payments are less likely to result in prosecution.
Whilst there is also a section on hospitality the Joint Prosecution Guidance offers less additional insight into when a prosecution might result from improper levels of hospitality.
The Act came into force on 1 July 2011 and marks a sea-change in the approach to anti-bribery compliance in the UK business environment.