Where does the final guidance on the Bribery Act leave us?

By Nick Benwell, Head of Crime, Fraud & Investigations, Simmons & Simmons

Over the past year, there has been growing concern amongst businesses over the Bribery Act 2010. For law firms, issues include offering hospitality to clients and the potential to be liable for the acts of those “performing services” for the firm, which will include legal process outsourcing but also agents dealing with staff visas, real estate and tax issues for offices across the globe.

Despite developed risk management strategies, some firms may not have previously addressed their own corruption risk, even if advising clients upon theirs. The guidance for organisations on how to implement procedures to prevent bribery has therefore taken on increased importance.

The draft guidance, circulated in September 2010, was not well received. The final version was published by the Ministry of Justice on 30 March 2011, together with guidance on the Act from the director of public prosecutions and the director of the Serious Fraud Office.

The Act, which remains wholly unchanged, will now come into force on 1 July 2011.

The final guidance differs greatly from the draft, with a less prescriptive tone and clear acceptance that adequate anti-bribery procedures can be risk-based and proportionate to the organisation’s circumstances. The guidance has been used as a means of clarifying certain provisions of the Act and it is this which provides the most significant development.

Issues for partnerships

Corporate hospitality

The final guidance goes further than the draft in stating that bona fide hospitality and promotional expenditure are recognised as legitimate and gives examples of more lavish hospitality – such as fine dining and tickets to sporting events – that would not usually raise an inference of bribery.

The prosecutors’ guidance states that lavishness is just one factor in determining whether an offence has been committed. Other factors include whether the hospitality or expenditure was connected to a legitimate business activity or was concealed.

Partnerships will still need to scrutinise the appropriateness of any hospitality they offer, but some of the potential implications of the Act have clearly been overstated.

Due diligence

Conducting due diligence on parties who will perform services for an organisation is a key requirement for managing bribery risk, but also potentially one of the most onerous and costly measures. This was not helped by the breadth of work implied by the draft guidance, which suggested that due diligence needed to encompass “all parties to a business relationship”.

Thankfully, this has been reined in and the final guidance is far more realistic, emphasising that the level of due diligence needed will depend upon the nature of the relationship and the level of risk. The guidance recognises that in many situations very little due diligence may be necessary in order to be adequate.

Facilitation payments

The final guidance is clear that facilitation payments will be illegal under the Bribery Act, just as they were under the old law. However, it recognises that eliminating facilitation payments may have to be a longer term aim.

The prosecutors’ guidance emphasises the importance of policies being put in place for employees to follow, should they face a request for such a payment. It also provides some comfort where the payer was in a vulnerable position when the payment was demanded.

Joint ventures

The final guidance reflects the reality that joint ventures take many forms and the level of control a participant has will affect its ability to implement measures to prevent bribery.

In the case of incorporated entities, the guidance is clear that a partnership will not be liable for the acts of a joint venture merely through having an ownership interest.

Where a joint venture is formed through a contract, any employee or agent who pays a bribe will ordinarily be considered an associated person of the organisation employing him, unless there is evidence that he sought to benefit all parties to the joint venture.

Debarment

In his statement that accompanied publication of the guidance, Ken Clarke, secretary of state for justice, noted that “a conviction of a commercial organisation under section 7 of the Act in respect of a failure to prevent bribery will attract discretionary rather than mandatory exclusion from public procurement under the UK’s implementation of the EU Procurement Directive”.

This perhaps reflects the breadth of seriousness of offences that section 7 might catch, but leaves open the possibility of debarment for offences involving no deliberate act.

The verdict

The fact that the Act is drafted so broadly and relies heavily on undefined concepts remains a cause of real concern. The final guidance cannot completely assuage this, because it cannot go beyond suggesting how such concepts are “likely” to be construed, a task that will ultimately lie with the courts.

However, for the purposes of reviewing anti-corruption procedures and understanding what is expected of them, partnerships are likely to find the final guidance more useful than expected.

The author grateful acknowledges the contributions of David Bridge to this article.