New Bribery Act - the end of Corporate Hospitality?

The Bribery Act 2010 was planned to come into effect in April, bringing together and updating all acts, guidance covering bribery and corruption in the UK and overseas since the Fraud Act 2006. Far reaching in its potential, UK businesses could be found guilty of offences in the UK, EC and worldwide. The delayed introduction of the Act has been welcomed by businesses and does give firms more time to get proper processes in place.


Some firms may be concerned about corporate hospitality. Reasonable and proportionate hospitality or promotional expenditure is recognised as an established and important part of doing business but if it is used as an inducement or rewards improper behaviour – that could be seen as an offence.


Commercial implications occur where substantial hospitality has become the norm in particular countries and industries. It will not be sufficient defence to state that everybody else pays bribes in any particular country/industry or that you have no control over overseas agents!


Because the act’s scope is broad, it concerns any individual usually resident in the UK, for offences committed anywhere in the world, and any partnership or corporate business can be prosecuted if it does business in the UK, even for offences outside the UK. Routine and incidental business expenses where the value or advantage involved is small or where hospitality is standard is unlikely to be seen as an offence (i.e. entertainment at a sporting activity). But there are no de minimis limits on amounts, which may well be relative to the country concerned.


The new Bribery Act will cover both the UK and overseas and includes two general offences:-


·         Offering, promising or giving an advantage

·         Requesting, agreeing to receive, or accepting an advantage. This includes bribery of a foreign public official and even the corporate offence of failing to prevent bribery offences


Severe penalties mean individuals could get up to 10 years imprisonment, with unlimited fines and potentially unlimited corporate penalties and confiscation of goods and profits. And that’s without taking account of any loss of reputation.


One recent high profile case in the UK was Innospec involving $8m in bribes and contracts worth $160m and a UK/US global agreement regarding corruption of public officials in the fuel additives market in Indonesia, Iraq and Cuba. The UK penalties were $12.7m which the judge stated was “wholly inadequate as a fine to reflect the criminality of Innospec Ltd”. The judge would have liked to impose fines measured in terms of millions but the penalty was restricted by the agreement. Although this is a large international case with significant bribes and potential penalties at stake, it highlights the problem that UK businesses face. 


The Act of being bribed means that an individual or company asks for, agrees to receive or accepts a financial or other advantage, intending that normal business activity should be performed improperly. The offence occurs whether a bribe comes as an inducement, or a reward. So activities could include anything of a public nature connected with the business or any function performed in the course of employment or any activity performed by or on behalf of a group. Bribery of a foreign public official is fairly self explanatory but there is also an offence of failing to prevent bribery. Failure of a relevant commercial organisation i.e. a limited company or partnership etc also covers an associated person to the company paying out for inducement/advantage. There is also test for assessing what a reasonable person in the UK would expect which disregards local customs or practices unless written into the laws of the country concerned.


For the majority of businesses defence may be available if you are able to show that the business has adequate anti-bribery systems are in place but it must be a genuine system.


Acting now means getting those systems in place. It can only be a matter of time before cases are brought through the Courts on a more local level. If businesses are concerned how the new act will affect them, they are best to contact Anthony Stevens, Partner at CFW for advice on 01536 713555.

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