Practical Law

The Bribery Act 2010 is expected to come into force in April 2011. It completely overhauls the UK’s fragmented and antiquated anti-corruption regime, replacing it with a modern and comprehensive one, fit for use in today’s global market. Notwithstanding the current cloud of apprehension, the message is clear: be prepared and be corrupt free.

Why worry in the first place?

The UK’s construction industry is at risk given the significant number of transactions involving procurement, supply chain management and regulatory relationships. The risk increases through the use of joint ventures, agents or intermediaries and where relationships cross borders into countries with different legal codes. The industry potentially falls prey to all forms of offence: bribery to obtain planning permission or win contracts, concealment of bribes, corrupt practices during tendering and project execution phases, asset misappropriation, accounting fraud… the list goes on.

What does the new law say?

The Act establishes four categories of offence; three are capable of being committed by an individual or a company, the fourth by a company only:

• Two offences render a party guilty if it participates in either active or passive bribery – that is to say, if a party either offers or receives a bribe in order to bring about or reward the improper performance of a public or business activity.
• One is a stand alone offence of actively bribing a foreign public official.
• The final strict liability offence could see a company prosecuted for failing to prevent active bribery being committed on its behalf by a person “associated” with it anywhere across the globe.

The consequences of a breach are severe: up to 10 years imprisonment for individuals and unlimited fines for companies and individuals.

Why worry now?

These are the strictest anti-corruption laws globally and the government has admitted that it could prove to be a handicap to UK business. By introducing a more stringent regime and higher standards of commercial integrity than those governing many foreign competitors (at a time when the construction industry is bracing itself for another tough year), the fear is that our competitiveness is being eroded. For example:

• There is no exception for facilitation payments (that is, low level payments to expedite a routine governmental action) that are considered ordinary business in many jurisdictions and permitted under US legislation.
• Domestic businesses that buy influence via “off the books” payments or through lavish corporate hospitality are targeted, leaving their unconstrained competitors unscathed. Custom and practice will no longer be a defence.

Companies are also struggling with the uncertainty created by legislation that fails to be entirely prescriptive. For example:

• How does one distinguish between a customary gesture of goodwill and unacceptable hospitality?
• What is the extent of liability if a subsidiary company breaks the law?
• Does a “consenting or conniving” officer have to choose not to investigate or merely turn a blind eye?

The answers will turn upon a case by case interpretation of the legislation. The real sting in the tail is the potential debarment from bidding for public contracts.

A piece of advice?

For a company, the only defence available to the offence of failing to prevent bribery will be to demonstrate that it had “adequate procedures” in place. The term is left undefined. Instead, the Ministry of Justice has published draft guidance based around six prevention principles. The more robust the anti-corruption programme is, the less likely it is that a company will be found guilty of the offence.

Essentially, it is a management and cultural issue: the responsibility lies with directors to make an ethical judgement and change corporate culture, starting with the CEO and ending with the bottom of the command chain. Simply introducing codes of conduct is not going to be sufficient. Employers, contractors and consultants will need to revisit procedures in a fundamental way.

Identifying the risks

Compliance is about identifying where the risks are:

• Who are you dealing with?
• Where and when is money changing hands?
• What due diligence is undertaken on overseas agents or intermediaries?
• How does existing guidance need to be amended to ensure compliance?
• Do your staff know the dividing line between a gift to a customer and a bribe?

Taking steps to implement procedures

The Act’s provisions will take effect immediately it is implemented later this year. Organisations need to ensure that they are ready for it. There is no “one size fits all” solution and steps should be taken now, on an individual basis, towards implementing procedures designed to comply with the requirements of the “adequate procedures” defence. In particular:

• Decide who is taking ownership of compliance with the Act.
• Undertake a thorough risk assessment of corruption risks.
• Review, update and globally communicate current anti-corruption policies and response plans.
• Seek advice on due diligence issues for M&A activity, joint ventures and procurement.
• Develop and deliver structured training programmes for all staff.
• Update anti-corruption provisions within all relevant contracts.
• Carry out adequate due diligence of third parties and monitor those relationships on an ongoing basis.
• Consider obtaining external support on any serious internal investigation.

The Ministry of Justice’s final guidance note is expected this month and it is hoped this will provide more certainty.