Corporate Focus - February 2010

Bungs Will Get You Hung

After heavy criticism from the European Union and the recent BAE Systems scandal, the Government is set to enact one of the most comprehensive laws in the world, aimed at stamping out the use of bribes, kickbacks, gifts and corporate corruption to secure contracts.

Expected to come into force before May 2010, the Bribery Bill (“the Bill”) looks set to cause shockwaves throughout the commercial world.

The Offences

In its current form (and there may still be several amendments to be made), the Bill creates two criminal offences: to bribe someone, and to be bribed.

It imposes a strict liability offence upon any commercial organisation which is found to have failed to prevent an associated person (including employees, agents or subsidiaries) from bribing another person with the intention of obtaining, or retaining business, or of obtaining or retaining an advantage in the conduct of business, for the organisation. The intention is that this will promote an ethos of self-regulation within commercial organisations, and will also motivate the disclosure of instances of bribery. Much in the same way the Money Laundering Regulations have.

The legislation will catch many types of organisations, including partnerships. It will also apply to non-UK based organisations having a subsidiary in the UK, even if the bribe is paid or accepted elsewhere in the world. There is not even a requirement for the UK branch to be involved in the bribe. The fact there is a UK branch will give the UK prosecutors and courts jurisdiction.

The Bill also creates general bribery offences dealing with passive and active bribery in the public and private sector; as well as the offence of bribing a foreign public official

There is a specific offence, that only applies to Directors and Senior Officials who are UK persons (natural and legal), of conniving or consenting to a commercial organisation which commits either the general offences of bribery or the offence of bribery of foreign public officials.

The Government has made it clear that corporate hospitality is a legitimate part of doing business and will not be caught by this legislation as long as it remains within appropriate and proportionate limits.

Facilitation payments, on the other hand, will be subject to the provisions of the Bill.

Adequate Procedures

The only statutory defence available to an organisation accused of failing to prevent bribery will be to show, on the balance of probabilities, that it had adequate procedures in place to prevent persons associated with it from partaking in bribes. The Bill does not give guidance as to what would constitute adequate procedures. The Government is proposing to provide non-statutory guidance, which is intended to be non-prescriptive and provide good practice examples. However, it has been inferred that an organisation will be able to point to its size, sector and its operation in high risk markets as relevant factors when facing a charge of bribery. The guidance is expected to be published before the legislation comes into force to give businesses time to prepare.

Penalties

The Bill provides for the punishment of both individuals and organisations found guilty of an offence.

Fines

Courts will be able to impose unlimited fines on organisations and individuals, which reflect the seriousness of the offence and the circumstances of the case.

Prison

Individuals convicted of an offence may be sentenced to a prison term of up to 10 years.

Debarment

Under the Public Contracts Regulations 2006 a company found guilty of a corruption offence is automatically and permanently debarred from competing for public contracts.

The debarment provision requires that the organisation is convicted of an offence of active involvement in corruption. Given that the Bill does not require proof of “active” involvement, it is unclear at this point if the Government considers that the conviction of an organisation under the Bill would trigger this automatic debarment. It would certainly not encourage organisations to disclose instances of bribery, which is one of the main aims of the new legislation.

Implications

The Bill places the onus firmly upon organisations to monitor anyone who is associated with them including staff, agents and subsidiaries, regardless of their location (or position). Organisations should review their current anti-corruption policies; rigorous and demonstrable measures must be in place to prevent anyone from engaging in bribery and the criminal consequences this could have.

If you would like more information on the changes proposed by this Bill, please contact Ian Vicary, Partner in our Corporate team on 0151 242 6841 or ian.vicary@weightmans.com.