This Alert covers the corporate hospitality aspects of the Bribery Act 2010 (the Act). An article addressing other aspects of the Act can be accessed via the following weblink: http://www.mwe.com/info/news/wp0311b.htm.
The UK Ministry of Justice has published its long-awaited official guidance on the Bribery Act (the Guidance). The Act will now come into force on 1 July giving businesses three months to review their policies and procedures in light of the Guidance, updating these if necessary.
Despite fears that the Act would prohibit all forms of corporate hospitality, the Guidance makes it clear that it is not the Act’s intention to criminalise bona fide hospitality and promotional, or other business expenditure which is recognised as an established and important part of doing business. This includes hospitality or expenditure which seeks to establish cordial relationships, present products and services or improve the image of a commercial organisation.
Hospitality and promotional expenditure can form the basis of four offences under the Act:
bribing another person - which requires an intention to induce improper performance that is intended to induce conduct that amounts to a breach of an expectation that a person will act in good faith, impartially, or in accordance with a position of trust judged by the standard of a reasonable person in the UK;
- being bribed by another person in the circumstances described above;
- a specific offence, bribing a foreign public official - which requires an intention to influence the foreign public official in his or her official role and thereby retain business, obtain new business or obtain a business advantage and a sufficient connection between this and the advantage obtained; and
- failing to prevent a bribe but a defence to this will be having adequate procedures in place to prevent it.
Factors taken into account
The full circumstances of each case will be considered, including: the lavishness of the hospitality or expenditure; the standard or norms applying in a particular industry; and whether the hospitality or expenditure was concealed or clearly connected with legitimate business activity. In deciding whether to prosecute, where the circumstances trigger the offences mentioned above, prosecutors will carefully consider what is in the public interest. That is a much higher test than, for example, considering what good business practice might be or what is in the interests of shareholders of an enterprise.
The Guidance provides the following examples:
- it would be acceptable, as part of a public relations exercise designed to enhance knowledge in the organisation’s field or cement good relations, to invite foreign clients to attend a Six Nations match at Twickenham;
- hospitality or expenditure in the form of accommodation and travel costs that would otherwise have been borne by the relevant foreign Government rather than the official him or herself would also be acceptable; and
- in contrast, a five-star holiday unrelated to a demonstration of the organisation’s services or flights and accommodation to an unnecessary or unrelated destination could raise an inference of bribery.
Intention of the legislation
The Guidance explicitly states that the provision of bona fide hospitality or expenditure to improve the image of an organisation or to establish cordial relations is recognised as an established and important part of doing business which it is not intended to criminalise. Routine business courtesy which is reasonable and proportionate within the norms for the particular industry which do not involve public officials in the UK or otherwise are therefore highly unlikely to be caught by the Act.
The following steps may be helpful in both preventing bribery taking place and establishing a defence to “failing to prevent”; creating and/or updating policies; publishing a policy statement; issuing internal guidance; regular monitoring, review and evaluating the adequacy of internal procedures and compliance with them; and providing appropriate training and supervision to employees.
The Act provides for an unlimited fine for commercial organisations and an unlimited fine or a maximum penalty of ten years’ imprisonment for offences committed by individuals.