The Bribery Act 2010 came into effect on 1 July 2011. It is amongst the toughest anti-bribery and corruption legislation in the world.
There has been a considerable amount of publicity which has led to concern about the impact of the Act on corporate hospitality and other promotional expenses. This is because, at first glance, the legislation is so broadly drafted, it appears that providing or accepting corporate hospitality might fall foul of the Act and therefore be illegal.
Such concerns are overstated. As the Government has made clear, it is not the intention that genuine hospitality or reasonable and proportionate business expenditure should infringe the legislation. You can continue to provide bona fide hospitality, promotion and other business expenditure. The intention of the legislation is to catch hospitality which is really a cover for bribing someone.
In a commercial context (that is not involving foreign public officials) for there to be an offence, the prosecution must show that the hospitality:
(a) provided an advantage to another person and
(b) was offered or given with the intention of inducing the person to perform a relevant function improperly or in the knowledge of acceptance of the advantage would in itself be improper performance
It should be understood that improper performance of a function is a performance which amounts to a breach of an expectation that a person will act in good faith, impartially or in accordance with a position of trust. Functions both in the private and public sectors are covered.
Under the Act a company can be guilty of failing to prevent bribery subject to a defence that they had adequate procedures in place to prevent persons associated with them from bribing on their behalf. Statutory Guidance has been given by the Government as to what amounts to adequate procedures.
In order to bring a case relating to provision of hospitality or promotional expenses, the prosecution would have to show that the hospitality was intended to bring about improper performance and this is judged by what a reasonable person in the UK would think. Local custom and practice is not a defence. This is particularly relevant in view of the fact that U.K. commercial organisations can be prosecuted here for bribery by persons associated with them which occur anywhere in the world.
In his foreword to the Guidance, Kenneth Clarke made it clear that the tough new legislation was aimed at making life difficult for those responsible for corruption but not to unduly burden the vast majority of decent law abiding firms. He went on to say that no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix. This raises the question of what sort of hospitality is likely to infringe the Act?
Within the legislation a bribe is widely defined as 'a financial or other advantage'. They will look at such things as the level of hospitality offered, the way in which it was provided and the level of influence the person receiving it had on any business decision in question. As a general proposition hospitality which is proportionate and reasonable, given the sort of business that you do, is very unlikely to infringe the Act.
So companies can be sure that continuing to provide tickets to sporting events, taking clients to dinner, offering gifts to clients as a reflection of your good relations or paying for reasonable travel expenses in order to demonstrate your goods or services do not infringe the Act, provided that they are reasonable and proportionate to the business being undertaken. The Guidance specifically allows for the standards and norms of a particular sector to be relevant to proportionality.
The best protection for companies, to ensure they do not infringe the Act, is to publish clear written policies prohibiting gifts, expenses or hospitality which might influence or be seen to influence a contractual or material matter. Some guidance on the upper limits for hospitality, gifts and expenses without line management authorisation should be provided and the policy well communicated to employees and business partners acquiring business on behalf of the organisation. Most importantly gifts, hospitality and expenses whether given or received, or indeed refused, should be fully documented because transparency is key to avoiding suspicion.
To avoid excessive bureaucracy a minimum level can be introduced below which such expenditure need not be recorded, but be careful this does not permit frequent low cost hospitality which taken together, becomes disproportionate.
Just a final word of warning, more careful consideration should be given if hospitality is being provided for a foreign public official. There is a specific offence of bribing foreign officials which has a lower threshold of proof in that a prosecutor only has to show that an advantage was being provided which was intended to influence the official in their capacity, and intended to gain business or a business advantage. This is more problematic given that commercial organisations frequently only deal with foreign public officials to further their business interests with an intention to gain business, and therefore an advantage might be more easily inferred from a course of dealing. Again, transparency is the key.
Being open and transparent with the relevant Government department who employ the official and getting their consent to attendance will make it difficult to show there was an intention to influence or give an advantage.
In conclusion, companies should implement procedures to cover the provision of corporate hospitality, gifts and expenses but the risk to the company should be properly assessed and policies adopted to reflect those risks that are a proportionate response to that risk. Any business could suffer considerably in gaining or retaining business if they overreact.