The essence of the new legislation is to criminalise payments made to people to induce or reward improper conduct. It comprises of four offences:

• giving a bribe, with the intention of encouraging a person to improperly perform a relevant function or activity;
• receiving a bribe, with the intention that a relevant activity will be performed improperly as a result;
• bribing foreign officials, with the intention of retaining or obtaining business, or to influence that official, where there is no express legal permission or obligation to do so; and
• (for commercial organisations) failing to prevent a bribe.

Giving & Receiving Bribes

A bribe is “a financial or other advantage”. A “relevant function or activity” includes any function of a public nature, any activity connected with a business, any activity performed in the course of a person’s employment and any activity performed by or on behalf of a body of persons (whether or not incorporated).

A relevant function or activity will be performed improperly if the person performing the relevant function or activity is expected (known as a ‘relevant expectation’) to perform it in good faith, impartially or is in a position of trust by virtue of performing it and fails to do so as a result of the bribe.

This is wide ranging. The Act is not just about brown envelopes stuffed with £50 notes; it will also cover gifts – it could even include lavish entertaining. It can be given or received by or on behalf of a person, so bribes given by or to agents will be caught along with direct bribes. If an employee becomes over excited with the company credit card and throws in some nice bottles of wine when submitting a pitch document for a piece of work, this could well constitute a bribe. Similarly, if a company were to organise a team lift and tries to poach employees in breach of their employment contracts, it is arguable that the company could be liable if it offers joining bonuses or indemnities to those employees.

International considerations relating to the offences under the Act

Readers should note that when judging whether there was a relevant expectation in the context of a relevant function, the touchstone will be what a reasonable person in the UK would expect. Leaving aside whether it is possible to identify a reasonable person in the UK, an important point to note is that local customs are therefore disregarded when judging what is to be expected of a person performing the activity. Therefore, even if it is customary in some countries to offer a small sweetener to win a tender, this will not be a relevant consideration when judging if the person giving or receiving the sweetener has breached their duty.

Importantly, it does not matter that the relevant function takes place in the UK or overseas, or has any connection with the UK. Simply having a UK holding company that benefits from a bribe is enough to fall within the scope of the Act, even if the alleged bribe is committed overseas.

Bribing foreign officials

The offence of bribing a foreign official is almost superfluous, given the wide territorial scope of the Act generally. However, it is designed to catch payments which do not result in the improper performance of duties, but merely influence the official so as to give a business advantage. In other words, if you make a small ‘facilitation payment’ in order to encourage the official to do his job more quickly, this will be caught by the Act. Those readers who are familiar with the Foreign Corrupt Practices Act will note that this is very different from the position under US law. The only defence in these circumstances will be if there was a written law which required such payments to be made to public officials, or that said that paying public officials in this way is not illegal. In practice, therefore, there will be no defence.

Failing to prevent bribery

The most controversial offence under the Act is the new corporate offence whereby a company is now automatically liable if any of its employees or agents pays a bribe to win or retain business for the company.  Given that the Act catches bribes given by third parties, this is a very wide ranging and serious offence. If an agent in a foreign country makes a facilitation payment to a government official on your business’s behalf because this is culturally acceptable (and expected) in that country, your business could be held liable.

There is a defence under the Act to the offence of failing to prevent a bribe, if an organisation has adequate procedures in place to prevent bribery. The adequacy of the procedures will depend on the organisation, and the government is currently deciding what guidance it will give on this point. As a minimum however, it would appear that businesses will need to:

• draft policies relating to corruption;
• review their terms and conditions with suppliers and agents;
• include provisions in employment contracts which make it possible to dismiss employees where they breach the corruption policies; and
• provide training to employees to ensure that they are aware of their obligations under the Act and the policy.

The offences under the Act carry with them the penalty of a fine or a ten year prison sentence. The fine is likely to be set by reference to the profits that could have come from the bribe, not the value of the bribe itself. They could run into millions of pounds. Aside from the criminal penalties, however, an important point to remember is that many government contracts will not be open to any business which has been convicted of a corruption offence. This could therefore have devastating consequences to many firms.

Some have played down the significance of the Act. They compare it to the insider dealing legislation and point out how few prosecutions have taken place under this. However, there is a major difference between these two pieces of legislation: your competition will be eager to report you under the Act if they feel that you have unfairly won a piece of work that they pitched for. If you did not think that the Act affected you or your business, think again.

Mishcon ASSURE™ provides a tailored service which will protect your organisation from Bribery Act related criminal sanctions, civil liability and reputational damage.