The Bribery Act 2010: Corporate Hospitality and What Businesses Need to Know

As many will be aware, the Bribery Act 2010 comes in to force on 1 July 2011.  The Act will introduce a new corporate bribery offence and will replace the common law offence of bribery, as well as several statutory offences relating to corruption and corrupt behaviour.

The main purpose of the Act is to regulate and enhance the UK’s approach to investigating and preventing bribery, in all its forms.  The penalties imposed by the Act for non-compliance are severe: a maximum prison sentence of ten years or an unlimited fine.

The Act will introduce the new offence of failure by a ‘relevant commercial organisation’ to prevent any ‘associated person’ from bribing third parties for the purposes of benefiting the organisation.  The term ‘relevant commercial organisation’ means a company or partnership incorporated or formed in the UK, or a company or partnership incorporated or formed outside the UK but which does business in the UK.

The term ‘associated person’ means anyone who performs services for or on behalf of the relevant commercial organisation – this will include employees, agents, consultants and subsidiary companies and their respective employees, agents and consultants and any other parties which act in the name of, or on behalf of, the organisation.

So, what has all this got to do with businesses and their day to day operations?

Essentially, bribery involves a party giving, offering or promising some advantage (financial or otherwise) to another, with the intention that the provision, offer or promise of such advantage will, or might, encourage, result in, or reward an improper performance of an activity or function, to the benefit of that party.

Consideration must, therefore, be given to the possibility that corporate hospitality offered by companies and other business organisations could fall within the ambit of the new Act.  Much debate is currently taking place regarding where the line can and should be drawn between what is regarded as bribery and what is legitimate corporate hospitality.  So, where do matters currently stand?

Under the new Act, organisations will have a defence to an accusation of bribery if they can demonstrate that they have in place ‘adequate procedures’ which are designed to reduce and control the risk of bribery occuring within and on behalf of the organisation.  Given that the Act is now in force, organisations should put in place adequate procedures as soon as possible, preferably in the form of a formal ‘anti-bribery policy’.

To assist, the Ministry of Justice has produced some guidance for organisations to consider when preparing anti-bribery policies.

Organisations should:

  • Identify the risks, taking in to account the way in which the organisation operates, the geographical market place in which it operates and the business sector in which it operates.  The risks involved will, of course, very much depend upon the organisation and the nature of its business operations.
  • Formulate a policy which seeks to address and minimise the risk of bribery occurring within and on behalf of the organisation.  Of course, the effectiveness of any such policy will depend upon it being recognisable, practical, realistic and measurable.  There must also, of course, be a workable system of accountability linked to the operation of the policy.
  • Communicate the anti-bribery policy to all employees, agents, consultants, suppliers, customers and any other parties which act in the name of, or on behalf of, the organisation.  Communications should be provided to all parties as effectively and efficiently as possible.  Depending on the nature of the organisation and its business operations, formal or informal internal(and/or external) seminars or talks, hard copy mail shots or e-mail might be adopted as effective methods of communication.
  • Make clear to all parties (as above) what the consequences are for failure to comply with the organisation’s anti-bribery policy and, in particular, the Bribery Act 2010.

Although any anti-bribery policy will need to address all of the above issues, in reality common sense should hopefully prevail.  The Ministry of Justice recognises that reasonable and proportionate corporate hospitality often plays an important part in running a progressive and successful business and has produced some guidance on what might be regarded as appropriate corporate hospitality.  In general, the greater the expenditure and the more generous the hospitality provided, the greater the inference will be that it is intended to influence another party and, therefore, constitute bribery.  Organisations will also need to consider the timing and purpose of any hospitality.  However, this will very much depend upon the nature of the organisation and its business and it will, therefore, be for individual organisations to decide upon what constitutes acceptable corporate hospitality.

In conclusion, it would appear from the guidance issued by the Ministry of Justice that the Bribery Act 2010 is not intended to penalise well run commercial organisations.  However, businesses should ensure that they produce anti-bribery policies as soon as possible and communicate them as effectively as possible to all employees, agents, consultants, suppliers, customers and any other parties which act in the name of, or on behalf of, the organisation, to ensure that they do not risk falling foul of the new legislation.


MKB Solicitors LLP

July 2011