With the Bribery Act 2010 due to be in full force from 1 July 2011, new official Guidance sheds light on how its provisions will be interpreted and applied. What are the key points for advertising businesses to take on board with just a few weeks to go? Jonathan Mayner reports.
Topic: Regulatory
Who: Ministry of Justice, Serious Fraud Office
When: 30 March 2011
Where: UK
Law stated as at: 2 May 2011 (Bribery Act in force from 1 July 2011)
What happened:
On 30 March 2011 the Ministry of Justice (the "MOJ") published its final guidance on the Bribery Act entitled Guidance on Adequate Procedures (the "MOJ Guidance") and announced that the oft-delayed Bribery Act will now come into force on 1 July 2011. In addition, the Serious Fraud Office (the "SFO") has issued prosecution guidance setting out its approach to prosecution decisions under the Act (the "SFO Guidance").
The Bribery Act – a recap
As reported by Marketinglaw in May 2010 (see article here) the Bribery Act 2010 (the "Act") received Royal Assent on 8 April 2010 and replaces a range of bribery and anti-corruption laws, some of which date back to 1889.
Under the Bribery Act it will be an offence for an individual to give, promise or offer a bribe or to request or agree to receive a bribe, the maximum prison term for which offences will increase from 7 years to 10 years. More controversial for businesses is the introduction of a new corporate offence of failing to prevent bribery which is punishable by potentially unlimited fines for the company involved (in addition of course to prison terms for any individuals convicted of the actual bribery offence). The Act has extra-territorial scope and is intended to cover offences committed by UK companies, their employees and agents acting overseas. A defence to the corporate offence of failing to prevent bribery will be available if the accused business can show that it has in place adequate procedures to prevent bribery.
What these adequate procedures should be in order to satisfy the requirements of the Act has been the subject of much consternation within the business community which has resulted in further consultation between the Government and businesses, the delay of enforcement of the Act and ultimately the publication of the MOJ Guidance. Moreover a major concern for businesses has been the absence of any defence or allowance in the Act relating to reasonable or routine corporate hospitality, raising fears that normal business development activities may be seen as a bribery offence, fears which the SFO Guidance is intended to ally to some extent.
Corporate Hospitality and Promotional Expenditure
Compared to the MOJ's draft guidance issued in September 2010, the final MOJ Guidance is clearer as to what might constitute acceptable hospitality as well as promotional expenditures. The MOJ Guidance, reiterated publicly by Justice Secretary Kenneth Clarke, has made it clear that hospitality is not prohibited by the Act. The SFO Guidance states that it will be looking to prosecute only businesses involved in real wrongdoing. This view is echoed by the MOJ Guidance which states that corporate hospitality which serves a legitimate business interest (such as improving a company's image, presenting products and services or establishing cordial relations with potential clients and customers) will not be criminalised under the Act, provided such hospitality is not disproportionate. As a result, reasonable gifts, hospitality or promotional expenses which are not intended to influence decision making will not be deemed to be a bribery offence however where hospitality is extraordinary or has the ability to influence the decision-making of the recipient (such as by its value or timing in relation to a procurement decision) it may still be caught by the Act.
All businesses and particularly those operating in the marketing and promotions field will breathe a sigh of relief that normal business development activities will not be criminalised under the new regime, however it should be expected that with businesses reviewing their anti-bribery regimes and hospitality policies with a view to putting adequate procedures in place to prevent falling foul of the corporate offence, there may still be a noticeable muting of corporate hospitality and promotional activities in the months ahead.
B2B Incentive Schemes
As previously reported by Marketinglaw, the Act potentially affects B2B schemes where a retailer’s or re-seller’s staff are offered incentives by a supplier. Suppliers often offer prizes or rewards to staff at retail outlets who achieve the highest sales of a particular product. Under the old legislation, if the employer had consented to this it was not an offence. None of the guidance issued by either the MOJ or the SFO since the Act received Royal Assent has dealt expressly with this issue.
Given that the tenor of the MOJ Guidance and the SFO Guidance is that the Act is not intended to criminalise previously legal activity it may be a case of business as usual, however considerable caution is still warranted as the letter of the new law is likely to catch this type of activity and there is precedent for the SFO to begin to pursue companies for activities previously considered as industry norms, as the construction industry found out to its detriment during the "cover-pricing" debacle only a few years ago.
As under the old regime, businesses involved in such incentive schemes should seek to ensure that the incentive scheme is open and transparent, that the relevant employer has consented to their employees' participating in the scheme and that where there may be an expectation of impartiality on the part of the end customer that consideration of some form of disclosure about the incentive scheme may be warranted.
Per the SFO Guidance, to give rise to problems, the financial or other advantage offered must result or be intended to result in some "improper performance" on the part of the decision maker. Accordingly businesses who allow their employees to benefit from such incentive schemes should ensure that their employees are aware of the need to carry out their procurement and sales duties responsibly and impartially, and participation in such schemes should be the subject of a policy drafted and implemented as part of the company's adequate procedures to prevent bribery.
Why this matters:
Businesses have long been waiting for clear guidance from the MOJ and the SFO as to how robustly the letter of the new law will be enforced and what businesses will have to implement in terms of "adequate procedures" to be able to avail themselves of the defence to the corporate offence of failing to prevent bribery. The guidance now issued will be the Government's final word in the long debate with the private-sector over concerns that the Act will be too burdensome for businesses, and with the in-force date now set, businesses know precisely how long they have left to ensure that their compliance regimes are up to the task.
Insofar as the final guidance has sent a signal that the Act will not now be deemed to have brought down the curtain on all corporate hospitality and promotional expenditure it will come as something of a relief to businesses in general, but in particular to those for whom corporate entertaining and hospitality forms a large part of their day-to-day operations, such as those engaged in marketing and promotional activities for themselves or their clients.
There remains a need for a certain degree of caution however as it is still unclear whether at some point in time the Act may be construed against organisations for which commercial incentives are an accepted feature of normal dealings.
