Law firm, Prettys, warns companies not to ignore Bribery Act as strict new rules spread to the wider business community.

Although implementation of The Act has been delayed, it looks likely to come into force later this year and could extend to normal business conduct that many companies do not realise will be affected. Penalties for offences under the Act will be harsh with up to 10 years imprisonment and unlimited fines being imposed. There will also be the possibility of a court imposing confiscation, compensation and disqualification orders. This is not an area of the law that any organisation can afford to ignore – being unaware of the legislation will be no defence!

While a common sense approach to proportionate corporate gifts and hospitality is expected, it is vital to assess the potential risks to your organisation and put preventative measures in place.

The new Bribery Act 2010 will impact on UK businesses in three important ways. First, it will outlaw the offering, promise, giving or receipt of bribes as a way of securing a contract. Secondly, the bribery of a foreign public official will be outlawed. Thirdly, it will create a new corporate offence of failing to prevent bribery by employees, subsidiaries or agents. The Act will therefore have significant implications for all UK businesses, in particular those which operate in countries where similar regulations do not apply. There is concern in the business community that this could put UK companies at a disadvantage when competing for overseas business. At a time when the government is pushing UK businesses to focus on the export market, many feel that the timing of this could probably not be worse.

Fiona McMutrie, Partner at Prettys, comments: “The new corporate offence is of greatest importance as any person associated with the organisation who is involved in bribery or corruption may cause the organisation to be found in breach of the Act. Importantly, it will be possible for a ‘clean’ organisation to commit this offence if it has within its ranks a corrupt employee, agent or subsidiary. The commercial organisation will be guilty of the offence, even if it did not know what the employee, agent or subsidiary was doing, unless it can show that it had ‘adequate procedures’ in place designed to prevent bribery. “

The Ministry of Justice (MoJ) issued a consultation paper in September 2010 which provides outline guidance in the form of six principles to help commercial organisations develop such adequate procedures. Although the guidance is currently being reviewed, Prettys anticipates that the redraft (which is expected by May 2011) will substantially encompass the same six principles which are as follows:

1. Risk assessment – the regular and comprehensive examination of the business to identify key bribery risks.
2. Top level commitment – the role of management in delivering clear and unambiguous messages to employees, agents and subsidiaries and establishing an anti-bribery culture.
3. Due diligence – the task of making sure that you know who you do business with, specifically on entering into and managing business relationships with third parties.
4. Clear, practical and accessible policies and procedures – taking steps to address any identified risks by providing guidance to employees, agents and subsidiaries.
5. Effective implementation – appropriate communication and training, going beyond ‘paper compliance’.
6. Monitoring and review – regular audits to ensure that you are dealing with any changes in bribery risk.

Once the redrafted guidance is published, there will be a three month window before the Act itself comes into force. Organisations should take advantage of the extra time they now have to prepare for the new legislation by reviewing and auditing their risk areas identifying what can be done to reduce their exposure and starting to put in place adequate procedures to prevent bribery.

• Fiona McMutrie is a Partner at Prettys