The Bribery Act (1st July 2011)

12/07/11 General

Kickbacks and greasy palms are part of doing business, particularly in some geographies, some might argue. Over the years tales of extra ‘import duty’ that needs to be paid to officials at airports, excessive ‘corporate hospitality’ and more recently alleged cash transfers designed to influence decision-makers within the sports world have made the headlines. The U.K. has just introduced The Bribery Act 2010 (the Act) but there is concern that this broad ranging act will restrict U.K. businesses.

The Act came into force on 1 July 2011. Under the Act it is a criminal offence to give or receive a bribe. It also introduced a corporate offence of failing to prevent bribery. Under the powers granted by the new law prosecutors are able to prosecute both domestic and foreign companies, providing they have some presence in the U.K. Bribes committed in the U.K. and abroad could be prosecuted under the Act. Individuals face up to 10 years in prison and an unlimited fine if found guilty of committing bribery. Under the corporate offence a company faces an unlimited fine if it is found to have failed to prevent a bribe taking place.

Some experts have argued the new law could put British companies at a disadvantage as it goes further than similar legislation in other jurisdictions. Under U.K. law facilitation payments, which are payments that induce officials to perform routine functions that they are obligated to perform, are prohibited by the Act. In this regard, the U.K. law differs from U.S. Foreign Corrupt Practices Act which does permit certain facilitation payments.

The Government does not believe the law will make doing business difficult, suggesting it will help reaffirm the U.K.’s place as a leader in fighting corruption. It has produced six principles to help you decide what changes, if any, you need to put in place in your business. These include ensuring anti-bribery policies are proportionate to the risks you face within the markets you operate in, that you diligently monitor and review your anti-bribery policies and that they are supported by the management and directors of the company. Businesses that can demonstrate they have adequate procedures in place to prevent bribery may be able to avail themselves of a full defence against any prosecution.

The good news is that as a general rule hospitality or promotional expenditure is not prohibited. If the hospitality or expenditure is proportionate and reasonable to the business taking place then it is unlikely to engage the Act. Tickets to sporting events, dinners and travel expenses fall within this assessment if they are reasonable and proportionate for your business.

From an insurance point of view there is nothing radically different about the new offences under the Act. Rather they add to what is already a highly complex patchwork of offences in the arena of financial crime. Your standard Directors and Offi cers (D&O) policy may come into eff ect to help with defence costs if you are charged with a bribery off ence, remembering that a ‘conduct’ exclusion in your policy could mean that if you are found guilty of the offence cover may cease at that point and may, in some instances, allow insurers to claw back the defence costs already advanced. Careful analysis of your D&O policy with us will help determine whether you have cover for alleged infringements of the provisions of the Bribery Act.

To help protect your business, firstly educate yourself and your staff and put in place internal processes to monitor client entertaining. Secondly, consider buying or reviewing your Directors and Officers liability insurance to protect you and your business.

Individuals face up to 10 years in prison and an unlimited fine if found guilty of committing bribery.

For more information please email ourselves at mail@lwood.co.uk or contact us on 01274 515747