16 May 11
A guide to the Government's Final Guidance on the Bribery Act 2010, which comes into force on 1 July 2011
Further to the article at Journal, February 2011, 54, the Government confirmed on 30 March 2011 that the Bribery Act 2010 will come into force on 1 July 2011. The announcement was accompanied by the Government’s finalised guidance on adequate procedures (“the Final Guidance”), which applies across the UK, along with non-statutory “quick start” guidance. Also on 30 March 2011, the Serious Fraud Office (SFO) and the Director of Public Prosecutions (DPP) issued their joint guidance on how they will exercise their prosecutorial discretion in enforcing the Act in England & Wales.
This article will assess the Final Guidance and its impact on the issue of “adequate procedures”. It will also highlight the potential impact of the Act on the Scottish legal profession and other professional advisers, and what law firms may need to consider going forward. Finally, it will seek to highlight measures that the Crown Office may consider to assist Scottish commercial organisations, the public sector and individuals to assess their risk and stay on the right side of the law.
The importance of adequate procedures
By way of recap, the issue of adequate procedures is a critical issue for “a relevant commercial organisation”, which under s 7 of the Act can face prosecution for failing to prevent bribery by an “associated person”. It will be a defence for a commercial organisation to show that it had adequate procedures in place to prevent unlawful conduct.
The Final Guidance (buttressed by the SFO/DPP Guidance) is more prescriptive than the draft of September 2010. It provides a greater number of illustrative case studies (11 rather than five), and does, as noted below, seek to provide more concrete guidance to businesses on certain key areas of concern.
As with the draft guidance, adequate procedures are to be based on six guiding principles, but these have been articulated in a more user-friendly manner. Most importantly, the Final Guidance stresses in principle 1 that while anti-bribery procedures are to be clear, practical, accessible, effectively implemented and enforced, they are also to be proportionate to the bribery risks faced. Indeed, proportionality is viewed as the “core principle” to be applied in considering adequate procedures and is a concept that permeates the guidance, reflecting in turn a clear governmental endorsement of a risk-based approach to managing bribery risks.
The other five principles can be summarised as follows and do not come as any great surprise:
- There should be top-level commitment to anti-bribery measures, fostering a culture within the organisation in which bribery is never acceptable.
- The commercial organisation should carry out, on a periodic basis, a risk assessment of the bribery risk faced.
- Due diligence procedures should be in place, relative to persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.
- Internal and external communication measures (including training) should be in place to ensure that bribery prevention policies and procedures are embedded and understood throughout the organisation.
- The commercial organisation should monitor and review anti-bribery procedures on an ongoing basis.
Shades of grey
The Final Guidance seeks to grapple with a number of grey areas. The following can be noted, in particular:
- Departures from the suggested procedures contained within the Final Guidance will not in itself give rise to a presumption that an organisation does not have adequate procedures.
- The application of bribery prevention procedures is of particular importance if an organisation wishes to report an incident of bribery to the regulatory authorities. The commercial organisation’s willingness to co-operate with a 2010 Act investigation and to make a full disclosure will also be taken into account in any decision as to whether it is appropriate to commence criminal proceedings (though ultimately this will remain, in Scotland, a matter for the Lord Advocate to decide).
- The Final Guidance explicitly recognises that reasonable and proportionate corporate hospitality (e.g. tickets for a sporting event) is unobjectionable unless the circumstances suggest otherwise. It also offers some useful comment on when other types of business expenditure (e.g. arranging for visits by foreign public officials) may be objectionable.
- In relation to bribery of a foreign public official (FPO), the Final Guidance notes that the Act does not require proof of intention relative to improper performance. However, it stresses that it is not the Government’s intention to criminalise behaviour where no underlying mischief occurs. Rather, the focus of the Act is principally on preventing a FPO’s decision making being improperly influenced by personal enrichment.
- Non-UK incorporated bodies that do not have a demonstrable business presence in the United Kingdom will not be caught by the Act. Indeed, the Government’s view is that the mere fact that a company’s securities are traded on the London Stock Exchange will not in itself qualify that company as carrying on a business or part of a business in the UK. Likewise having a UK subsidiary will not, in itself, mean that a parent company is so carrying on business, the Final Guidance noting that a subsidiary may act independently of its parent or other group companies.
- Due diligence of business partners should be focused primarily on those over which an organisation is likely to exercise control. Further, the Final Guidance recognises that due diligence is only necessary in relation to persons who will actually perform services for or on behalf of the organisation, which is unlikely to be the case in relation to someone who simply supplies goods.
- While the Final Guidance confirms the unacceptability of facilitation payments, it does also recognise the problems that commercial organisations face, in this respect, in some parts of the world. The SFO/DPP Guidance usefully lists a number of factors tending in favour of prosecution (e.g. large or repeated payments), and a number of factors tending against prosecution, including where the payments come to light as a result of a genuinely proactive approach involving self-reporting and remedial action.
All in all, the Final Guidance goes somewhat further than many anticipated in providing greater clarity and comfort to businesses grappling with compliance issues. While there remain a number of areas where careful thought will be required to ensure compliance, the final guidance does provide, as one would hope, an extremely useful frame of reference.
Impact on the professions
Law firms and lawyers are undoubtedly “associated persons” within the meaning of the Act, carrying on as they do services for or on behalf of their clients.
Accordingly, it is no surprise that lawyers are being asked by clients (as part of their own due diligence requirements in terms of adequate procedures) to confirm their anti-bribery/anti-corruption credentials, often via a request for the firm’s anti-bribery policy and procedures. This is also being seen in the context of tenders (particularly in relation to public sector work). Evidently, regulated as the profession is, lawyers should represent low risk and, as such, law firms should be in a position to take a proportionate, light touch approach to the Act: for example, by bolting revised policies and procedures onto pre-existing money laundering, FSA and similar policies and identifying their commitment to anti-bribery in, for example, engagement letters and website notices.
Lawyers also need to bear the Act in mind when instructing third parties (e.g. local agents/foreign lawyers). Again, a light touch approach is likely to be appropriate given the normal pre-instruction checks law firms carry out, but the Act is something that should be covered off for the sake of prudence and risk mitigation.
What is sauce for the goose is sauce for the gander. Accountants and other professional service providers also need to integrate anti-bribery issues into their standard risk compliance measures. And for both lawyers and analogous advisers, careful consideration has to be given to POCA: the SFO has made it clear, for instance, that it would expect auditors to report suspected bribery infringements to SOCA.
Crown Office comfort?
Based on our discussions, we understand that Crown Office is considering whether or not to publish Scottish enforcement guidance of a type similar to the SFO’s. Evidently, on a practical basis, one would expect Crown Office to consider the SFO’s approach (and vice versa) in determining whether or not to proceed with prosecutions in Scotland, though of course this will always be a ultimately a matter for the Lord Advocate’s discretion.
In relation to the (criminal) cartel offence under the Enterprise Act 2002, Crown Office has entered into a memorandum of understanding (“MOU”) with the OFT, which sets out how the two bodies will co-operate in investigating and/or prosecuting individuals in Scotland. The MOU has a tartan tinge, allowing the Lord Advocate to retain her discretion while providing, particularly, whistleblowers and self-reporting companies a degree of comfort as to how the Scottish prosecutor will proceed.
It is understood that Crown Office is not minded to enter into a MOU relative to the 2010 Act. Be that as it may, as noted in the February article, requirements of legal certainty militate in favour of a joined up approach to enforcement of the Act.
Sebastian McMichael is a solicitor with the Regulation and Markets team of Shepherd and Wedderburn LLP.
WHERE TO FIND THEM
The Government’s Final Guidance: www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf
Non-statutory “quick start” guidance: www.justice.gov.uk/guidance/docs/bribery-act-2010-quick-start-guide.pdf
Serious Fraud Office/Director of Public Prosecutions joint guidance on exercising prosecutorial discretion in England & Wales: www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2011/bribery-act-prosecution-guidance-published.aspx