Bribery Act 2010

1. Introduction

1.1 Who should read this practice note?

All solicitors and other staff in a law firm who are involved in compliance.

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1.2 What is the issue?

The Bribery Act was given Royal Assent in April 2010 and will come into force on 1 July 2011.

The act makes it an offence for a United Kingdom (UK) citizen or resident to pay or receive a bribe, either directly or indirectly. The act provides for transactions that take place in the UK and abroad, and both in the public and private sectors.

Companies and partnerships can also commit an offence where a bribe has been paid on their behalf by an associate. Associates include employees, agents and other persons providing services on behalf of the corporate entity. However, it is a defence to have adequate procedures in place to prevent bribery.

This practice note explains in more detail the provisions of the act and provides further information on the procedures that firms can put in place to prevent bribery being carried out on their behalf and to avail themselves of the statutory defence.

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2. Overview of offences under the act

2.1 The three main offences

The act creates three main offences:

• bribing a person to induce or reward them to perform a relevant function improperly
• requesting, accepting or receiving a bribe as a reward for performing a relevant function improperly
• using a bribe to influence a foreign official to gain a business advantage.

A relevant function (see 2.1.1) can be an activity associated with the private or public sector provided that the function should be carried out in either good faith, impartially or that the person performing it is in a position of trust.

Commercial organisations can also commit an offence if they, or an associate, commits bribery on their behalf to gain or retain a business advantage. However, it is a defence, in this case, for the organisation to have in place adequate procedures to prevent bribery.

Where an offence of bribing another person, including a foreign official, or being bribed, has been committed by an organisation with the consent or connivance of a senior officer (a director, manager, secretary or other similar officer of the body corporate or a partner in a Scottish partnership) of that organisation then that senior officer can also be held liable and proceedings can be taken against them.

2.2 The offence of bribing another person

A person would be guilty of an offence if they offer, promise or give an advantage to another person, intending that the person (or someone else on their behalf) is rewarded for, or induced to, perform a relevant function improperly.

It is important to note that there must be an intention to induce improper performance of a relevant function and the prosecution would need to be able to demonstrate this. It is extremely unlikely that hospitality designed to cement good business relations would engage this section.

A person would also be guilty of an offence where they offered, promised or gave an advantage to a person knowing or believing that acceptance would, in itself, amount to improper performance of a relevant function.

In this case the prosecutors will need to show that the person knew or believed that the acceptance would constitute improper performance.

A person does not have to offer, promise or give the advantage themselves to be guilty of an offence, it can be carried out through a third party. The advantage does not have to be financial.

The offence does not have to take place in the UK but the person committing the offence must have close connection with the UK. A close connection means being:

• a British citizen
• a British overseas territories citizen
• a British national (overseas)
• a British overseas citizen
• a person who under the British Nationality Act 1981 was a British subject
• a British protected person within the meaning of that act
• an individual ordinarily resident in the UK
• a body incorporated under the law of any part of the UK
• a Scottish partnership.

The description 'offer, promise or give' should be considered to have a wide meaning and can include an implied offer. The Law Commission gave the example of a meeting being held over an open briefcase full of money as a situation where an implied offer can be inferred.

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2.3 Offences relating to being bribed

A person commits an offence if, directly or indirectly, they request, agree to or accept a bribe:

• intending that a relevant function should be performed improperly, either by them or by a third party
• when to do so, in itself, would be improper performance of a relevant function
• as a reward for carrying out a relevant function improperly, or
• in anticipation or consequence that they (or someone else on their behalf) will perform a relevant function improperly.

In the last three cases, it does not matter if the person committing the offence knows or believes that the performance of the function was improper nor in the last case does it matter if a person carrying out the action on their behalf was aware of this.

The offence does not have to take place in the UK but the person committing the offence must have close connection with the UK.

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2.4 Bribery of a foreign official

It is an offence to attempt to influence a person acting in their capacity as a foreign official by offering, promising or giving a financial or other reward to gain or retain a business advantage. It is still an offence if the offer, promise or giving is done through a third party and/or where the offer, promise or giving of a reward is to a third party at the foreign officials request or agreement.

Unlike the offence under section 1, there is no requirement to show that the foreign official was being bribed to carry out their function improperly. However, the Ministry of Justice's guidance recognises in many cases there will be an element of improper performance. They also state that it is not the intention of the government to 'criminalise behaviour where no such mischief occurs'. They provide further guidance about what this will mean in practice in relation to:

• government tenders where those bidding are required to offer additional benefits to the local community, and
• hospitality, promotional and other business expenditure (See Ministry of Justice (MoJ) guidance, PDF).

A foreign official includes any person who:

• performs public functions in any branch of the national or local municipal government
• exercises public functions for any public function or agency
• is an agent of a public international organisation such as the World Health Organisation or the World Bank.

An exception to this offence is made where a foreign official is permitted or required by local law to be influenced by offers, promises or gifts.

The offence does not have to take place in the UK but the person committing the offence must have a close connection with the UK.

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2.5 Corporate offence

If a person associated with the organisation bribes a person with the intention of gaining or retaining a business advantage for a commercial organisation, then the organisation may be guilty of an offence under the act and liable for an unlimited fine.

An associated person would be bribing someone if they are or would be guilty of the offence of bribing a person under the act. In this situation, unlike the offence of bribery itself, there is no need for the person to have a close connection with the UK. An associated person is a person who performs services for, or on behalf, of the commercial organisations. This includes, but is not limited to, employees, agents and subsidiaries. Employees will be presumed to be performing services for their employer unless the contrary can be shown. Government guidance highlights the broad scope of the definition of associate and that it may also apply to contractors (although it is unlikely to apply to a supplier simply acting as a seller of goods). Where there is a supply chain in place, the government suggests that a firm carries out the appropriate due diligence on the contractual counterparty and requests the counterparty adopts a similar approach to the next party in the chain.

A commercial organisation has a wide meaning and includes partnerships, limited liability partnerships and bodies corporate which carry on business. It is the government's intention that a body incorporated in the UK (or a partnership formed in the UK) will be caught under the definition of 'carrying on business' if it engages in commercial activities regardless of what the profits are for. Therefore this could include commercial activities with charitable aims or those that are purely public functions.

A commercial organisation does not have to be incorporated or formed in the UK, nor does the offence need to be committed in the UK, to come under the act , it merely has to carry on some or part of its business in the UK. It is the government's view that this will mean that there will need to be a demonstrable business presence in the UK, merely being listed on a UK market will not be considered as 'carrying on business'.

It is a defence for a commercial organisation to have adequate procedures. This might include an anti-bribery programme (see section 3).

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2.6 Senior officials

Where a body corporate (or a Scottish partnership) has committed an offence mentioned in 2.1 and a senior officer has consented to or connived in the commission of the offence, the senior officer can also be held liable for the offence and proceeded against and punished accordingly. For a senior officer to be found guilty under this offence they must have a close connection with the UK. A senior officer means:

• in relation to a body corporate, its director, managers, secretary or other similar officer
• in relation to a partnership managed by its members, its members
• in relation to a Scottish partnership, its partners.
  

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3. Anti-bribery programme

As noted above, it is a defence to have in place 'adequate procedures' to prevent bribery. This may include implementing anti-bribery procedures. It is important that firms consider what adequate procedures are most appropriate for their firm given the risks they face and they way they run their business. The procedures should be proportionate to the risk posed.

For some firms there will be no need to put bribery prevention procedures in place as there is no risk of bribery on their behalf. Other firms may need to put in place measures in key areas, such as gifts and hospitality, as this is the area where they have identified a risk.

The programme described below is overarching and covers a wide range of issues. It is unlikely that all firms will need to implement the programme in full but firms may wish to implement parts of the programme depending on the risks they identify.

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3.1 Commitment from the top

A successful anti-bribery programme will need support from the top of the organisation. If those at the top turn a blind eye to bribery then employees are unlikely to support or comply with the programme.

Someone senior within the organisation should take the overall responsibility for developing and implementing the programme. In larger firms it may be that the anti-bribery programme becomes a standing item on the agenda of the audit committee or equivalent while in smaller firms it might be discussed at the partners' or directors' meetings.

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3.2 Creating an anti-bribery policy

The anti-bribery policy should reflect the firm's aims to put in place a programme. It is important that the policy reflects that the firm's commitment not to offer or accept bribes.

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3.3 Analysing areas of risk

You should identify where within your firm you are most at risk of either offering or accepting bribes. You should consider factors such as:

• the countries you do business in

Are the countries you do business in at high risk from bribery? Do you have sufficient oversight of staff working within these countries? You can find out more about the risks associated with various countries on the Business Anti-Corruption Portal and via the corruption index published by Transparency International.

• the sectors your firm trades in

Are you doing business in a sector that is at high risk of bribery?

• the contracts you have with agents and other business partners

Where appropriate, do your contracts make it clear that offering or accepting bribes could lead to termination of the contract? Are there clear payment terms within the contract that are appropriate for the services provided?

• the checks you have made on the integrity of those you do business with where necessary

Do those you do business with have an anti-bribery policy? Do they do business in countries that are at high risk from bribery? Have they ever been involved in bribery?

• what the law requires you to do in the countries within which you operate.

Your risk analysis should inform you of the main areas that your programme should concentrate on. Any procedures you put in place should be proportionate to the risk.

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3.4 Due diligence

As part of an anti-bribery programme you may wish to put processes in place for checking associates, agents, contractors and others that your firm has a business relationship with. You should consider:

• whether they have an anti-bribery policy, and
• if they understand your anti-bribery policy and are happy to comply with it.

Where appropriate, contracts should:

• allow for immediate termination if your anti-bribery policy is contravened by a business
• have clear payment terms, and
• identify what is being paid for.

You should also check that what is paid is reasonable for the services provided and that the services provide measurable benefit.

For example, if you are paying an agent a substantial sum of money, consider what services you are getting for the money. Is it transparent from the invoices what you are paying for, is the sum appropriate for the work done and are the services provided of measurable benefit to your firm?

The extent of the due diligence you carry out should depend on the nature of the relationship and the risk of bribery occurring. For example, if you are preparing to enter into a joint venture with a company involved in an industry where there is a high risk of bribery, in a country where bribery is a high risk, your due diligence process will be more rigorous and searching than if you are entering into contract with another regulated professional based in a country where the risk of bribery is low.

Depending on the risk, as part of your due diligence you may wish to conduct a background research on the parties you are or plan to work with, and give consideration to the following in doing so:

• obtaining detailed information about the companies with which you are dealing, together with their owners, key managers and decision-makers, and their operating and litigation history;
• seeking insight on the background, track records, competencies, potential conflicts of interest, and political / criminal links of individuals with which you engage, and;
• gathering intelligence from regulators, industry observers, suppliers, competitors, distributors and customers, both former and current.

Sources of information might include UK diplomatic posts, UK Trade and Investment, local law societies and business representative bodies. The government-sponsored Business Anti-Corruption Portal aimed at small and medium sized businesses involved in overseas trade also provides further guidance on sources of information.

A firm can commit an offence if anyone associated with the firm offers, promises or gives a bribe on your firm's behalf to gain a business advantage unless the firm has adequate procedures in place to prevent bribery. As noted above, the term associate is loosely defined but, given that it includes agents and subsidiaries, it can be concluded that it has a wide meaning. Firms will need to be very careful when employing agents.

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3.5 Gifts and entertainment

Many firms will give gifts and provide hospitality to build relationships and to market their products. Hospitality would normally include entertaining, meals and tickets to events. If the host does not attend the hospitality then it should be considered a gift rather than hospitality. Firms may also pay expenses for a prospective client to visit part of the firm or to attend a conference or event.

There can be significant risks around gifts, entertainment and expense in relation to bribery. Gifts and hospitality are often part of the business culture and it can be difficult for staff to know what is appropriate in terms of giving and receiving gifts and hospitality. Gifts and hospitality can be used to influence and corrupt third parties and on occasion to manoeuvre employees into a position of obligation.

The firm should seek to prevent the giving or receiving of gifts, hospitality or paying of expenses if it might influence or be perceived to influence a business decision. Firms should ensure staff and other relevant stakeholders are made aware of any policies on gifts and entertainment.

Firms may wish to provide guidance on what gifts or hospitality it is acceptable to give or receive - this is often done in terms of a financial limit. Any limit should take account of the cumulative impact of several small gifts. Where firms operate internationally they may wish to provide guidance to on how gifts and hospitality might be handled in relation to local customs and culture.

Where firms offer to pay expenses, they may wish to provide guidance on what are considered acceptable expenses. Firms should be transparent about the expenses they pay and the business reason for their payment.

Many firms will be offered hospitality or gifts by other professionals who they are likely to refer work to. Firms should consider how they handle such offers or whether they need to ensure that acceptance of such offers is approved at a more senior level and whether any threshold should be applied. Firms will also need to be mindful of their duty to act in the best interest of the client when referring clients to other professionals.

Firms often offer clients hospitality. Government guidance highlights that offers of hospitality are not prohibited under the act. However, firms should consider what is appropriate in terms of hospitality.

The firm may wish to keep a record of gifts, hospitality and expenses given or received. Given the potential range of hospitality or gifts a firm might receive, the firm may wish to consider an element of materiality when deciding what should be recorded.

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3.6 Facilitation payments

Facilitation payments are small payments demanded by officials to provide a service that they are obligated to perform eg processing a visa application. Facilitation payments are often used to obtain permits or to 'jump the queue' for services such as customs checks or visa processing. These payments are also sometimes known as 'grease' payments.

These payments differ from the payments made to upgrade services eg upgrading to a faster train, where the price is clearly advertised, open to everyone and payment is receipted.

Some countries such as the USA make specific exemptions for such payments within their anti-bribery legislation. However, there is no such exemption under the UK act and as such these types of payments are unlawful.

The government does, however, recognise the problems that some commercial organisations face when operating in certain sectors and in some parts of the world. The prosecution guidance provides specific detail on facilitation payments.

Factors that would make it more likely that a prosecution would occur include that:

• making such payments is seen as a standard part of conducting business, and
• payments are repeated or large.

Failure to follow the firm's procedures on payment facilitation payments might also be a factor. Prosecutors are less likely to take action where payments are a 'one-off' or where there has been self-reporting and remedial action taken.

The guidance highlights that those making payments under fear of loss of life, limb or liberty are likely to have the common law defence of duress available to them. The guidance also sets out that prosecution is less likely where the person making the payment was in a vulnerable position. Any anti-bribery policy should include guidance for staff on the issue of facilitation payments.

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3.7 Charitable donations

Many firms donate money to charity and provide pro bono services. However, it is important to ensure that you are donating to a legitimate charity.

You should:

• Check whether a charity is registered under the local country's law and the purpose of the donation.
• Ensure that money is donated to the organisation directly and not to an individual.
• Exercise caution when making a donation if the charity has a connection to a customer or an organisation (including a government) that might influence your firm's business. For example, it might be appropriate to wait for a deal with an organisation to be concluded before promising to make a donation to a charity linked to that organisation.

There are cases where governments permit those tendering for contracts that offer some additional benefit for the local community. The government has provided further guidance on this matter. It has also provided a case study which has examples of the act ions a company might take when asked to provide such additional benefits.
Read the MoJ guidance (PDF)

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3.8 Referral fees

The Bribery Act is a consolidation of the current law relating to bribery. With the exception of the creation of a new corporate offence, the offences under the act have not change markedly from those previously in force. There has been no implication that referral fees were illegal under previous legislation and therefore it is unlikely that such fees are illegal under the new arrangements.

However, you may wish to consider how the introducer is obtaining work that is then referred to you. If the introducer is paying bribes to gain the work, this may, in certain circumstances, be seen as them paying a bribe on your behalf.

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3.9 Audit of programme

If you have put in place an anti-bribery programme it will be important to carry out regular reviews to ensure that it is being adhered to and is effective. Results of the review may be reported to the partners or equivalent within the firm to ensure any remedial action required is taken promptly.

Reviews should also be undertaken where a breach of the programme has occurred to ensure that any actions to prevent further breaches are taken as soon as possible.

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3.10 Reporting systems

Employees should be aware of the procedure for reporting any breaches of policies or procedures related to the bribery programme. You may have one point of contact within the firm (or department depending on size) who employees can contact to discuss any concerns or to find out further information about the programme.

It is important that staff feel confident about reporting concerns and do not believe that they will penalised for speaking out.

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3.11 Human resources

Your human resources (HR) policies should be a key part of any anti-bribery programme. Where appropriate, you may wish to allow that any staff breach of the anti-bribery programme could lead to disciplinary action..

Conversely, staff should know that the firm will support them in implementing the programme and that they will not be penalised for losing business by refusing to pay a bribe.

Staff raising genuine concerns about payments made to the firm, or associates on its behalf, should know that raising these concerns will not affect their career prospects or lead to disciplinary action.

If a programme is put in place staff should be made aware of the programme and its implications. Training can be an important part of this and the level of training needed will depend on the risks an employee is likely to encounter. For example, those working in countries with a high level of corruption or working closely with associates such as agents will normally need a much greater understanding of the risks of corruption occurring and the actions they will need to take than those working in an internal role in the UK.

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4. Scenarios

A firm currently gives Christmas gifts each year to local estate agents. Is this still acceptable under the new act?

The firm should consider:

• the purpose of the gifts – are they to cement good business relations or are they intended as some form of inducement?
• does the firm have a policy on gifts which is clear and transparent and do these gifts comply with the policy?
• is the recipient given the impression that they are under some obligation to confer business on the firm as a result of accepting the gift?
• is the gift lavish?
• is a record made of the gift and the cost entered into the accounts?

It is unlikely a small token of appreciation sent to local estate agents at Christmas will engage section 1 of the act. However, firms should consider carefully the intent behind gifts. They should also ensure that they have a clear policy on gifts and record both the giving and receiving of gifts.

A firms is considering setting up an overseas operation in a country which has a high level of corruption . What risks should they consider?

There are particular risks that occur during the setting up of the firm, for instance there are risk around:

• gaining the appropriate government licences for the firm
• acquiring planning permission for changes to offices or for building new offices
• applying for visas for staff who will be working in the new offices.

These are all transaction where there is a risk of being asked to pay a bribe. Many of the these issues may be dealt with by a local agent. Using a third party also creates a risk, as the firm will have less control over the third party.

A firm has instructed a professional firm based overseas on behalf of a client regarding a dispute in another country. There is a high level of corruption within this country. The firm is concerned that a bribe may have been paid by the professional firm in order to resolve the dispute. The firm is not clear on whose behalf the bribe has been paid on.

In most cases, the bribe is likely to have been paid on behalf of the client, as the professional firm is providing services on their behalf. However, this may vary depending on the retainer that has been put in place. If the retainer makes it clear that the professional firm has been retained on behalf of the firm, then they may be liable for any bribe paid. Firms should consider carrying out appropriate due diligence on firms they refer work to. The due diligence required will depend on the risk, including:

• the country the firm operates
• current knowledge eg the firms reputation, previous experience of dealing with the firm
• the nature of the transaction eg is the work a simple research exercise or does it involve contract negotiation or dealing with government officials where the risk is likely to be higher.

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5. More information

5.1 Professional conduct

Rule 1 and Rule 9 of the Solicitors' Code of Conduct 2007 are relevant to this issue.

5.2 Legal and other requirements

• Bribery Act 2010
• British Nationality Act 1981

5.3 Further products and support

5.3.2 Useful training

Bribery Act 2010 online training course  

What the Bribery Act means for your firm - online seminar

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5.4 Status of this practice note

Practice notes are issued by the Law Society for the use and benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversight bodies for your actions.

Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.

For queries or comments on this practice note contact the Law Society's Practice Advice Service.

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5.5 Terminology in this practice note

Must

A specific requirement in legislation or of a principle, rule, outcome or other mandatory provision in the SRA Handbook. You must comply, unless there are specific exemptions or defences provided for in relevant legislation or the SRA Handbook.

Should

• Outside of a regulatory context, good practice for most situations in the Law Society's view.
• In the case of the SRA Handbook, an indicative behaviour or other non-mandatory provision (such as may be set out in notes or guidance).

These may not be the only means of complying with legislative or regulatory requirements and there may be situations where the suggested route is not the best possible route to meet the needs of your client. However, if you do not follow the suggested route, you should be able to justify to oversight bodies why the alternative approach you have taken is appropriate, either for your practice, or in the particular retainer.

May

A non-exhaustive list of options for meeting your obligations or running your practice. Which option you choose is determined by the profile of the individual practice, client or retainer. You may be required to justify why this was an appropriate option to oversight bodies.

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