Bribery Act 2010: case study
Sarah-Marie Williams of Clyde & Co LLP continues a series of articles on the Bribery Act 2010 with a case study that looks at the conduct of two employees working for a commercial organisation and whether or not it constitutes a bribery offence under the Act. Under the Bribery Act, employers may be liable for acts of bribery carried out by their employees and "associated persons" who provide them with services.
ABC Insure-it Ltd is an
international insurance business with headquarters in
The HR director, Karen, has just received an anonymous letter claiming to be from one of ABC Insure-it's employees, and sent under the company's whistleblowing procedure. The letter makes allegations about two of ABC Insure-it's employees, claiming that they have been acting contrary to the Bribery Act. The complaint alleges that a senior manager in the sales department, Jane, is authorising an agent who is based abroad working on behalf of the company to make payments to certain key people to try to get business for ABC Insure-it in that country. The letter also alleges that another employee, George, who is a client liaison manager, is acting in breach of the Bribery Act because of the corporate hospitality that he offers his clients, which includes occasionally taking them to football matches and giving them gifts of food and wine hampers at Christmas.
Are Jane's actions likely to be in breach of the Bribery Act 2010 and could ABC Insure-it be liable for those actions?
The Bribery Act 2010 is due to come into force on 1 July 2011. Prior to this date, no action can be brought against Jane, or ABC Insure-it Ltd, under the Act. The Act consolidates existing provisions relating to bribery law and introduces a new offence of corporate liability for acts of bribery by employees and "associated persons" (see Bribery Act 2010: overview in this series for more details).
Once the Act is in force, it is likely that Jane will be in breach of it if she continues to authorise payments (assuming that the allegations against her are proven to be true). Offering or receiving a bribe is an offence under the Act and Jane could be found guilty as an individual. ABC Insure-it Ltd could also be guilty of an offence under the Act. The payments that she has allegedly been authorising might amount to facilitation payments, which are defined in government guidance (Bribery Act 2010: Guidance about commercial organisations preventing bribery (PDF format, 390K) (on the Ministry of Justice website)) as "small bribes paid to facilitate routine government action". There is no exemption from liability under the Act for facilitation payments.
The Act introduces a new offence of bribing a foreign public official. If a public official is involved, the company could, potentially, commit a specific offence under s.6 of the Act in respect of Jane's actions. Foreign public officials include government officials and those working for international organisations. Therefore, if Jane authorises payments to a government official, she, and as a consequence the company, will be guilty of an offence under the Act. However, there will be no offence if the foreign public official is permitted by the written law of his or her country to be influenced in his or her capacity by an offer, gift or promise. If, following an investigation, ABC Insure-it Ltd establishes that Jane has authorised bribes to foreign public officials on behalf of the company, it should look into the written law of the relevant country to try to establish whether or not Jane (and indeed the company) would be in breach of the Act. In addition to the Bribery Act, Jane may also be acting in breach of any law with extraterritorial effect (ie the anti-bribery laws of the country concerned).
In Jane's case the allegation is not that the payments are made directly by her but that they are made through a third party. The Bribery Act prohibits both direct payments and those made via a third party. Therefore, the company could still be liable.
Should ABC Insure-it Ltd report Jane's breach?
Where an employer finds that an employee has committed an offence under the Bribery Act it should report the matter to the senior manager to whom it has given overall responsibility for its compliance with the Act. He or she will need to consider whether or not the matter should be reported to the relevant authority (namely the Serious Fraud Office). This is particularly the case if anti-money laundering legislation may also have been breached. In the event of a potential prosecution, the prosecuting authorities may look more favourably on an organisation that has reported and addressed its own breaches than they do on one that has attempted to conceal a breach.
ABC Insure-it has not, to date, taken steps to appoint a Bribery Act compliance officer or manager. Under the Act, if an investigation concluded that the allegations about Jane were true, Karen, or another senior person, would need to report the breach.
Are George's actions likely to amount to a breach of the Bribery Act?
George's conduct, assuming that the allegations in the letter to Karen are true, might amount to a breach of the Bribery Act, once it is in force, depending on the circumstances. The company should carry out an investigation into the type and extent of hospitality that George offers his clients. Proportionate hospitality in the course of business to meet and network with clients and to improve relationships is unlikely to be in breach of the Act. However, hospitality and expenditure that is used to induce or reward someone for the improper performance of a function or to obtain an improper advantage is likely to amount to a breach. The amount spent on corporate hospitality should not be excessive or lavish. Small nominal gifts aimed at building a relationship are unlikely to be in breach of the Act, provided that they are given without expectation of any value in return. The government guidance gives an example of an invitation to foreign clients to attend a Six Nations rugby match as a public relations exercise as being unlikely to amount to a breach of the Act. Therefore, George's offer of occasional football tickets and Christmas hampers, if aimed only at fostering good relations with clients, is likely to be an acceptable level of hospitality.
What actions should ABC Insure-it Ltd take to limit its potential liability under the Act?
A commercial organisation like ABC Insure-it will commit an offence under the Bribery Act if a person associated with it (such as one of its employees like Jane or George) bribes another for that organisation's benefit.
An organisation has a defence if it can show that it has in place adequate procedures designed to prevent bribery. While there is no definition in the Act as to what constitutes "adequate procedures", the Government's guidance sets out six key principles to guide commercial organisations in this regard (see Bribery Act 2010: guidance principles and practical implications for more details).
In broad terms, according to the guidance, it is important for the company to conduct a risk assessment to consider the nature and extent of the risk to which it is exposed. Top-level commitment is emphasised as a principle in that top-down responsibility should be encouraged, including the involvement of the board of directors and senior managers, to establish a culture in which bribery is not acceptable. Due diligence should be conducted in respect of all business relationships to seek to identify the risk of corruption before entering into those relationships. It is important that there are clear, practical and accessible policies and procedures in place to prevent bribery and that they are effectively implemented. ABC Insure-it should, as a matter of urgency, put in place anti-corruption and bribery policies and review, and if necessary amend, its existing policies and procedures, including its disciplinary and whistleblowing policies, to ensure that they reflect the principles in the government guidance. It should also set up a training programme to ensure that all managers and staff are aware of the risks of bribery and their obligations under the Act. The policies and procedures should also be carefully and continuously monitored and reviewed.
Next week's topic of the week article will be a checklist to help employers to avoid liability under the Bribery Act 2010 and will be published on 23 May.
Sarah-Marie Williams (Sarah-Marie.Williams@clydeco.com) is a legal director at Clyde & Co LLP.
Further information on Clyde & Co LLP can be accessed at www.clydeco.com.
