Beware Corporate Entertaining!

On 25 March 2009 the then Labour Government published the draft Bribery Act, a piece of law that was set to combat bribery in public and private sectors alike and to replace the fragmented and often complex Common Law and Prevention of Corruption Acts of 1889 - 1916.

Currently the implementation of the Act has been delayed whilst we wait for the Secretary of State to issue the all important Guidance Notes, but we will likely see this Act pass into law by the Summer.

Since the Bribery Act was announced it has struck fear into the hearts of many due to its potentially far reaching application and it has certainly led to a flurry of activity in businesses, both large and small alike.

The big questions, however, are 'just how far reaching will this Act be' and 'what will be the impact on smaller to medium sized businesses'?

Rather unhelpfully the Bribery Act does not include a definition of Bribery and so we will need to continue to rely on the established Common Law definitions. Transparency International (a non-governmental anti-corruption organisation) has provided a useful definition which defines bribery as "the offering, promising, giving, accepting or soliciting of an advantage as an inducement for an action which is illegal or a breach of trust".

Loosely speaking the Act provides for two general offences which cover the offering, promising or giving of an advantage and requesting, agreeing to receive or accepting of an advantage. Significantly, it also creates a new offence of a failure by a commercial organisation to prevent a bribe being paid for or on its behalf.

Key points to consider in relation to the Bribery Act are that:

it applies to all activities connected to a business, trade or profession and so is extremely far reaching;

an organisation will be fully responsible for the actions of each and every one of its employees, agents and sub-contractors (even outside of the jurisdiction of the United Kingdom);

a person being bribed need not necessarily be aware of that fact in order to have committed an offence. The question is whether a reasonable person would have had such knowledge;

directors and members of corporate organisations could face a personal liability, in addition to the corporate entities liability; and

penalties will be severe.

But fear not, there is an "Adequate Procedures" defence!

It is not all doom and gloom as business organisations, trades and professions will be able to rely on the adequate procedures defence at Section 7(2) of the Act. This states that it is a defence for an organisation to prove that it had in place adequate procedures designed to prevent bribery.

Until the Secretary of State has issued Guidance Notes we cannot know how far the Act will reach. What we can be sure of is that it will affect businesses, both large and small alike, who should be thinking about taking the following steps to limit their exposure under the Bribery Act:

Prohibiting bribery in any form;

Committing to the implementation of systems to counter bribery;

Training key members of staff to spot the warning signs;

Encouraging whistle blowing; and

Conducting a detailed risk assessment.

Finally and turning to the cautionary note in the title. All businesses should look very closely at their policies on both receiving and providing corporate entertainment as this is an area that is likely to be very closely examined. But do not fear as we are sure that taking your solicitor out to lunch should be ok!

Please do not hesitate to contact a member of the Commercial Team at Pellys Solicitors if you want to find out more about the full implications of the Bribery Act, how your organisation might be affected and what you can do to protect it.