The new bribery act: are UK companies ready?

This post has been written by Chandrashekhar Krishnan, Executive Director, Transparency International UK.

On 9^th April, a new Bribery Act was passed into law. This will help to restore the UK’s reputation for taking corruption seriously by ensuring the UK is compliant with the OECD Anti-Bribery Convention. It also sends out a strong message to British companies and the rest of world that the UK will not tolerate bribery.

The Act provides UK law enforcement with a sound legal framework to prosecute offenders. The message is clear: ethical practices must be firmly embedded in all echelons of business. The new legislation will level the playing field for those companies that are already conducting business ethically.  It should also help businesses to reduce costs, given that companies themselves estimate that bribery adds at least 10 per cent to the cost of business transactions overseas.

What does it mean?

The Bribery Act sets out four offences: offering a bribe; accepting a bribe; bribing a foreign public official; and failure of a commercial organisation to prevent bribery. A key feature is that UK companies and their directors would be liable if they failed to prevent bribery. However, it is a defence for a company to prove that it had in place adequate procedures designed to prevent persons associated with it from undertaking such conduct. This means that UK companies who do not already have robust anti-bribery systems need to put them in place without any delay. And those who already have such systems need to ensure that they will be fully compliant with the new law, which is tougher in some respects than the US Foreign Corrupt Practices Act, eg. by criminalising facilitation payments and outlawing private-to-private bribery.

Research undertaken by TI-UK for the City of London Corporation has indicated that many UK companies may be inadequately prepared for the new law. Only one in four respondents in a survey considered themselves well informed about the  Bribery Act, while a recent survey by law firm Eversheds found that one in five businesses had no policy in place to address corrupt practices. It is possible that many UK companies – and small and medium size enterprises in particular – are not aware that:

• They can face unlimited fines, while directors can be imprisoned for up to ten years for failing to have ‘adequate procedures’ to prevent bribery
• Hospitality, publicity, insider information, and donations to charity could all be considered as bribes in certain circumstances
• Individuals can be liable for accepting an advantage even if they did not know that the other party intended to induce improper conduct
• Companies can be liable for bribes paid by subsidiaries, agents or partners in joint ventures.

Next steps

TI-UK recommends that companies take six basic steps:

• Assess corruption risks thoroughly
• Plan for proper systems and policies to address the risks
• Act swiftly to implement the policy with leadership from the top corporate echelons
• Monitor implementation
• Report to stakeholders
• Seek external assurance that anti-bribery systems are effective.

The UK government will issue guidance to companies on “adequate procedures” for preventing bribery before the key bribery offences in the Act come into effect. TI-UK believes that the bribery offences in the Act should come into effect no later than October 2010. Any delay beyond that date would attract criticism from the OECD Working Group on Bribery. TI-UK also urges the new Government to ensure that adequate resources are made available to enforce effectively the new Bribery Act. Although public financial constraints are acute, it would be a pity if UK prosecutors and investigators were not given the resources they need to make full use of the new legal framework they now have to combat bribery.

This post is an extract from an article that will appear in the July edition of the International Construction Magazine.