By Paul Gershlick, Partner For Matthew Arnold & Baldwin LLP

The new Bribery Act came into force on 1 July 2011. The UK’s bribery and corruption laws went from being some of the most lax in the developed world to becoming the strictest.

The Act was passed as a result of widespread concern that the UK was failing to meet its international treaty obligations following the failure of several high-profile prosecutions. So in theory, the new Bribery Act should have made a huge impact.

But what difference has there been in reality?

In autumn 2010, Transparency International — an independent international body that monitors the level of corruption in certain countries — ranked the UK as the 20th least corrupt country in the world. But by autumn 2011, after the Act had come into force, the UK was ranked the 16th least corrupt. Fascinatingly, in 2010, Qatar was ranked one place above the UK but by 2011 had fallen to 22nd.

Based on the very different attitudes the two countries had in their relations with FIFA for the World Cup bids, one may question whether the rankings of least corrupt countries should have depicted a greater difference. The effects of the Bribery Act may also not have been fully felt at the time of the 2011 results.

There has not been a flood in the number of prosecutions since the Act was implemented, but of course, more prosecutions may well still come.

However, it is clear that what has already been achieved by the Act is solid education and training and a change of practices.

It is worth reminding ourselves of what the Act introduced. There are four offences — the active offence, the passive offence, bribing a foreign public official and, most controversially, the corporate offence of failing to prevent bribery. These offences apply to activity taking place anywhere in the world on behalf of any organisation that has a presence in the UK.

The Active Offence

The active offence involves someone offering or promising a financial or other advantage either to induce or reward improper performance of any activity.

The Passive Offence

The passive offence is the reverse of the active offence. This is where someone agrees to receive or requests a financial or other advantage and intends to reward improper performance. It can also be an inducement to carry out improper performance of any activity.

In each case, the bribe could be sent directly or indirectly and given to someone else such as a family member or even a charity. The offences could be either forward-looking or backward-looking and “financial” or other advantage could be interpreted very widely. “Improper performance” is judged by the standards that a reasonable person in the UK would expect in connection with the activity. The act also disregards any local customs unless they are written in law or determined by court cases.

Bribing a Foreign Public Official

The third offence of bribing a foreign public official overlaps with the active offence, and was introduced specifically to ensure the UK complied with its international treaty obligations.

Failing to Prevent Bribery

The fourth offence of failure by commercial organisations to prevent bribery is the most highly controversial. This makes businesses responsible for anything that could be considered a bribe being offered where the business benefits, and regardless of whether they knew about it or not. It includes anything done just by employees but also anyone externally.

The best ways for businesses to defend themselves against the corporate offence is to ensure they have adequate policies and procedures in place — both internally and externally. The Government has issued guidelines that makes clear that what is adequate depends on the size of the organisation, the particular risks faced, what due diligence an organisation has undertaken on the people working for them, how the policies have been communicated to everyone associated with the organisation, including what sort of top-level commitment from directors to having zero tolerance to bribery, and how this is all updated and reviewed.

As a result of the Act, it is important for an organisation to impose additional obligations in employment, agency, distributor and subcontractor contracts. It is highly recommended that any statements and policies should appear on both the organisation’s website and any internal channels of communication such as intranets.

Knowing what due diligence to carry out on representatives in other countries has so far proved the most complicated area to comply with. It is often helpful to appoint a representative abroad to help advise on this area.

Another problem area has been facilitation payments — standard payments made to a local official to get a product on the market there can be expected practice. Unlike the US or other countries’ laws, the UK offers no defence for paying facilitation payments. This puts UK businesses at a competitive disadvantage. This continues to be an area that organisations have struggled to find an answer to what they should do.

As regards corporate hospitality, it has largely been business as normal. In line with the Government’s guidance, people are still taking guests on business trips or to sporting events. However, businesses have become more cautious when it comes to giving or receiving gifts, and many people have introduced corporate hospitality and gifts registers to monitor what has been given or received.

As to what happens next, I expect that it will only take one high-profile prosecution for businesses to tighten up their procedures still further.

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