Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP, comments: “This shows an interesting strategy in its fight to stamp out bribery. Despite the bribes having taken place in another country, this still fell within the SFO’s remit. Innocent people should still do their due diligence on the foreign businesses in which they invest, and they should try to make sure that the business is conducted properly. Otherwise, they can face clawback for dividends paid out to them despite not being at fault or having any knowledge of the issue.”

In July this year, the UK introduced the Bribery Act – the world’s toughest anti-bribery laws. Businesses can be held criminally liable for anything done on their behalf without their knowledge anywhere in the world, unless they can prove that they satisfy the defence of having had adequate procedures in place. The SFO is the prosecutor in charge of bringing cases under the Act.

The Bribery Act, which came into force on 1 July 2011, increases the maximum penalty for bribery from seven to 10 years imprisonment. The Act has also introduced a corporate offence of failure to prevent bribery by persons working on behalf of a business. To avoid breaching the Act, employers must demonstrate that they have adequate procedures in place to prevent bribery. Further details of the Act are here.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “The Bribery Act is the biggest legal development of the year and given its very wide reach and political force behind it, it is no surprise to see a successful prosecution so soon after it came into force. What this prosecution shows is that the law is there not just to catch big businesses on complex international deals, but also small payments made on a local level too. Prosecutors will take action regardless of size. Every business should be aware of the Act and should take appropriate steps to stop its employees, agents and other representatives from breaking the law, particularly as their actions can in turn leave their business criminally liable too.”

Munir Yakub Patel is due to appear before Southwark Crown Court on 14 October 2011 for allegedly “requesting and receiving a bribe intending to improperly perform his functions” (a breach of section 2 of the Act.) It is alleged that Mr Patel told an individual, who had been summonsed to court for a motoring offence, that he could influence the course of the proceedings in exchange for £500.

The Bribery Act, which came into force on 1 July 2011, increases the maximum penalty for bribery from seven to 10 years imprisonment. Further details of the Act are here.

The Act has also introduced a corporate offence of failure to prevent bribery by persons working on behalf of a business. To avoid breaching the Act, employers must demonstrate that they have adequate procedures in place to prevent bribery. For more details of what employers should be doing to avoid breaching the Act, please click here to read an article by our head of employment, Michael Delaney.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “The Bribery Act is the biggest legal development of the year and given its very wide reach and political force behind it, it is no surprise to see a prosecution so soon after it came into force.  What this prosecution shows is that the law is there not just to catch big businesses on complex international deals, but also small payments made on a local level too.  Prosecutors will take action regardless of size.  Every business should be aware of the Act and should take appropriate steps to stop its employees, agents and other representatives from breaking the law, particularly as their actions can in turn leave their business criminally liable too.”

I have outlined some of the ways employers can ensure they comply with the new Act – please click here.

This article is only intended as guidance. There are many issues to consider, so employers should seek legal advice where necessary to ensure they are not contravening the Act, or inadvertently breaking other laws when implementing compliance measures.

If you would like any legal advice regarding the Bribery Act and its implications on your business, please contact me at michael.delaney@mablaw.com.

A bribe is defined in section 1 of the Act as “a financial or other advantage” offered, promised or given to “induce a person to perform improperly a relevant function of activity, or to reward a person [for doing so.]”

This definition covers many “advantages”, including gifts, hospitality and entertainment, political or charitable donations, sponsorship and publicity.

Employers should note the following:

1. A “financial or other advantage” is still a bribe even if it is given or paid after the event; and

2. Employers or other individuals can be liable even if they unwittingly give or receive a bribe.

Section 7 of the Act introduces a criminal offence for the failure of a commercial organisation to prevent bribery by an “associated person” for its benefit. The statutory definition of “associated person” is very wide, and it covers those people who perform services for, or on behalf of, the employer (e.g. employees, agents and subsidiaries.) However, other people working for the employer, such as consultants, agency workers and volunteers, will also be “associated persons” for the purposes of the Act. Consequently, an employer is potentially responsible for the actions of a wide range of individuals, some of whom it may have only minimal control over.

Breaching the Act: The penalties

* Individuals who breach the Act could be imprisoned for up to ten years; and

* Commercial organisations can face an unlimited fine and be prevented from tending for public contracts.

Preparing for the Bribery Act: The key principles for employers

In March 2011, the Government published Guidance on the Bribery Act which set out six key principles to give commercial organisations assistance in planning, implementing, monitoring and reviewing their anti-corruption and bribery policies and procedures before the Act comes into force.

1. The employer’s anti-corruption and bribery policies (and related policies) should be clear and accessible to all those people who work for them and who  fall within the definition of “associated person”;

2. The management team should establish a zero-tolerance culture regarding bribery and corruption, and ensure that all workers, and those that the company does business with, are fully aware of the company’s anti-corruption and bribery policies;

3. Employers should be fully aware of the bribery risks they face in their sector(s) and in the countries or regions in which they do business. They should carry out regular and comprehensive risk assessments;

4. Employers must take steps to ensure that they know who they are doing business with;

5. Employers should embed anti-bribery principles into their internal controls, recruitment and remuneration policies, operations, communications and training; and

6. Employers must decide who will be responsible for monitoring and reviewing their policies and procedures. They should ensure that they have effective financial and auditing controls that pick up potential and actual irregularities.

Staying on the right side of the law: The key considerations for employers for 1 July and beyond

Employers should consider the following issues to ensure that they do not contravene the Bribery Act, and should seek legal advice where necessary.

1. Recruitment: carry out additional background checks and vetting during the recruitment process (e.g. bankruptcy checks, criminal record checks and additional references);

2. Inductions: include training on the company’s anti-corruption and bribery policies and procedures for all employees and workers (e.g. agency staff, voluntary workers and independent consultants);

3. Expenses: carry our regular audits and ensure there is evidence as to how and why money was spent for each expenses claim submitted;

4. Hospitality: create a hospitality policy, including clear guidance on both the giving and receiving of gifts;

5. Disciplinary procedures: amend disciplinary policies and procedures to make it clear that any breach of the company’s anti-corruption and bribery policies (and related policies) may amount to gross misconduct. Employers may wish to (1) consider making it a specific contractual requirement that employees and other workers comply with these policies and procedures, and (2) consider whether it should be a contractual requirement for some workers to report any suspicions or knowledge they have of a breach of these policies;

6. Bonus and commission schemes: review these schemes to ensure that, as far as possible, they do not unintentionally encourage employees to ignore bribery and corruption risks. Employers should also review incentive arrangements to ensure they do not unintentionally incentivise workers to act improperly or illegally;

7. Whistleblowing: set up a comprehensive and up-to-date whistleblowing policy. All workers should be made aware of its existence, understand how it applies and be given access to a copy of it;

8. Investigating potential breaches: ensure that every incident of a suspected breach is investigated and documented. All investigations should be fair and confidential; and

9. Discrimination: ensure that any anti-corruption and bribery policies and procedures are not based on racial stereotyping of certain nationalities.

This article is intended to simply highlight the main issues and potential problems that employers may face when trying to comply with the Bribery Act. There are many issues (and pitfalls) to consider, so employers should seek legal advice where necessary to ensure that they are not contravening the Act, or inadvertently breaking other laws when implementing compliance measures.

If you would like any legal advice regarding the Bribery Act and its implications on your business, please contact me at michael.delaney@mablaw.com.

There is the thorny issue of facilitation payments – payments made to officials to speed up processes, for example to get an export licence through quicker.  Lots of business are asked to pay these, but what should you do, as the Bribery Act makes it clear that you should not pay them?

Corporate hopitality – can you take clients to Lords or out to lunch?  Can you send them a client to say “thank you”?  One interesting question that came up yesterday was whether you can take away the personal partners or families of the people you want to impress?

But a big thank you must go to Lord Triesman and the Sunday Times.  Thank you for providing a very live case study about alleged corruption by certain members of football’s international governing body, FIFA.   Can the Bribery Act catch them if they have done anything wrong?  Would accepting a gift that is for a charity or a “good local cause that helps the community” rather than the member of the committee’s back pocket amount to a bribe?  And what is the story with Qatar’s bid, because according to Transparency International Qatar is deemed to be a less corrupt place than the UK, as can be seen here: http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results?  Should England have played ball to have won the right to host the 2018 World Cup?  Or should England be keen to be the winner of the more humble fair play award?

In your own business, can you afford not to play keepy uppy with what your competitors are doing?  Or can you afford not to play ball with the requirements of the new Bribery Act?  Do you play a gung ho formation and just go for it, or play it with a solid defence?

These are the dilemmas facing businesses.  But there are very serious issues at stake and businesses can’t afford to bury their heads in the sand.  To continue the sporting analogy, you might want to make your own luck, and speak to us to find out more what tactics to pursue.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, is currently giving advice on the Act.  He is pleased with what is contained within the revised guidance. He says, “There had been a lot of concern amongst law-abiding business that the Act would be so onerous that they would be caught out and risked prosecution. However, what is clear is that they are not the target, and the Government is trying to ensure fair play. Reasonable and proportionate corporate hospitality, such as tickets to sporting events and dinners, can continue as a recognition that this is just about building normal business relations, unless it is a cover for bribery.

“Also, although businesses will be liable for anything done on their behalf unless they have good policies in place, the Government has helpfully clarified that the  type and extent of policies and risk assessments will depend upon the size and risks faced (such as which markets they are in). It is also clear, though, that businesses cannot turn a blind eye if there are genuine risks. This is a common sense approach to the implementation of what could have been a despised piece of legislation that could have hampered genuine business. “

Paul adds a word of caution. “The new guidance does, however, still make clear that facilitation payments are outlawed. Facilitation payments – sweeteners to encourage public officials to loosen red tape and allow their products to enter a market – are seen as a fact of life for businesses that export into some markets, whether or not the business wants to pay them. Concerns remain that this may still leave UK businesses at a competitive disadvantage when trying to win business overseas if businesses from other countries continue to pay facilitation payments.”

The Act creates a new offence which can be committed by a commercial organisation which fails to prevent persons associated with them from committing bribery on their behalf. It is, however, a full defence for an organisation to prove that despite a particular case of bribery it nevertheless had adequate procedures in place to prevent persons associated with it from bribing.

Bribery is defined as giving someone a financial advantage or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so.

The guidance is formulated around six guiding principles each followed by commentary and examples. The onus will remain on the organisation, in any case where it seeks to rely on the defence to prove that it had adequate procedures in place to prevent bribery. The guidance suggest certain procedures, but they may not be applicable to any particular circumstance.

The six principles are:

1. Proportionality: The action taken should be proportionate to the risks faced and the size of the business. So if an organisation is a large one or a business is in operating in an overseas market where bribery is commonplace, more might need to be done.
2.  Top Level Commitment: Those at the top of the business will want to make sure that they have been active in making sure that staff and the key people who do business understand that you do not tolerate bribery.
3.  Risk Assessment: An assessment of the risks faced should be taken. If business is primarily in the UK, then there may be little or no risk of bribery. If business is conducted outside the UK, then the country or sector will be relevant.
4. Due Diligence: Knowing exactly who you are dealing with can help to protect organisations from taking on people who might be less than trustworthy. Due diligence will only need to be done on persons who actually perform services for the business. Someone who simply supplies goods to the business is unlikely to do that.
5.  Communications: Policies and procedures should be communicated to staff and to others who perform services for the business.
6. Monitoring and review: An eye should be kept on the anti-bribery steps taken to keep pace with any changes in the bribery risks faced.

One of the most controversial areas was the issue of how much hospitality, promotional or other business expenditure could be done. The guidance stresses that genuine hospitality or similar business expenditure that is reasonably and proportionate will not be caught by the Act. So, businesses can continue to provide tickets for sporting events, take clients to dinner, offer gifts to clients as a reflection of good relations or pay for reasonable travel expenses in order to demonstrate goods or services will be fine as long as it is reasonable and proportionate.

Facilitation payments, which are payments to induce officials to perform routine function which they are otherwise obligated to perform are bribes although legally required administrative fees or fast-track services are not facilitation payments.

The guidance will prove very helpful to business. The guidance demonstrates that legitimate and proportionate business hospitality will not be caught by the Act and well run businesses with adequate procedures to prevent bribery are protected.

The Bribery Act is expected to have a huge impact on the way an organisation controls its internal affairs, as it will be responsible for any corrupt action by its employees unless it can show that it had in place adequate procedures and policies to prevent those actions.

The Bribery Act places the responsibility for compliance with the organisation rather than providing a tick-box system to ensure compliance. As part of the new law, the Government needed to produce guidance to help organisations to make the correct decisions.

The initial guidance was produced by the last government, but was widely criticised, by bodies such as the Law Society, for not being clear enough. Once the new guidance has been published, the MoJ have said that there will be a three month notice period before the Bribery Act comes into force.

BAE Systems plc (BAE) and the Serious Fraud Office (SFO) reached a settlement agreement in February 2010 as regards BAE’s alleged corruption in the procurement by BAE of a contract with the government of Tanzania. The settlement with the SFO was the result of co-ordinated action with the US Department of Justice.

Since the settlement with the SFO, some court cases have questioned the ability of the SFO to conclude settlements. Judges in two such cases stated that the courts could not be bound by such settlements and the SFO may only suggest a sentencing range, rather than specific sentences. The outcome of the BAE court case has therefore been eagerly anticipated.

Decision

BAE was sentenced on 21 December 2010 after pleading guilty to failing to keep adequate accounting records contrary to the Companies Act 1985.  The guilty plea formed part of the settlement which BAE had reached with the SFO. The judge stated that although he was not bound by the settlement, he accepted the basis of the plea itself.

Comment

The case will be of interest to companies considering self-reporting to the SFO for corruption. It also has a particular relevance given that the Bribery Act 2010 is due to come into force in April of this year.

How can we help you?

We can provide your business with a one hour bespoke training session to explain the implications of the Bribery Act 2010. The wording of the new Act is very wide so it may well affect the way in which your business operates. We can also suggest practical steps to reduce the risk of prosecution.

If you would like more information on the Bribery Act 2010 then please contact Emma Cameron at emma.cameron@mablaw.com

This article highlights the main changes that are scheduled to take place, though other changes may be announced by the Government during the year. We will look at all of these changes in more detail during 2011, nearer to the time that they come into force.

February 2011- New tribunal award limits come into force

The Employment Rights (Increase of Limits) Order 2010 increases the limits of certain employment tribunal awards and other amounts payable under employment legislation. Click here for more details (see the Schedule at the end of the legislation.) The increases apply where the event that gives rise to the award or payment occurs on or after 1 February 2011.

April 2011 – Extension of flexible working

The Government will extend the right to request flexible working to parents with children under 18. A consultation on how to extend this right to all employees and create a new system of flexible parental leave will be published early next year. Click here for further details.

April 2011 – Positive action in recruitment and promotion provisions of the Equality Act come into force

Section 159 of the Equality Act 2010 will come into force. It permits employers to “apply voluntary positive action in recruitment and promotion processes when faced with two or more candidates of equal merit, to address under-representation in the workforce”. However, the Government Equalities Office has stressed that quotas and positive discrimination will remain illegal and that a superior candidate “should always be offered the job.”

April 2011 - Right to request time off to train or study is extended to organisations with fewer than 250 employees.

Employers must seriously consider all requests for time off to train or study, but they can refuse a request if there is a good business reason for doing so. There was some recent confusion over whether this right would apply to organisations with fewer than 50 employees. At the time of writing, it appears that it will. Click here for more details.

April 2011 – Bribery Act 2010

The Bribery Act 2010 introduces a corporate offence of failure to prevent bribery by persons working on behalf of a business. The only defence open to employers will be to show that they have “adequate procedures” in place to prevent bribery and corruption. The definition of “adequate procedures” was considered in a recent public consultation and the Government’s response is expected to be published in early 2011.

April 2011 – Statutory sick pay, and statutory maternity, paternity and adoption pay increases

For full details of the increases, please click here.

April 2011 – Additional paternity leave remains in force

The Government announced in September 2010 that the Additional Paternity Leave Regulations 2010 would remain in force “as an interim measure” in order to facilitate its plans to extend flexible working rights and encourage “shared parenting from the earliest stages of pregnancy.” Additional paternity leave relates to children who are due to be born on or after 3 April 2011, or children who are matched for adoption with a person who is notified of the match or on after 3 April 2011. Click here for more details.

April/October 2011 – Abolition of the default retirement age

The Government proposes to abolish the default retirement age (DRA) of 65. On abolition, an employer will be unable to prescribe a compulsory retirement age, unless he/she can justify it as a proportionate means of achieving a legitimate aim. However, an employer that issues a notification of retirement before 6 April 2011 will be able to retire the employee if his/her retirement date is before 1 October 2011.

The Government’s consultation on the issue, which closed on 21 October 2010, proposed the following timetable for abolition:

6 April 2011 – Transitional arrangements to phase out the DRA and all associated statutory retirement procedures (including the “duty to consider” and “right to request” procedures) will begin. From this date, no new notifications of retirement under the DRA can be issued by employers. Paragraph 4 of Schedule 6 to the Employment Equality (Age) Regulations 2006, which allows an employer to give short notice of retirement of two weeks, will be repealed.

1 October 2011 – The DRA and the statutory retirement procedures will be abolished.

The Government’s response to the consultation is due very shortly.

October 2011 – Agency Workers Regulations come into force

The Agency Workers Regulations 2010 give agency workers the same basic employment conditions after 12 weeks in a given job, as if they had been directly employed by the recruiter. Click here and here for more details.

And…

In 2011, the Government is also reviewing the unfair dismissal qualifying period, and the vetting and barring scheme under the Safeguarding Vulnerable Groups Act 2006 – we will report on any developments, as and when they are announced.

If you have any concerns about these impending legislative changes, or anything else employment-related, please contact me at michael.delaney@mablaw.com.

The Bribery Act 2010 (Act) is due to come into force in April 2011. The current English law on bribery was considered to be unsatisfactory because it did not comply with the Organisation for Economic Co-operation and Development’s Bribery Convention, ratified by the UK in 1998. The handling by the English courts of the investigation into bribery allegations against BAE Systems has also been the subject of much criticism. The Act is designed to address these issues.

Commercial organisations will have a defence against the offence of failing to prevent bribery if they can show that they had “adequate procedures” in place to prevent persons “associated” with the organisation from making bribes. The Act does not provide any detail as to what constitutes such “adequate procedures”.

Consultation

The Ministry of Justice has now published a consultation document on guidance for commercial organisations to help them ensure that they have “adequate procedures” in place.

The draft guidance contains 6 principles:

• risk management and mitigation;
• top level commitment to bribery prevention;
• due diligence;
• clear, practical and accessible policies and procedures;
• effective implementation; and
• monitoring and review.

The consultation period is to last 8 weeks, with 8 November 2010 being the deadline for responses. A response will be published early in 2011 together with the final form of the guidance.

• Introduce a corporate offence of failure to prevent bribery by persons working on behalf of a business. A business can avoid conviction if it can show that it has adequate procedures in place to prevent bribery.
• Make it a criminal offence to give, promise or offer a bribe and to request, agree to receive or accept a bribe either at home or abroad. The measures cover bribery of a foreign public official.
• Increase the maximum penalty for bribery from seven to 10 years imprisonment, with an unlimited fine.

In September, the Government will launch a short consultation exercise on the guidance about procedures which commercial organisations can put in place to prevent bribery on their behalf.

This will be published early in the New Year to allow businesses an adequate familiarisation period before the Act commences in April.

See my previous blogs on the new Act and what it means for businesses.

Equality Bill

The Equality Bill has been carried over from the 2008-2009 parliamentary session. The Government intends to pursue the Bill in order to “harmonise discrimination law” and to “strengthen the law to support progress on equality”. The Bill addresses the differences in pay between the genders by requiring businesses with more than 250 employees to report on any disparities in the salaries of male and female employees.

UPDATE: It has been reported in the press that the Government will ‘water down’ the Equality Bill to prevent medium-sized businesses with 250-500 employees from having to produce data that shows they do not discriminate on pay in the workplace. The Equality and Human Rights Commission (EHRC) has said that these companies cannot be expected to produce as much data on pay as firms that employ more than 500 workers. The Government will wait until the EHRC’s full report in January 2010 before deciding whether to alter the Bill.

Financial Services and Business Bill

The Financial Services and Business Bill is intended to reform and strengthen regulation of the financial services industry. The FSA will be given powers to cancel employment contracts that contravene specified rules, and to make provision for the recovery of payments made under those contracts that are contrary to the rules. It will also end multi-year guaranteed bonuses, or large bonuses paid out as a cash lump sum at year-end.

Bribery Bill

The Bribery Bill will create a new offence relating to companies that negligently allow their employees or agents to pay bribes, subject to a defence that the company had adequate procedures to prevent bribery.

Agency Workers Regulations 2010

During the Queen’s Speech, the Government made clear its intention to legislate to provide agency workers with the right to be treated equally with permanent staff on pay, holidays and other basic conditions.

The consultation on the draft Regulations closed on 11 December 2009, with the final Regulations expected to be introduced in October 2011.

The bribery seeks to encourage self-reporting. However, one of the consequences of a corruption conviction would be that the convicted organisation would be automatically and perpetually prohibited from competing for public contracts under the Public Contracts Regulations 2006. Other consequences of breaching the new law would be large fines for individuals and the business concerned.

One grey area remains corporate hospitality. The Government does not intend that the new law should penalise legitimate and proportionate use of corporate hospitality to establish or maintain good corporate relations. But where should the line be drawn?