Ten-minute topic: the risks of corporate bribery

The deputy leader of Westminster Council, Robert Davis, has stepped down while his conduct in receiving nearly 900 gifts and invitations to hospitality over six years is investigated. It is important to point out that no conclusions of wrongdoing have yet been reached, but the case is a salutary reminder of the serious possible consequences of accepting gifts, including hospitality. A third of respondents to a survey conducted by the Chartered Institute of Building in 2013 did not define hospitality as bribery. It is often seen as a grey area which can be legitimised with transparency and the use of hospitality registers. So when does an invitation become a backhander or bribe? Corporate offending Commercial organisations are widely defined as a body or partnership incorporated or formed in the UK or an incorporated body or partnership which carries on a business or part of a business in the UK (irrespective of where it is formed). In contrast with the personal offences defined in sections 1 and 2, no subjective intention or knowledge has to be proved on the part of the company and, absent a relevant defence, there is strict liability for commercial entities where there has been a failure to prevent a bribery or offence by an “associated person” of the organisation. The “associated person” does not necessarily have to be an employee of the company; the term encompasses anyone who provides services on a company’s behalf – if the bribe is paid to or from the associated person with the aim of benefiting the company, the company is liable. That means organisations can face criminal liability and unlimited fines for actions by persons or companies they do not control. Defence A commercial organisation may have a defence if it can show that it had adequate procedures in place to prevent persons associated with it from bribing. This is judged on the balance of probabilities. Companies are expressly encouraged in the Act to put in place procedures informed by six guiding principles: 1. Proportionate procedures – clear, practical, accessible, effectively implemented and enforced procedures, proportionate to the risk. 2. Top level commitment to the prevention of bribery – implementation of zero-tolerance policies. 3. The carrying out of periodic, informed, documented assessments. 4. Due diligence carried out on external providers or suppliers performing services on the company’s behalf. 5. Strong emphasis on communication and training, including on anti-bribery related policies and procedures. 6. Monitoring and reviewing. It is suggested that adherence to the six principles is likely to be taken into account when assessing whether an organisation has committed a criminal offence under section 7, on the balance of probabilities. Facilitation payments  Small bribes paid to facilitate routine government action can trigger a section 6 offence (bribery of a foreign public official) or, where there is intention to induce improper conduct, including where the acceptance of such payments is improper, a section 1 or 7 bribery offence. Impact For commercial organisations, where there has been a failure to prevent a bribery offence by employees, agents or subsidiaries, there is strict liability, meaning that no intent on the part of directors or those in charge needs to be proven. Available sanctions under the Act are: ■ unlimited fines for companies; ■ up to 10 years’ imprisonment for individuals; ■ the disqualification of company directors for a period of up to 15 years; and ■ the confiscation of property under the Proceeds of Crime Act 2002. It should also be remembered that, aside from criminal liability, corruption and bribery will have an impact on any relevant contracts in relation to developments or works. Secret dealings between parties such as members of the professional team and contractors will be a fraud on the employer and will entitle the employer to recover any monies paid by bribe or secret commission, set aside the relevant contract and recover damages. Most construction contracts also contain an express provision to allow the employer to terminate the contract if the contractor has committed an offence under the Act (see, for example, clause 8.6 of the JCT Standard Form of Building Contract 2016). Advice for companies Companies and organisations are advised to adhere to the six guidance principles and put in place adequate procedures, manage risk actively, train staff, undertake necessary due diligence and continuously monitor and review. Implementing adequate measures can provide a defence to offences where associated persons act unlawfully on behalf of the company. These may include (although are not limited to): ■ Appointment of a person responsible for ensuring that proportionate and adequate procedures are in place. They should be senior management or reportable to them. ■ Issuing a memorandum for all staff to outline the business’ approach to corruption. ■ Issuing training and awareness programmes for staff. ■ Carrying out a risk assessment process and identifying key areas. ■ Doing due diligence on all potential associated persons. Reviewing and amending any existing and/or future contracts to prohibit bribery. ■ Creating clear policies and making them known and available to all staff. ■ Developing and implementing a whistleblowing and investigation procedure and ensuring it allows for confidentiality. The UK government has made clear its intention to crack down on corruption in the commercial world, for example in the constant tightening of anti-money laundering legislation and stringent “know your client” requirements on professionals who may be overseeing and assisting with monetary transactions. It is logical that this vigilance extends to an intention to eliminate corrupt dealings in the administration of business and policing the line between commercial courtesies and greased palms. Real estate businesses would be advised to take the sensible and practical steps outlined above to avoid a bad apple upsetting the apple cart. Catrin Rees is a senior associate and Imogen Jones is a trainee in the construction team at Collyer Bristow What is a bribe? The Act refers to a “financial or other advantage to another person”, which is broad and goes beyond monetary payments to extend to gifts and hospitality, employing relatives, and awarding contracts, donations, vouchers, services, etc. An acknowledged difficulty is the grey area between acceptable and unacceptable corporate hospitality. The Adequate Procedures Guidance issued by the government states that the government does not intend for bona fide hospitality and promotional expenditure to be caught. The determinative factor as to whether hospitality or gifts constitute bribery will be the specific circumstances in which they are provided. Circumstances which will be taken into account include level of expenditure, norms and standards in a particular industry, and whether the expenditure is a matter of routine business courtesy or intended to exert undue influence in order to obtain a specific benefit. The Bribery Act 2010 Offences: ■  Offering, promising or giving a bribe to another person (section 1) ■  Requesting, agreeing to receive or accepting a bribe from another person (section 2) ■  Bribing a foreign public official (section 6) ■  Failing to prevent bribery (corporate offence) (section 7) The Bribery Act 2010 (the Act) created new offences that do not rely on the establishment of a particular relationship between parties; rather they are predicated on the concept of improper conduct. The offences outlined in sections 1 and 2 are based on the principle that an advantage is offered or accepted with the intention that some function or activity is performed improperly as a result. This requires a knowledge or belief on the part of the person giving or receiving the bribe. An offence under section 6 arises when an advantage is promised or offered to a foreign public official, combined with an intent to influence that official in order to obtain or retain business. An offence under section 7 is committed when a commercial organisation fails to prevent a person it is associated with from committing bribery (ie an offence under sections 1 or 6).