Two days ago, the British government issued its long-awaited guidance regarding the application and interpretation of the Bribery Act of 2010. The Act is scheduled to go into effect on July 1, and is intended to modernize the UK's laws on bribery. It contains several provisions addressing passive bribery, active bribery and the bribery of a foreign official, and creates a new offense that can be enforced against an entity that fails to prevent individuals from committing an act of bribery on its behalf. Importantly, the existence of "adequate procedures" to prevent bribery is a complete defense to that charge.
The document, aptly called "Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing" (the Guidance), is intended to respond to the Act's directive that the government provide guidance regarding what will constitute "adequate procedures" to prevent bribery. The Guidance responds to many of the comments and criticisms of the draft that was issued last year.
The Guidance advocates six principles that should guide organizations in establishing bribery prevention procedures. The Guidance, of course, is most relevant to those companies subject to the Bribery Act, but it is not without significance to companies subject to other bribery statutes and looking to demonstrate that they are good corporate citizens. In formulating anti-bribery procedures, in-house counsel should keep the following six principles in mind:
- Proportionate Procedures - The depth of any procedures implemented by an organization should be proportionate to the risk that an "associated person" will engage in bribery. An important first step in establishing proportionate procedures is an initial risk assessment that considers, among other things, the size of the organization and the nature and complexity of the business activities. These procedures must be clear and effectively implemented and enforced.
- Top-Level Commitment - Senior management at an organization should take efforts to foster a culture in which bribery is not acceptable. In-house counsel must ensure, for example, that senior management communicates, both internally and externally, the message that there is no tolerance for bribery.
- Risk Assessment - After the initial risk assessment, an organization should continue to engage in periodic and well-documented assessments of any changes to the risks of bribery. Commonly encountered types of risk include: (i) country risk; (ii) sectoral risk; (iii) transaction risk; (iv) business opportunity risk; and (v) business partnership risk.
- Due Diligence - The organization should conduct risk-based and proportionate diligence regarding persons and entities that will perform services for or on behalf of the organization.
- Communication and Training - The organization should ensure that its policies and procedures for preventing bribery are understood by everyone in the organization, and it should provide relevant training.
- Monitoring and Review - The organization should take efforts to review the effectiveness of its procedures and make improvements when necessary.
Appendix A to the Guidance provides nine illustrative case studies that apply the six principles to different scenarios.
Although it is difficult to know how the Act will be implemented, the Guidance should give in-house counsel some relief that, at least at the outset, the Act will be implemented with the understanding that it is nearly impossible to change the state of play overnight. The Guidance recognizes, for example, that it is not feasible to eliminate facilitation payments immediately and has taken a much softer approach to "hospitality," recognizing that "[b]ona fide hospitality and promotional or other business expenditure which seek to improve the image of a commercial organisation, better present the products and services or establish cordial relations" is a legitimate and important part of conducting business. These positions recognize significant changes to the positions taken in the draft guidance issued last year, and respond to the concerns of many organizations.
Most of all, the emphasis that the Guidance places on proportionate procedures as a key first principle should be welcomed by in-house counsel. But with a focus on proportionate procedures comes the responsibility of striking the right balance. That is no easy task, but one that in-house counsel should be busy thinking about.