The introduction of the Bribery Act, which was voted through the House of Commons on 8 April 2010 and is expected to come into force in October 2010, is going to have a great effect on the way British companies operate aboard.  The Act brings together numerous parts of previous legislation relating to corruption and bribery under one bill making it easier for Serious Fraud Office or other law enforcement organisations to prosecute British companies and nationals.

 

The biggest impact on British companies will come from the extra-territorial reach and the strict liability clause.  As a result, any (illegal) action by a British company abroad can be prosecuted in the UK.   The strict liability clause also makes it an offence if an organisation fails to prevent a bribe either by an employee or an “associated” person.   An “associated” person is one who performs a service for the principal (i.e. company).   The Act does not define what these services are or the nature of the relationship between associated person or company.

 

The only defence a corporation has is if they can prove it had ‘adequate procedures’ in place to prevent incidences of bribery.  The Act does not define ‘adequate procedures’ and the Secretary of State is required to issue guidelines (and update them regularly) for companies.  However it is unlikely these guidelines will be detailed or failsafe.   Therefore the onus is on the company to introduce sufficient anti-corruption measures.   These measures could include introducing a zero tolerance attitude to corruption permeating from the top of the organisation downwards.  This culture can be introduced through training for existing and new staff through seminars, online training or other means.

 

The biggest risk to companies comes from the third parties employed to act on their behalf overseas either as an agent, representative, supplier or distributor.  It is recommended that companies conduct at least a minimal level of due diligence on contractors to ensure they have no history of corruption or have inappropriate political links.   Additionally, all contracts with third parties could have a clause highlighting the company’s anti-corruption culture and training could be provided where appropriate.

 

Although the above measures may appear onerous, the risks of failing to comply with this Act could be financially damaging.   Even prior to the Act being completed fines of millions of dollars were handed down to companies having been found guilty of corruption by the SFO and US authorities.  It would not be surprising if the legal authorities looked to create a precedent by prosecuting company sooner rather than later under this new legislation.