The Bribery Act: Commercial Organisations
01 August 2019
On 1st July 2011 the Bribery Act 2010 came into force. Under section 7 of the Act a company is liable to prosecution if any associated person engages in bribery, unless the company can show that it had in place adequate procedures to prevent such conduct.
But what constitutes adequate procedures? That is not defined within the Act. The defence was raised for the first time in March 2018 in the case of R v Skansen Interiors at Southwark Crown Court. The jury rejected the defence. The following points were raised by the prosecution, which may have led to the jury’s ultimate guilty verdict:
1. The company failed to have a designated individual responsible for compliance;
2. The company failed to document a culture of compliance (i.e. evidence of training, evidence of compliance checks etc) – having a policy in place was not enough;
3. The company failed to review and monitor policies – failure to show steps taken when the Act came into force in 2011.
Of note was the fact that, despite this relatively small company self-reporting the offence to the authorities after firing the wrong doer, they were not offered a Deferred Prosecution Agreement (DPA). The fact that the company had no assets was one of the main reasons that the CPS did not see a DPA as an option when charges were brought.
This and the verdict raised two grave questions in respect of the Act:
1. Are DPAs fair in their application to companies big and small? Or do the larger companies have an advantage over the smaller companies in being able to ‘buy themselves out of a prosecution’.
2. Is there sufficient guidance and/or definition of the ‘adequate procedure’ defence?
In March 2018 a House of Lord Committee was set-up, led by Lord Saville of Newdigate for post-legislative scrutiny of these issues (amongst others). In March 2019, after considering extensive evidence (52 witnesses and 60 written submissions), the results of that committee were published.
Whilst overall the legislation was described as an exemplary piece of legislation there were several recommendations made:
1. The committee concluded that DPA usage was largely effective and that discounts applied to financial penalties were appropriate. However, it stressed that DPAs cannot be a substitute to prosecution of any individual involved in corrupt conduct.
2. The government must improve their advice to small to medium size companies – clearer guidance and examples of what would be ‘adequate procedures’; clearer guidance of when corporate hospitality is legitimate and when it is not. Special support and guidance should be available for UK companies that dealt in export activity as they are exposed to such risks in a foreign culture.
3. The committee observed a relatively low number of prosecutions under this Act and identified a lack of training and expertise within the law enforcement bodies as a reason for this. Thereby suggesting training/guidance on both sides of the spectrum.
4. In dealing with the term ‘adequate procedure’, the committee recommended that further guidance should be available in this regard and that the burden of ‘adequate procedures’ should not be any more rigorous than ‘reasonable’, a term used in other similar legislation (e.g. the ‘reasonable prevention procedures’ defence in respect of facilitation of tax evasion under Criminal Finances Act 2017).
5. Greater inter-agency cooperation and speedier prosecution – prosecutions under the Act can be conducted by CPS, SFO, NCA, HMRC and others. There needs to be co-operation and uniform action by these bodies. Also, better training and guidance to these bodies should insure speedier prosecution of these types of proceedings.
Most of these recommendations will be positively received by commercial organisations. However, even though the legislation has been in force for more than 8 years it is still relatively young due to the limited contested litigation under the Act. The practical effect of the Committee’s findings therefore remains to be seen.
The full committee publication can be viewed here: The Bribery At 2010: post-legislative scrutiny