As indicated in blogs last week, the much heralded Bribery Act 2010 will finally come into force on 1stJuly 2011. We had a nice long wait for the Government’s guidance but I, for one, feel that the wait wasn’t really worthwhile.  The Act itself is really a gold plated effort by parliament to bring our bribery laws into the 21st century, but the Guidance falls far short of the standard set by the Act. I have some sympathy for Transparency International’s rather emotive language in their press statement on the Guidance:

 ‘The Bribery Act, as passed by the last Parliament, is one of the best anti-bribery laws in the world. But the Guidance will achieve exactly the opposite of what is claimed for it. Parts of it read more like a guide on how to evade the Act, than how to develop company procedures  that will uphold it.

‘It is deplorable that changes made to the draft Guidance since late last year, and now enshrined in the published version, depart from international good practice in several areas. The Ministry of Justice has exceeded its brief with this final Guidance which undermines the Act and will limit its effectiveness.  There is now a significant risk that bribery will go unpunished.”

Paragraph 21 of the Guidance gives as an example an invitation to a rugby match at Twickenham as part of a public relations exercise “designed to cement good relations and enhance knowledge of requirements in the organisation’s field” is “extremely unlikely” to engage Section 1 as “there is unlikely to be evidence of an intention to induce improper performance of a relevant function”.

I am intrigued as to whether attendance at a rugby match would actually enhance people’s knowledge of an organisation’s requirements.  Sporting matches are typically where people enjoy the sport itself, and for many people to enjoy (often excessive amounts of) food and alcohol.  People are more likely to get to know each other as people and just enjoy one another’s company. Technical and detailed discussions about a company’s goods and services are likely to be discussed on another date at a formal meeting.

The very point of much expensive hospitality that goes on in the UK is to get to know people, to show off your company’s generous hospitality and to try to encourage someone to buy your goods or services.  Whether that amounts to an intention to induce improper performance of a relevant function is of course something for the jury to decide, but the Government seems to be giving a clear steer to prosecutors that all sporting matches are ok,  that prosecutors shouldn’t go near them, and that the UK corporate hospitality industry should continue unabated.

That’s quite curious from an anti-bribery lawyer’s perspective because some of these events can cost many hundreds or even thousands of pounds per guest, and this has helped grow a huge and very profitable industry in the UK over the past few years. Presumably this industry, amongst others, was one of those that protested and lent on the government over the past few months after the Act was passed on 8th April 2010, to prevent damage to the value of their services.

But how are companies meant to interpret this Guidance? When setting an internal corporate gifts and entertainment  policy, is £500 per person per event an acceptable level? How about £1,000 ? and £5,000?  No-one knows.  Not even the legislators and prosecutors, it seems. It appears to us that what the Government’s Guidance is really saying is that the Serious Fraud Office just won’t prosecute anything except the very largest and most blatant examples of corruption. But that isn’t what the Act itself says, and the Guidance is, as it says, only guidance, and not the law, but none of the less-than-blatant but still-intending-to-influence levels of hospitality will ever see a court room, because the Act requires the Director of the SFO or the Director of Public Prosecutions to consent to a prosecution under the Act, and this Guidance makes it clear that they have been told by the government not to go there.

Actually, if you were to ask the ordinary man or woman in the street (who would form part of any 12 person jury) whether they thought that spending £500 per head on someone on an event was likely to influence someone in their decision-making processes I believe that they would indeed find that this level of expenditure was excessive or even grossly excessive (especially when most working class and middle class people’s disposable incomes are declining for the first time in 30 years, and ordinary people are struggling with normal living expenses – see the Guardian newspaper story on 29 March 2011).  

Getting to know a client or customer’s business can be achieved without vast expenditure, and certainly not at the levels of cost charged for major sporting events, so I feel that the Guidance has really fudged the issues, and is using the “getting to know you” reason as a justification to keep the sporting events and hospitality industry out of the reaches of prosecutors. This is not what the Act intended. Hence the reason for Transparency International’s complaint.

Interestingly, under the Section 6 offence of bribing foreign public officials, the Guidance suggests that “Flights and accommodation to allow foreign officials to meet with senior executives of a UK commercial organisation in New York as a matter of genuine mutual convenience , and some reasonable hospitality for the individual and his or her partner, such as fine dining and attendance at a baseball match are facts that are, in themselves, unlikely to raise the necessary inferences”. “Unlikely” is not a word worthy of crystal clear advice. Also, those 12 men and women of the jury on mainly ordinary incomes may well think that an invitation to you and your partner to dinner and/or to a baseball match was probably intended to cause some influence on the public official in his capacity as a foreign public official. Many of us would find the funding of a spouse or partner to be at odds with modern thinking about appropriate levels or types of hospitality.

Later on in the same paragraph the Guidance goes on to say that a five star holiday would  be “far more likely” to be an offence under section 6. We find it surprising that the Government found the need to fudge it by stating “far more likely”, as it is really difficult to envisage in which circumstances the provision of a five star holiday to a foreign public official would not be improper. All in all, on hospitality alone, one wonders whether the Guidance is at all helpful or clear, or whether in fact it is possibly even misleading, and gives a false sense of security, as it seems to be at odds with the wording of the Act. It seems to be a long and windy (the Guidance itself is far longer than most people would have expected, at about five times the length of the Act) way of saying that the only cases which the SFO will prosecute will be huge and extreme examples, rather than the lower value, but higher-in-number cases which persist around the world. 

But for companies trying to devise gifts and hospitality policies which do not breach the Bribery Act, the option of doing nothing, or setting no maximum level of expenditure, sends out the wrong signals to your staff about how you regard your risks and liabilities.  It is my view that if the SFO did investigate your company, you would be in a considerably weaker position to defend allegations of improper influence if you had set no expenditure limit, or had set a very high limit, than if you had set a limit at a more modest level.  Safer to ignore the Guidance and pay attention to the law in the Act.

As a footnote and to refer back to earlier posts on the Olympics: I doubt very much that the extremely high costs of corporate entertainment which will take place at the 2012 Olympics in London will attract any prosecutorial interest, on purely political grounds, even though such levels would very probably be regarded by 99% of the people in the UK as extremely high and disproportionate and intended to influence improperly. Of course, if that prediction is wrong, I will post on it !

What I hear clients asking for is the government’s practical guidance on the types and wordings of policies and procedures – but the Guidance is more or less silent on truly practical stuff. So companies worldwide with business in the UK will still need to do a lot of work to put in place “adequate procedures“, whatever the Government claims to the contrary!