Bribery Act 2010 – The Adequate Procedures Defence

04 September 2014

Practice Area: Commercial Law

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The Bribery Act 2010 (the “Act”) is widely regarded as one of the most stringent bribery law systems in the world. Its extra-territorial effect means that it covers bribes regardless of where the bribe is paid or received, and a breach of the Act can result in a number of significant penalties.

Fortunately, section 7 of the Act provides a defence for commercial organisations who have failed to prevent bribery, if they can show they had adequate procedures in place to prevent those associated with the organisation from undertaking such conduct. The onus will be on the organisation to prove that they had such procedures in place, and the Ministry of Justice (“MoJ”) have produced guidelines based on the six principles below on what amounts to adequate procedures.

Proportionate Procedures

A commercial organisation should have bribery prevention policies and procedures in place which are proportionate to the risk of bribery which they face. To ensure the procedures are proportionate, an assessment of risk will be a necessary first step. The level of risk your organisation faces, and therefore the procedures necessary, can be affected by a number of factors, including size, the type of persons associated with it, and the nature and complexity of its business.

Commercial organisations must ensure that there is a practical and realistic means of achieving the objectives of their policy. There is no one size fits all and what is proportionate must be assessed in the context in which the organisation operates.

Top-level Commitment

The MoJ guidance recognises that those at the top of an organisation are best placed to foster an anti-bribery culture. This is likely to include both communication by top-level management of the anti-bribery policies and procedures, and the involvement of top-level management in developing anti-bribery policies procedures.

Risk Assessment

An informed and documented risk assessment of the nature and extent of the organisation’s exposure to bribery risks should be carried out regularly. With a proper risk assessment, an organisation can identify the risks it faces and tailor its policies and procedures accordingly, allowing for the most effective use of its resources. The MoJ notes that some of the more commonly encountered risks are deficiencies in employee training on bribery, a bonus culture that rewards risk taking and the lack of a clear anti-bribery message from top-level management. Organisations may wish to consider involving their employees on the ground in such assessments, as they are more likely to have firsthand experience of where the risks lie.

Due Diligence

Not only is due diligence an important element of good corporate governance, but carrying out due diligence on risks identified through the ‘Risk Assessment’ process can help significantly reduce such risks.

The guidance suggests that in lower risk situations, there may not be a need for significant due diligence. However, where the risk is more substantial, an organisation may wish to consider conducting direct interrogative inquiries, indirect investigations or general research on the proposed associated persons. Due diligence may be from as little as simple internet searches or consulting the local chambers of commerce or business associations for advice.

Communication (including training)

The MoJ recognises the importance of communication and training in raising awareness of an organisation’s anti-bribery stance and their policies in relation to same. It will be for the organisation to assess whether they feel this communication and training should be internal only, or extend to its associated persons or even the general public.

The inclusion of this principle makes clear that it will not be sufficient for an organisation to simply have policies in place; they must be effectively implemented for the defence to be available.

Monitoring and Review

Organisations are constantly changing, as they acquire new employees, become involved with new business partners, and enter new markets and countries. As an organisation grows and changes, the bribery risks it faces will change with it. Therefore, it is essential for commercial organisations to continually monitor and review their anti-bribery policies and procedures. The MoJ suggests that this may be done using staff surveys, questionnaires or feedback forms, formal periodic reviews and reports from top-level management, or through an external review and verification of the bribery policies.

Conclusion

These guidelines are designed to help commercial organisations comply with their obligations. However, the MoJ has made clear that the guidelines are not prescriptive and it will fall to the courts to decide on a case by case basis whether adequate procedures were in fact in place. Of course, it is possible for bribery to occur even if all of these precautions are taken. The key thing is for organisations to do all they can to follow these principles, and keep a full paper trail of this, so they are as prepared as they can be in the event that they need to avail of the ‘adequate procedures’ defence.

For more information, please contact Maeve McClean. 

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