[co-author: Luke Hardingham]
This is the third in a series of articles in which members of BCLP’s White Collar team review the recent report of the House of Lords Select Committee’s, entitled “The Bribery Act 2010: post-legislative scrutiny”. Here we explore the precarious art of corporate hospitality; a problematic area that remains wholly untouched by any case law despite the implementation of the UK Bribery Act almost eight years ago.
Ministry of Justice Guidance
Despite the UK Bribery Act 2010 (the “Act”), a vacuum of legal precedent exists in relation to corporate hospitality. The Act does not directly refer to the topic nor has any relevant case law emerged since it came into force. The sole source of guidance on which companies can reasonably rely is the Ministry of Justice Guidance issued in March 2011 (the “Guidance”), on which the Committee has focussed.
In his foreword to the Guidance, then Lord Chancellor and Secretary of State for Justice, Rt Hon Kenneth Clarke QC, observed that “combatting the risks of bribery is largely about common sense, not burdensome procedures”. The Guidance goes on to clarify that the Act was not intended “to prohibit reasonable and proportionate hospitality”, only to prevent bribery under the guise of entertainment. Further, prosecutors must show a sufficient connection between the benefit provided and the intention of the offeror or offeree to bring about improper performance. It is made clear that the manner and form in which the benefit is offered, together with the level of influence that the offeree holds, will be relevant factors in deciphering this.
Theory vs Practise
In theory, the Guidance implies that avoiding criminal liability is relatively self-explanatory. However, the Committee’s analysis identified several practical problems with the Guidance and the issue of corporate hospitality in general.
Generally, the Committee highlighted that conducting business across different cultures often poses challenges. In so doing, it recognised that remaining within the bounds of UK law may well damage a business relationship where lavish gifts are culturally commonplace. It is difficult and often awkward for companies to tread what can be a fine line between risking criminal liability and securing foreign business.
The Committee also noted that certain industries seem particularly unsure as to what is required of them. The Committee commented on a 2013 report by the Chartered Institute of Building, which stated that some in the construction industry now view “common courtesy, such as refreshments at meetings or business lunches… as a possible bribe or way to influence a decision”. Such an outcome, so far removed from the intentions of the Act, is clear evidence that greater clarity is needed. Whilst the Guidance notes that “standards or norms applying in a particular sector may… be relevant” when establishing what proportionate hospitality might look like, when no set standards exist, companies with no criteria against which to assess their policies are in danger of becoming more and more cautious until they are too frightened even to offer sandwiches.
Moreover, the Committee observed that FCA-regulated firms are expected to meet a different standard to that set out in the Guidance. The FCA states that “sporting and social events […] did not appear capable of enhancing the quality of service to clients as they were either not conducive to business discussions or the discussions could better take place without these activities”. By contrast, the Guidance specifically states that a trip to Twickenham “to cement good relations […] is extremely unlikely to engage section 1” of the Act. It also says that a UK company paying for flights and accommodation to allow its senior executives to meet foreign public officials in New York as a matter of genuine mutual convenience along with fine dining and a trip to a baseball game attended by the individual’s partner would be unlikely to raise the inference of bribery. This is a markedly different approach to that of the FCA. No wonder commercial organisations are perplexed as to what is acceptable when tasked with translating such mixed messages into practise.
A Common Sense Approach
In the absence of any judicial interpretation, there is currently no Government-supported answer to this uncertainty. The interpretation of the Act remains subjective, both in regard to the individual and the sector in which he or she operates. If case law does eventually emerge (the snail like pace of current investigations does not suggest that there will be any particular developments except over a very long period of time), discretion will still be required depending on the circumstances of each commercial relationship. A common sense approach must be taken.
The Act demands that companies take adequate steps to prevent corruption. To realise this, they must take a proactive approach to establish that corruption, in all its various guises, will not be tolerated. Regular anti-bribery and corruption training and a clear, well-publicised policy against which corporate entertainment can be assessed on a case-by-case basis are essential. Whilst industry, geography, and the size of any given benefit may affect whether hospitality is corrupt, the underlying principle must remain unchanged: intention is key. The following basic questions, which can be incorporated into any such policy, also act as helpful guidelines:
1. Will the offeree feel any pressure to contract?
2. Are we completely comfortable disclosing what we have offered or accepted?
3. What might a reasonable member of the public think?
4. Could a prosecutor establish a link between the benefit offered and an intention to influence?
5. Is the benefit being offered as a quid pro quo for the award of business?
No hospitality policy is infallible: compliance with the Act is ultimately down to the people who make up the corporate. Corrupt intentions to influence third parties will often arise as a result of pressure from the top to secure business. Companies that prioritise cultivating an environment in which such pressure cannot be genuinely be taken as a green light for corrupt practices stand in good stead for keeping well within the confines of the law. This is achieved through diligent recruitment, maintenance of relevant procedures for combatting corruption, clear communication and regular training. Having laid such strong foundations, companies must then strive to foster a culture in which mutual trust is championed and employees take responsibility in good conscience, without which a company is as good as built on sand.