1 July 2012 marked the first anniversary of the introduction of the Bribery Act 2010.
Less than a month later, one of the biggest sporting events ever to take place in the UK starts in London – the 2012 Olympic Games.
Inevitably, it will be London 2012 that receives the most attention but, given the ample corporate entertainment opportunities, it seems an appropriate time to re-examine the impact that the Act has had after being in force for a whole year– and the impact it is likely to have on corporate entertainment this summer too.
The Bribery Act: The first year
The Act came into force a year ago to much controversy and speculation. The former head of the Serious Fraud Office, Richard Alderman, declared that the organisation would "enforce the Act vigorously".
Meanwhile, Keir Starmer QC, director of public prosecutions, warned that the legislation would take "a robust approach to commercial bribery".
Despite these pronouncements, we have seen only one prosecution in the first year. Munir Patel, an administrative officer at Redbridge Magistrates’ Court, was found guilty in November 2011 of accepting a £500 bribe in exchange for not putting the details of traffic offences into the court’s database.
He was sentenced to three years imprisonment for contravening Section 2 of the Act, which in broad terms prohibits the acceptance of bribes.
Although a three-year sentence is obviously significant, the Court placed more emphasis on Patel’s six year sentence for misconduct in public office and focused on his role as a court official, which brought with it a particularly high standard of conduct.
We are, therefore, not really any the wiser as to the approach that the courts will take in relation to breaches of the Act.
In spite of the lack of convictions to date, businesses should not be complacent – a blasé attitude towards its provisions is likely to be particularly dangerous as we approach London 2012. Breaches of the legislation can result in unlimited fines for organisations and potential criminal sanctions for individuals, so it is vital to get it right.
Reasonable and proportionate hospitality
The Government’s official guidance on the law makes clear that corporate hospitality and gifts could potentially constitute bribes and businesses needed to be vigilant in avoiding anything "lavish".
But given the prices of some Olympic tickets alone, let alone broader corporate hospitality packages, organisations need to take care that any Olympic entertainment is not in breach. Business leaders and commercial bodies have raised concerns that the Act has the potential to prevent corporate hospitality altogether.
The Guidance went some way towards easing these worries, however, as it assured organisations that bona fide hospitality and promotional or other business expenditure that sought to improve their image was recognised as an established and important part of doing business – provided it is "within the reasonable and proportionate norms" of a particular sector.
It was, the Government stated, never the intention of the Act to criminalise such behaviour and employers that have proper policies and procedures in place to avoid abuse should be able to rely on the defences set out in the Act.
The SFO has stated that the following factors will be taken into account when considering whether any particular case of corporate expenditure falls outside the bounds of reasonable and proportionate hospitality:
- Whether the company has issued a clear policy on gifts and hospitality
- Whether the scale of expenditure in question is within the limits set out in the policy and, if not, whether the person making it asked an appropriate senior colleague for special permission to do so
- Whether the expenditure was proportionate (based on who received it and the norms within that particular industry)
- Whether there is evidence that the company recorded the expenditure
- Whether the recipient was entitled to receive such hospitality under the law of their own country.
The SFO has indicated that, where there are unjustifiable "add-ons" such as travel or accommodation, the risk of a gift or hospitality expenditure being viewed as a bribe is greater.
Horses for courses
Likewise, the risk of a breach is more significant if there is a competitive pitch process underway or a particular business opportunity in the pipeline at the time when the corporate hospitality is made available.
But in the vast majority of cases, it is understood that there is likely to be an "anticipated business" opportunity – otherwise it would be hard to see the point of most corporate entertainment.
All of this leaves organisations with the prospect of having to jump the "reasonableness and proportionality" hurdle when considering whether taking clients to the Olympics is appropriate, however.
Former director of the SFO, Richard Alderman, helpfully made it clear in a speech in June 2011 that it is very much a question of "horses for courses". He said that: "What is sensible and proportionate will need to be judged by reference to who you are talking about and what is generally regarded as acceptable and safe practice."
Businesses will need to look, in each case, at whether:
- There is a legitimate business purpose for the proposed entertainment – what are you hoping to gain from a trip taking someone to see beach volleyball?
- The entertainment is reasonable and proportionate in all circumstances, which includes taking into consideration what other organisations in the same sector are doing (or are likely to be doing)
- The proposed entertainment complies with the recipients’ own internal rules and procedures
- There is a particular business decision pending that could make the entertainment appear less appropriate.
The Olympics are a great opportunity for organisations to impress their clients. But it is vitalto ensure that all of the right procedures are in place and that they are vigorously enforced in order to avoid tripping before you even get to the starting line.
Beth Hale is an associate in the employment team of law firm, Stephenson Harwood.
