Corporate hospitality faces potential hit from Bribery Act | 31 March 11
COMPANIES looking to entertain clients via corporate hospitality events will have to take a serious look at their plans to avoid falling foul of new anti-bribery laws, a leading law firm had warned.
Experts at Ward Hadaway say the Bribery Act, which comes into force on July 1, will tighten up what activities businesses can take part in when it comes to corporate entertainment.
The Ministry of Justice has published detailed guidance for businesses on the Bribery Act and how it affects the activities they carry out.
The Act is intended to replace existing piecemeal anti-bribery legislation with a comprehensive raft of laws to combat corruption.
Amongst other things, the Act introduces a corporate offence of failure to prevent bribery by persons working on behalf of a business.
As well as including employees, this can extend to agents working in the UK and abroad on behalf of a company.
Businesses have expressed fears that activities which may previously have been seen as standard practice – such as corporate hospitality – may now be potentially viewed as bribery.
The Ministry of Justice’s guidance outlines how companies considering corporate hospitality events “may want to consider” a range of safeguards to ensure they do not fall foul of the Bribery Act from July onwards.
These safeguards include:
- Conducting a bribery risk assessment relating to a company’s dealings with business partners
- Publishing a policy statement committing the company to transparent, proportionate, reasonable and bona fide hospitality and promotional expenditure
- Issuing internal guidance on procedures that apply to providing hospitality and/or promotional expenditure
- Regular monitoring, review and evaluation of internal procedures and compliance with them
- Appropriate training and supervision provided to staff
Kirsty Gomersal (pictured left), partner in the regulatory and licensing team at Ward Hadaway, said: “The Justice Secretary Kenneth Clarke has said that the Bribery Act will not be a major burden or expense on business, but just looking at the example of corporate hospitality shows that there is actually likely to be quite considerable time and expense spent by companies in complying with the new legislation.
“Companies looking to offer corporate hospitality to their clients will now need to be very cautious and to think carefully about what they offer, who they offer it to and why they are offering it.
“Similarly, people who receive corporate hospitality invitations will need to carefully consider the nature of those invites and how they tally with their organisation’s anti-bribery procedures and policies.
“The net effect of this may be that companies will simply stop offering corporate hospitality. Anecdotal evidence suggests that some businesses are already refusing to let their employees accept any hospitality - even a sandwich or a short lunch – while other organisations are putting strict limits on accepting hospitality, such as a maximum of £50 per person.
“This may not have been the intention behind the introduction of the Bribery Act, but the reality is that many organisations simply do not want to take any chance when it comes to complying with the new legislation.”
The Bribery Act does not prohibit corporate entertainment and gifts which are acknowledged to be an accepted part of business practice.
However, companies must ensure that such hospitality is for a legitimate business purpose, is proportionate and at a level where it cannot be inferred that the hospitality is intended to bribe a recipient.
Kirsty said: “Companies therefore need to carry out advance planning well before sending out invitations to ensure they are satisfied that the entertainment could not fall foul of the new legislation.
“This advance planning will take time and effort, but the cost will be undeniably less than dealing with an investigation by the Serious Fraud Office - or even prosecution.
“Companies who consider this a waste of time need to consider their position carefully as those being invited may very well take the Act far more seriously.
“Do you really want to risk losing a major account by offering hospitality that a client is not permitted to accept? If you’d done the advance planning, you may have recognised this and acted accordingly.”
Such caution is perhaps understandable considering the potential penalties for the most serious offences covered by the Bribery Act.
Conviction under the Bribery Act may result in unlimited fines, serious damage to an organisation’s reputation and permanent exclusion from undertaking public contract works.
Senior officers from organisations, including directors and company secretaries, may also face personal liability under the Act and possible prison sentences of up to 10 years.
Kirsty Gomersal said: “While no-one is suggesting that accepting a lunch invitation could lead to a prison sentence, there is understandable disquiet about the effect that the Bribery Act could have on what has previously been considered normal practice in the course of business.”
As well as corporate hospitality, the Bribery Act will also affect companies who do a lot of their business abroad.
In addition to covering the activities of employees or agents working for UK businesses in other countries, the Act introduces a specific offence of bribing a foreign official.
In these cases, what constitutes bribery is based on the UK definition of the term, so an activity which considered normal practice in some countries could still see a UK company prosecuted.
Kirsty Gomersal said: “This means UK companies will have to tread extremely carefully when it comes to how they conduct their business abroad and what invitations they offer and accept.
“Drawing up and following clear and transparent anti-bribery policies will be essential if businesses want to successfully trade abroad without falling foul of the new laws at home.”
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