I give my clients gifts. Am I guilty of bribery?
Expenses-paid trips to Monaco fall on just the right side of the law
Harry from Whetstone writes:
My company is essentially a family business, founded originally by my grandfather. We are long-established in the field of sporting goods and we export heavily. We employ upwards of 200 people and our turnover has held up remarkably well despite current economic conditions.
Ever since I joined the business as a youngster, we have been generous in our treatment of both our important suppliers and customers, many of whom are abroad, in terms of corporate hospitality etc. For example, we have in the past given nice birthday gifts to them and sometimes also their wives, and we host lunches at major sporting events, such as Wimbledon and Henley and Twickenham. We have also flown our best clients on all-inclusive long weekends to the Monaco Grand Prix. I was recently told by my accountant that this sort of thing is now dangerous in view of changes in the law concerning bribery, and I would like to know if he is right, or merely being alarmist.
Harry, he is essentially right. The Bribery Act 2010, which came into effect in July 2011, has radically changed the climate and attitude of the law towards bribery. Corporate practices which were considered the norm in the past must now undergo careful reappraisal by businessmen such as yourself. Intended by Parliament to give domestic effect to various United Nations and European conventions against corruption, and proclaimed openly to try to change the culture of British business, this legislation cannot be ignored.
It is wide-reaching. It applies to any commercial organisation whether incorporated or not. It has wide extra-territorial effect. It gives the UK courts jurisdiction over any business anywhere in the world, provided that it carries out part of its business in the UK. It does not matter where in the world the alleged acts of bribery are committed. Although yet to be tested, some legal commentators suggest that even a connection as tenuous as a foreign business operating a bank account here, might trigger jurisdiction.
Moreover, by a draconian extension, a business is also liable to prosecution if a person merely associated with it (but not employed by it) bribes another person. Thus for example, a Yorkshire textile mill could be liable to prosecution if its independent textile agent in Saudi Arabia bribed a local importer, thus securing a large order. The chances are the mill will know nothing whatever about it. It is given a defence however, if it can prove on the balance of probabilities that it had "adequate procedures in place" to prevent persons associated with it from bribing. Advising on just what such procedures might be in a real world is now a lucrative source of work for my profession, at the behest of businesses not wanting to fall foul of the law.
Bribery is widely defined under the Act. It arises whenever a financial "or other" advantage is offered or accepted and is "intended to reward an improper performance of a relevant function or activity." Although yet to be tested, that "other advantage" would I think certainly include, say, sexual services or chips at the casino, if the Monaco junkets were to become too raucous.
Above all, it is no defence to say that such things always went on in the past, nor that you will lose out to foreign competitors otherwise.
The Act provides severe criminal penalties. It can carry up to 10 years imprisonment and unlimited fines, and there are powers to disqualify company directors from office. All benefits obtained in consequence of a bribe, for example the profit from a contract obtained thereby, may be confiscated on conviction.
The area of corporate gifts and hospitality which you highlight Harry, is inevitably something of a grey area. As with all prosecutorial decisions, a wide measure of discretion is granted to the authorities. Each case turns on its own exact facts.
The Crown Prosecution Service, the Serious Fraud Office and the Ministry of Justice have all published guidance on how they will exercise discretion. In essence, they insist that reasonable and proportionate business hospitality and entertainment remain legitimate. But they will want to see if it has been properly recorded in the books. And they will look with a sophisticated eye at the type and size of your business and the level of your generosity, if you were to come under suspicion.
My feeling is that Wimbledon, Henley and even Monaco all remain fine, but the birthday gifts, and especially gifts to wives, could easily be misconstrued, especially if of high value.
It all boils down to common sense, recognising that the previous climate of the authorities turning a blind eye to encourage export orders has changed, and is unlikely ever to return.
The above is not formal legal advice and is given without liability. Jonathan Goldberg QC is a leading London barrister. Visit www.GoldbergQC.com