The Bribery Act 2010

Steve Gray

Compliance Hub

The UK Bribery Act received Royal Assent in April 2010 and despite not coming into effect until April 2011, is already being regarded as legislation that could have significant consequences, not just for UK businesses, but for those throughout Europe and further afield1.

The Act introduces four offences, of which two are being seen as essentially new to our national statute books. The offences are:

• Making a bribe

• Accepting a bribe

• Bribing a Foreign Public Official

• Failing to prevent bribery at a corporate level

We will return to the implications of the fourth point, once we have explored the others but, just to whet your appetite a little, it means that the company officers are criminally liable for the actions of their staff and agents if they fail to establish control mechanisms.

In theory, the pharmaceutical industry already addresses many of the issues within the Association of the Pharmaceutical Industry’s (ABPI) Code of Practice. However, it is important to understand just how far the implications of the Act extend.

Offence 1: Providing a bribe

It is an offence for anyone to offer, promise or give a financial advantage to another person in the context of a public service or business. A bribe does not have to be actually given – the intent is sufficient2. Nor does it have to be actual money. All that is necessary is that the effect is to cause someone to act improperly by doing something they should not have done, or not doing something they should have! The Act therefore uses the term ‘advantage’ instead of ‘bribe’, to recognise the wider scope of the inducement.

One challenge for compliance officers is that the potential range of activities that might constitute ‘advantage’ is incredibly broad and is not defined. Financial incentives, excessive honoraria fees, payment for activities that are not actually needed and hints of reciprocal support all fall within scope.

 

“A bribe does not have to be actually given – the intent is sufficient.”

 

The advantage might constitute an actual inducement, however it is also sufficient for it to intend improper performance. It is also sufficient to know that acceptance of the bribe would in itself constitute improper performance.

Business to business transactions fall within scope3. As do trade associations and all public services. Pharmaceutical companies have long been guided by clauses 18 and 19 of the ABPI Code, which guard against excessive hospitality and the inducement of individuals. The Bribery Act arguably goes further – in that the intent is sufficient.

This is true even where the person benefitting from the ‘advantage’ is not the person who is induced to act inappropriately. The Act also might apply if the agency or company employees provide excess hospitality to PCO Budget managers.

The fact that the Act applies to private business and the public sector is where the UK Act extends beyond the infamous US Foreign Corrupt Practices Act (FCPA), which only regulates bribery within the public sector.

Offence 2: Receiving a bribe

The second offence is that of receiving an advantage (bribe). Again, there is no need for a direct link between the recipient of the advantage and the individual who acts improperly, thus if a Marketing Company Department Head is influenced in awarding the renewal of an agency contract based by how well the agency has “looked after” the team during the year, this would fall within scope.

The Act of receiving a bribe applies whether an individual actually receives or agrees to receive an advantage or acts improperly so that someone else receives an advantage. With that in mind, it is appropriate for companies to consider implementing policies regarding the acceptance of gifts and hospitality etc. to supplement the policies about gifts and hospitality that employees can offer. A register of interests for employees may also be a sensible step – even to the extent of knowing whether relatives might be in a position of employment that might impact on company business – such as being a public official or working for an agency that provides services to the pharmaceutical industry etc.

 

“…the UK Act extends beyond the infamous US Foreign Corrupt Practices Act (FCPA), which only regulates bribery within the public sector.”

 

Offence 3: Bribing foreign officials

The third area of the Act applies to the bribing of a foreign official. It is a specific offence to proffer an advantage in order to win or retain business through the improper actions of a foreign official. Again, there is no need for the official to be the direct recipient of the advantage. Nor is there a requirement for any improper activity to actually take place – the intention is sufficient. However, it is also an offence if the foreign official acts improperly in expectation of receiving an advantage even if none was offered. This means that the onus is on the provider to ensure that their actions are completely transparent and appropriately documented so that an audit trail exists to provide adequate records of their dealings should the need for evidence arise. This is another area where the scope of the Bribery Act extends beyond the scope of the FCPA, which only encompasses intended improper performance. As an example, the scope covers ‘facilitation payments’ made by a company in the normal course of conducting business in certain jurisdictions around the world4.

Now it could be argued that this third area is less relevant to a UK business operating solely within the UK. However that is not true, owing to two further important factors.

Firstly, the individuals that fall within scope of all provisions of the Act are not just UK employees, but any individual with a significant link to the UK – this includes, in effect, all British passport holders, even if the activity they perform has nothing to do with the UK business. It also encompasses all businesses that have a link to the UK, by conducting part of their business here – however, there is no need for the activity to be related to the UK. So, in effect, any activity conducted by any company anywhere in the world falls within the scope of the Act if that company has so much as a small office in the UK or (theoretically at least, a single salesperson). The scope also encompasses individuals and companies that are “associated” with the primary organisation, such as subcontractors, intermediaries, distributors, suppliers, advisors, joint venture partners and introducers.

Offence 4: Failing to prevent

However, the major impact for business is the fourth and final part of the Act. This relates to the failure of commercial organisations to prevent bribery through the introduction of ‘adequate measures’. The government has yet to define what ‘adequate measures’ might be, but there is some guidance contained in other legislation that is likely to apply here as well. For example, the Serious Fraud Office issued guidance that included the need for clear policies on government lobbying, giving and receiving gifts and hospitality, regular audits on SOPs adherence and a corporate code of ethics5.

 

“A failure to prevent bribery by taking adequate measures is a criminal offence, which in effect makes company directors liable for the actions of their employees…”

 

A failure to prevent bribery by taking adequate measures is a criminal offence, which in effect makes company directors liable for the actions of their employees if they do not introduce sufficient controls. The scope of the Act means that this responsibility encompasses not just employees, but any agents carrying out an activity to win or retain business for a company. It also means that parent companies of all UK pharmaceutical companies and agencies servicing the pharmaceutical sector fall within scope of the Act.

Importantly, there is no need for an individual to be found guilty of offering a bribe for the company directors to be found guilty of failing to introduce controls.

This Act gives significant powers to UK authorities to influence the behaviour of corporations throughout the world. Mostly importantly for pharmaceutical companies and agencies operating in the UK, it places added emphasis on the requirements of the Code regarding transparency and hospitality, etc – and then goes some way beyond the Code’s requirements.

References:

1. N Peters, ‘Legislative Comment: No more bungs’, Euro. Law. 2010, 97, 44-45

2. Editorial, ‘The Bribery Act 2010’, Crim. L.R. 2010, 6, 439-440

3. T Duthie &amp, D Lawler, ‘The United Kingdom Bribery Bill’, Const. L.J. 2010, 26(2), 146-152

4. A Anwar &amp, G Deeprose, ‘The Bribery Act 2010’, Scots Law Times. 2010, 23, 125-128

5. D Aaronberg &amp, N Higgins, ‘The Bribery Act 2010: All bark and no bite?’, Arch. Rev. 2010, 5, 6-9

About the author:

Steve Gray is Managing Director of Compliance Hub Ltd, and an established compliance professional. He can be reached at: steve@compliance-hub.com.

Compliance Hub provides training and consultancy in respect of the ABPI Code of Practice. Visit www.compliance-hub.com to find out about their services and their 2011 Code package.

What impact will the Bribery Act have on pharma?