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UK Bribery Act: A game changer

The Director of the Serious Fraud Office intends to enforce the Act ‘vigorously’ – it would be wise to take him at his word

RegulationThe UK Bribery Act came into force on July 1, 2011, and since then there has been only one reported decision under the Act.

Given that the Act only applies to offences committed wholly on or after July 1, 2011, and that most reported cases have not been in relation to isolated incidents, this may come as no surprise. Nevertheless, the Director of the Serious Fraud Office (SFO) has stressed that his Department will vigorously enforce the Act and it would be wise to take him at his word.

The Act creates four offences – active bribery, passive bribery, bribing a foreign public official and failure by a commercial organisation to prevent bribery. The first two offences repeat much of the old law, while the second two are new.

Much of the public and governmental focus on the Act has been on the new corporate offence which has a wide extra-territorial reach and imposes a duty on commercial organisations which carry on business in the UK or are incorporated or established under UK law to prevent bribery by 'associated persons' purporting to act on their behalf.

In principle, an organisation is now automatically liable under the new corporate offence whenever any of its associated persons, such as agents and employees, gives or receives a bribe.

Statutory defence
There is, however, one specific statutory defence to the corporate offence, which is that the relevant commercial organisation has put in place 'adequate procedures' to prevent bribery happening. According to the Ministry of Justice guidance issued in March 2011, the defence of 'adequate procedures' has six principal components – proportionality; top-down commitment; risk assessment; due diligence; communication and training; and monitoring and review.

The Code for Crown Prosecutors states that Crown Prosecutors will apply a two-stage test in deciding whether or not to prosecute an alleged offence – namely: whether there is a realistic prospect of conviction or whether the prosecution is in the public interest.

In deciding on the public interest element the prosecutor will start by assuming that prosecution is in the public interest unless the prosecutor is sure that the public interest factors tending against prosecution outweigh those tending in favour. 

External risks of the Bribery Act

When assessing external risks, you should consider the following:

1. Have a whistle-blowing system in place
2. Before entering into any transaction with a supplier, customer or other 'associated person' carry out proper due diligence
3. Identify key risk areas and potential activities
4. Take extra care when dealing with high risk countries and foreign public officials
5. In any contract ensure that anti-bribery terms and conditions are included
6. Ensure that not only is your anti-bribery policy communicated within your organisation but that it is communicated to all subsidiaries, sales representatives, contractors and other 'associated persons' from the outset of the business relationship.

SFO applauds self regulation
The UK pharma industry has taken significant steps to put its house in order by way of the ABPI Code which deals with gifts, hospitality and general marketing issues. The SFO has recognised the work done by the ABPI in the Memorandum of Understanding, which has been put in place between the SFO, ABPI and the PMCPA. The SFO respects the self-regulatory approach of the ABPI while retaining discretion over serious cases it wishes to investigate.

Prosecutions in the US show that the greatest risk of contravening the Act may well revolve around hospitality, sponsorship and promotion. However, sensible and proportionate promotional expenditures are not outlawed by the Act. Business expenditure to improve the commercial image, present products or establish relations is acceptable provided that it is done in good faith, is transparent and can be considered standard for the business sector concerned.

The more lavish the hospitality or the higher the expenditure, the greater the risk that it will be considered a bribe.

Risks abound but not in promotion
While the focus has been on hospitality and promotion, the industry is likely to find a higher risk in other areas of the business. For instance, regulatory approvals, government contracts, customs and the fight against counterfeit medicines place an extra burden on pharma companies to be vigilant against bribery.

When faced with a decision to contravene the Act or protect human life it will be important to have adequate procedures to ensure that any decision taken can rely on the common law defence of duress. Of course, the Crown prosecution will also have to decide whether it is in the public interest to prosecute an isolated incident of bribery or whether it is better served not to do so where public health is protected.

The UK government recently issued a proposal to allow companies to avoid prosecution in certain cases. Following the US practice of deferred prosecution agreements, companies may be allowed to accept a penalty and take remedial action as an alternative to criminal proceedings.

There is no doubt that the Act is a 'game changer' which creates a stricter regime even than the US Foreign Corrupt Practices Act 1976 and it is also clear that the pharmaceutical industry is taking the Act seriously. However, there is no room for complacency.

The Authors
David Glass is senior partner and Iain Richardson is an associate at Pritchard Englefield Solicitors. They can be contacted at and, respectively.


2nd November 2012

From: Regulatory



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