International In-house Counsel Journal
Vol. 5, No. 17, Autumn 2011, 1
International In-house Counsel Journal ISSN 1754-0607 print/ISSN 1754-0607 online
UK Bribery Act 2010: Has a Revolution in Corporate Governance
Begun?
MATTEO GRASSANI
Head of Legal, BG Italia (gas and electricity), Italy
1. Introduction
On 1st July 2011, the UK Bribery Act 2010 (“Bribery Act) has entered into force
1, thus
paving the way for a new stage in the battle to bribery and corruption. Not only criminal
offences already present in the old law have now been reinforced by enhancing
sentencing powers for the courts and reaffirming an offence relating to bribery of a
foreign public official, but a specific new offence relating to commercial bribery was
introduced, in the form of corporate liability for commercial organizations.
In particular, failure of a commercial organization to prevent bribery from being
committed on its behalf is now a criminal offence, which may lead to a fine of an
unlimited amount. If anyone, falling under the one-size-fits all definition of “associated
person” with a commercial organization, bribes another person, then the commercial
organization also commits a criminal offence, unless it can prove that it had in place
“adequate procedures” designed to prevent the associated persons from committing
bribery.
In other words, under the Bribery Act, the company may be found guilty, even if no one
within the company knew of the bribery.
It is worth noting that the provision of the Bribery Act has a wide jurisdictional reach, as
the courts will have jurisdiction over both offences committed in the UK and those
committed outside the UK territory.
The practical impact of the Bribery Act on the corporate governance of an enterprise is
remarkable and should lead all corporations to a thorough internal analysis to rethink the
way their day to day business is carried on. Each and every commercial organization
(from large to medium and even small ones) will need to assess where they stand against
the new requirements and legal risks introduced by the Bribery Act.
The role of general counsels and legal departments is key in leading the inevitable
changes to be made within a company, in the way the organization is structured, powers
are delegated, suppliers are selected and relations with stakeholders and institutional
entities are managed.
This article will outline the main features of the Act, drawing particular attention to the
new form of corporate liability for commercial organizations and the meaning of
“adequate procedures”, as the latter represent the only valid defense allowed by the
Bribery Act upon which a company may rely.
1 The Act received the Royal Asset in April 2010 and came into force on 1 July 2011, according to Section 2 of
the Bribery Act 2010 (Commencement) Order 2011, available at
http://www.legislation.gov.uk/uksi/2011/1418/made.
2 Matteo Grassani
In particular, it will provide a preliminary review of the main topics to be discussed while
assessing the major areas of bribery risk within a company and adopting a risk-based
approach to managing bribery risks. These topics include: stressing the importance of a
top level commitment by CEOs, creating a function promoting an ethical conduct culture,
reassessing the whole supplier selection process, providing useful guidance to public
affairs functions, creating template clauses to be used in general agreements and joint
venture partnership agreements.
2. The battle of bribery and corruption
The importance of tackling corruption issues both from a Governmental and
entrepreneurial perspective is self-evident. However, a good description of the effects of
corruption in a globalised world comes from the foreword of the 2003 United Nations
Convention against corruption, according to which “Corruption is an insidious plague
that has a wide range of corrosive effects on societies. It undermines democracy and the
rule of law, leads to violations of human rights, distorts markets, erodes the quality of
life and allows organized crime, terrorism and other threats to human security to
flourish2”.
No single country is exempt from the issue, as “this evil phenomenon is found in all
countries, big and small, rich and poor”, remarks the foreword of the UN Convention.
The Bribery Act represents an answer to the concerns of the UN Convention a strong
piece of anti-corruption legislation, as it covers both public and private forms of
corruption (Section 3), introduces a new form of criminal liability to companies for acts
of associated persons (Section 7) and extends the jurisdictional reach to include -under
certain circumstances- bribery cases committed abroad (Section 12).
Pragmatically, CEOs and General Counsels would probably first start asking “how the
new legislation will be enforced?” This is quite unclear at the moment3, but we may draw
some useful experience from similar legislative tools around the world.
As of today, the most re-known piece of legislation for combating bribery on a world-
wide scale had been the US Foreign Corruption Practices Act of 1977 (FCPA), which
after a slow start lead to an increasing number of investigations carried out by US
Authority, over time. As nearly no investigation was commenced until the early years
2000, the number increased exponentially thereafter involving many world re-known
multinational companies and leading to multimillion dollar fines issued by the US
Authority4.
Another possible lead in the way UK authority will be enforcing the Bribery Act may be
found in some recent speeches by the Director of the Serious Fraud Office. He has
repeatedly referred to supporting good ethical UK businesses, which would find
themselves at a competitive disadvantage against a foreign company, which had paid a
bribe (even if in the lighter form of a facilitation payment)5.
2 Forward of the United Nations Convention Against Corruption, adopted by the General Assembly by resolution 58/4
of 31 October 2003, http://www.unodc.org/unodc/en/treaties/CAC/index.html. 3 The first prosecution under the Bribery Act took has taken place. A former magistrates' court clerk was prosecuted
under section 2 for accepting a bribe with the intention of improperly performing his functions. In this case, he had
accepted £500 in exchange for omitting to record a traffic offence. Sentencing is expected in November 2011. For info
see release by The Crown Prosecution Service at available at http://www.cps.gov.uk/news/press_releases/127_11/. 4A comprehensive list of fraud cases pursued by the US Department of Justice, under the Foreign Corruption Practices
Act of 1977 is available at http://www.justice.gov/criminal/fraud/fcpa/. 5 Speech by Richard Alderman, Director of Serious Fraud Office, 13 October 2010 available at
http://www.sfo.gov.uk/about-us/our-views/director's-speeches/speeches-2010/lawyers-in-commerce--industry-in-
association-with-mayer-brown.aspx;
UK Bribery Act 2010 3
It seems reasonable to guess that, at first, UK Authority may be cherry picking a strong
case against a foreign corporation (being active in the UK), which may allow the creation
of favorable case law, show the muscles of the new statute and put the Bribery Act under
the spot light.
Hence, multinational and medium size companies should promptly adapt to an increased
exposure to new legal risks and liabilities. In particular, they should asses where they
stand against the new rules introduced by the Bribery Act (through a gap analysis) and by
focusing on how to improve and enhance both their corporate governance system and the
relationship with their stakeholders, customers, suppliers and partners (through an action
plan).
Finally, some major companies may be objecting that they have already in place
compliance systems which were developed and enhanced over time, based on the FCPA
and, thus, need no review of their corporate governance system.
Having an FCPA compliance system in place, certainly represents an advantage, in terms
of developing an anti corruption mind-set within the organization, but does not exempt
from taking action to address the legal risks and liabilities under the new regulatory
framework. Bribery Act and FCPA present differences, as the Bribery Act prohibits
facilitation payments, introduces bribery in the private sectors, provides for a wide
definition of “bribery of foreign public officials” and may sanction an “intention to
influence” a foreign public official to obtain or retain business (whilst a corruptly made
payment is generally required to trigger the FCPA).
3. The new corporate offence introduced by the Bribery Act
The Bribery Act repeals much of the UK’s existing law on bribery6, aiming to
modernizing and simplifying this area of the law. From a practical standpoint, however,
in-house legal departments will need to find their way through a set of broad statutory
provisions, which intentionally leave a greater room for discretion in order to capture all
different kinds of wrongdoings.
As the recently issued “Prosecution Guidance7” suggests “the language is wide enough
to include cases in which an offer, promise or request can only be inferred from the
circumstances” and it adds that “it is also clear that, except where the allegation is that
an advantage was given or received, there is no need for a transaction to have been
completed. The Act focuses on conduct not results8”.
Furthermore, with respect to the newly introduced corporate offence (i.e. for commercial
organizations which do not prevent bribery, committed by “associated persons” on their
behalf), it should also be remarked a clear difference against the old law, where the
involvement of senior management was a key condition for a company to be guilty of
bribery9.
6 The Act repeals the whole Public Bodies Corrupt Practices Act 1889; Prevention of Corruption Act 1906 and
Prevention of Corruption Act 1916. 7 “Bribery Act 2010: joint prosecution guidance of the Director of the Serious Fraud Office and the Director of
Public Prosecutions” available at
http://www.sfo.gov.uk/media/167348/bribery%20act%20joint%20prosecution%20guidance.pdf 8 “Bribery Act 2010: joint prosecution guidance of the Director of the Serious Fraud Office and the Director of
Public Prosecutions” available at
http://www.sfo.gov.uk/media/167348/bribery%20act%20joint%20prosecution%20guidance.pdf. 9 In Tesco Supermarkets v Nattrass [1972] AC 153 case law provides that corporate liability arises only where
the offence is committed by a natural person who is directing mind or will of the organisation. See also
Section 14 of the UK Bribery Act, which regulates bribery by bodies corporate.
4 Matteo Grassani
In particular, the following general bribery offences may now lead to a corporate liability
of the company, as provided under Section 7 of the Bribery Act:
Section 1: offence of bribing another person (“active bribery”)
A person (“P”) is guilty of an offence, if either of the following two cases
applies:
(Case 1), where P offers, promises or gives a financial advantage
to another person and P intends the advantage to induce a person
to perform improperly a relevant function or activity or to reward
such improper performance.
(Case 2), where P knows or believes that the acceptance of the
advantage offered, promised or given, in itself constitutes the
improper performance of a relevant function or activity.
In case 1, it does not matter whether the person to whom the advantage is
offered, promised or given is the same person as the person who is to perform,
or has performed, the function or activity concerned.
The Act provides a definition of both the expressions “improper performance”
and of “relevant function or activity” (see Section 3, 4 and 5 of the Bribery Act),
whilst the expression “financial or other advantage” remains undefined.
In summary, an improper performance amounts to a breach of an expectation
that a person will perform a function or activity by acting in good faith or
impartially or that a person is in a position of trust by virtue of performing it.
For these purposes “the test of what is expected is a test of what a person in the
United Kingdom would expect in relation to the performance of the type of
function or activity concerned” (Section 5).
It is worth noticing that the offence applies not only to bribery relating to any
function of a public nature but also to “any activity connected with a business”,
performed in the course a person’s employment or performed on behalf of a
body of persons (where corporate or unincorporated). Therefore, bribery in both
the public and private sectors is covered.
It will be interesting to monitor how the case law will outline the boundaries of
bribery in the private sector. However, the Secretary of State’s guidance about
procedures which relevant commercial organizations can put into place to
prevent persons associated with them from bribing (“Secretary of State’s
Guidance”), which was published in 2011, seems to suggests a sound approach
to corporate events, where it states that “an invitation to foreign clients to attend
a Six Nations match at Twickenham as part of a public relations exercise
designed to cement good relations or enhance knowledge in the organisation’s
field is extremely unlikely to engage section 1, as there is unlikely to be
evidence of an intention to induce improper performance of a relevant
function”10
.
10 See Secretary of State for Justice, “Guidance about procedures which relevant commercial organizations can
put into place to prevent persons associated with them from bribing”, page 10, available at
http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf.
UK Bribery Act 2010 5
Section 6: bribery of foreign public officials
Section 6 creates a standalone offence of bribery of a foreign public official. In
particular, a person (“P”) who bribes a foreign public official (“F”) is guilty of
an offence if P’s intention is to influence F in F’s capacity as a foreign public
official, to obtain or retain business or an advantage in the conduct of business.
In principle, a large range of common behaviors may be now captured by the
new offence, as the latter requires a simple “intention to influence” the public
official’s conduct. This becomes self- evident by comparing the provision under
Section 1 (active bribery) and 2 (passive bribery) of the Bribery Act, where the
offence is triggered from a “improper performance” by the public official having
taken place or, at least, the proof of an intention to induce it11
.
Section 1 and 6 may capture the same conduct but will do so in different ways.
The Secretary of State’s Guidance suggests that such activity is very likely to
involve conduct which amounts to “improper performance” of a relevant
function or activity to which section 1 applies, but section 1, unlike section 6,
does not require proof of it or an intention to induce it”.
Coherently with a “zero tolerance” approach to corruption, facilitation
payments12
are not exempt from the Bribery Act and may be pursued by the
public prosecution, if occurred in the UK or abroad, as the case may be.
Furthermore, the offence under Section 6 is not committed where the official is
required or permitted by the applicable written law to be influenced by the
advantage.
It is once again self-evident that the wide scope of Section 6 conveys an
incredible “leverage effect” to the UK Authority, which will be able to purse any
suspected conduct related to a foreign investment of any company carrying on a
part of its business in the UK.
Section 7: failure of commercial organization to prevent bribery
The Bribery Act has now introduced a new criminal offence, which may be
committed where a commercial organization fails to prevent bribery under
Section 1 and Section 6 from being committed by a person “associated” with it.
11 According to the Guidance issued by Secretary of State for Justice in March 2011 “the policy that founds the
offence at section 6 is the need to prohibit the influencing of decision making in the context of publicly funded business opportunities by the inducements of personal enrichment of foreign public officials or to others at the
official’s request, assent or acquiescence. Such activity is very likely to involve conduct which amounts to
“improper performance” of a relevant function or activity to which section 1 applies, but section 1, unlike section 6, does not require proof of it or an intention to induce it”. This is because the exact nature of the
functions of persons regarded as foreign public officials is often very difficult to ascertain in with any accuracy
and the securing of evidence will often be reliant on the co-operation of the state any such official serve. To require the prosecution to rely entirely on section 1 would amount to a very significant deficiency in the ability
of the legislation to address this particular mischief”. For reference see “Guidance about procedures which
relevant commercial organizations can put into place to prevent persons associated with them from bribery” available at:
http://www.justice.gov.uk/guidance/docs/bribery-act-2010-guidance.pdf. 12“ Facilitation payments” are unofficial payments made to public officials in order to secure or expedite the
performance of a routine or necessary action. See also “Bribery Act 2010: joint prosecution guidance of the
Director of the Serious Fraud Office and the Director of Public Prosecutions” available at
http://www.sfo.gov.uk/media/167348/bribery%20act%20joint%20prosecution%20guidance.pdf
6 Matteo Grassani
In particular, under Section 7(1) of the Bribery Act, a relevant commercial
organization (“C”) may be found guilty of an offence, “if a person (“A”)
associated with C bribes another person intending to:
(a) to obtain or retain business for C, or
(b) to obtain or retain an advantage in the conduct of the business
for C13
”.
The company may be subject to an unlimited fine, in case of conviction14
.
The definition of “commercial organization” is aimed at capturing companies,
partnerships and any other body corporate, which may be established under the
law of any part of the United Kingdom or carry on business in any part of the
United Kingdom, if formed elsewhere. Section 7 covers both bribery committed
in the UK or abroad15
.
Furthermore, under the new statutory regime, the definition of “associated
person” remains vague, as it includes a person who performs services for or on
behalf of the commercial organization. The Bribery Act expressly states that (i)
the capacity in which the associated person performs services for or on behalf of
the commercial organization does not matter and (ii) any employee, agent or
subsidiary may fall under the definition of associated person (see Section 8)16
.
The commercial organization will have a full defence, if it can show that it had
in place “adequate procedures” designed to prevent persons associated with it,
from undertaking the corruptive conduct. Again the expression “adequate
procedures” remains quite broad, even if the Bribery Act assigned the task to
provide some guidance about these procedures, to the Secretary of State for
Justice.
4. The “six principles” underpinning adequate company procedures to prevent
bribery
The Secretary of State for Justice is responsible for publishing (and revising from time to
time) guidance about procedures that relevant commercial organizations can put into
place to prevent person associated with them from committing bribery17
.
The first guidance was issued in March 2011. It is of general application and is
formulated around six guiding principles. The guidance is not prescriptive and,
ultimately, it is for the company to analyze its own internal and external organization,
assess the different levels of bribery risk and, consequently, implementing the best way to
protect the company, though proportionate measures aimed at preventing bribery.
It must be clear from the outset, however, that the question whether an organization had
adequate procedures in place to prevent bribery in the context of a particular prosecution
is a matter to be only resolved by the courts taking into account the particular fact on a
case by case basis.
13 See UK Bribery Act 2010, Section 7(1). 14 See UK Bribery Act 2010, Section 11(3). 15 See UK Bribery Act 2010, Section 7(3). 16 See UK Bribery Act 2010, Section 8. 17 See UK Bribery Act 2010, Section 9.
UK Bribery Act 2010 7
According to the guidance published by the Secretary of State, procedures put in place by
commercial organization wishing to prevent bribery being committed on their behalf
should be informed by the following six principles:
1. Proportionate procedures
Any company should adopt a risk-based approach to managing bribery risks.
Therefore, any procedures adopted to prevent bribery are to be proportionate to
the actual bribery risks the company faces and to the nature, scope and
complexity of its activities.
Clearly, any risk assessment may vary depending on the sector, market or
jurisdiction where the company is active. For example, reliance on a third party
agent representing the company with foreign public officials would certainly be
a red flag and should be dealt within a specific procedure.
2. Top-level commitment
Top and senior management is in the best position to foster a culture of integrity
and “zero tolerance” against bribery. For this very reason, clear top-down forms
of communication and a direct involvement of senior management in developing
prevention procedures represent a key factor, when shaping anti-bribery
procedures and policies.
Formal statements from top management should be periodically repeated and
should be available to the employees (e.g. on the company’s intranet) and
counterparties.
Senior management is also to show effective leadership in bribery prevention
(for example, policies and procedures should be approved by the Board) and in
encouraging employee training and a transparent dialogue throughout the whole
organization.
3. Risk assessment
As explained, bribery risks may be both internal and external to the relevant
commercial organization. The level and areas of risk, therefore, are to be
assessed periodically, to make sure any anti bribery procedure is kept up to date
and properly tailored on the developing structure of the company.
Anti-bribery procedures may provide for different layers of protection and due
diligence depending on several factors:
where the business is to take place, as some countries present higher degree of
risk18
(country risk);
the economic sector involved, as some sectors (e.g. large infrastructures) are
more infested than others of bribery issues (sector risk),
the type of transaction to be made, as some transaction (e.g. licensing and
permits) often present a negative track record in terms of bribery history
(transaction risk);
the magnitude of a project, as prospected high value projects or with many
intermediaries often give rise to bribery concerns (business opportunity
risk);
the partners or suppliers involved, as certain relationships with politically
exposed persons may give rise to bribery risk (business partnership risk)
18 High risk countries are rated on the Transparency International Corruption Perceptions Index, available at
http://www.transparency.org/.
8 Matteo Grassani
4. Due diligence
For a company wishing to mitigate the risk of a possible charge under Section 7
of the Bribery Act, setting up proper due diligence procedures, covering all the
internal and external risks, which might lead to that charge, represents a key
factor of protection.
Any due diligence policy should address, among others, the following topics:
how to hire employees, select suppliers, liaise with partners, how to use local
agents.
5. Communication (including training)
The commercial organization needs to ensure that its bribery prevention policies
and procedures are embedded and well understood throughout the organization.
Hence, anti-bribery information should be always available and should be
addressed not only to employees, but also to counterparties, and should cover
various aspects (from recruitment to procurement and tendering).
Making information widely available to all employees assists in more effective
monitoring, evaluation and review of bribery prevention procedures.
Furthermore, “speak-up” and “whistle-blowing” procedures represent an
effective way to establish an anti-corruption culture. The same applies to
providing a good level of training to both new and existing employees.
6. Monitoring and review
Once “adequate” procedures are put in place, they have to remain as such during
time.
Hence, not only they have to be implemented, but they have to be monitored and
reviewed to make sure that they are duly changed or improved, as the company
itself may change over time.
Staff surveys, questionnaires and feedback may be used as additional tool for
these purposes. The Secretary of State makes clear that seeking form of external
verification or assurance of effectiveness of the anti-bribery procedures will not
prevent the prosecution from filing charges for failure to prevent bribery, as the
case may be.
5. The impact of the Bribery Act on corporate governance
Once a company finds itself caught under the Bribery Act, providing evidence of
sufficient adequacy of its procedures and compliance mechanisms may prove a very
difficult task. Not to mention that the pressure on senior management and legal
departments would rise quickly from the very early stage of any criminal investigation,
for protecting global business reputation and shareholders’ value.
For this very reason, the Bribery Act is going to affect (or maybe even revolutionize in
some cases) the whole “value chain” of any medium to large seize company in the day to
day activity: from its own core (the functioning of governing bodies) down to its
employees, agents, suppliers, contractors, sub-contractors, JV partners and customers.
Each single section of the chain is to be thoroughly reviewed against the requirements of
the Bribery Act, seeking for risks to be covered or mitigated and gaps or loopholes to be
tied up.
In utmost summary, the following topics should be discussed at senior management level,
when defining a course of action to put in place or enhance anti-bribery procedures:
UK Bribery Act 2010 9
(i) Board or Directors and Senior management:
The tone from the top is a key factor in order to foster an anti-bribery culture
and “zero tolerance” environment. This includes clear evidence of a strong
commitment by the board of directors and senior management, such as:
The board of directors should not only approve bribery prevention
procedures, but should communicate both internally and externally
the commitment to “zero tolerance” against bribery;
Members of the board and senior managers should clearly set the
ethical standards for the organization, and sponsor anti-corruption
campaign, through e-learning modules, speeches and company
events.
Anti-bribery policies should be enforced without complacency and
violations should be duly sanctioned.
Thorough background checks are critical for those employees and
directors in critical positions (e.g. board members or senior
managers).
i. Setting up a dedicated function for compliance and ethical matters
Those who have responsibility within the senior management of a company, to
deal with ethical conduct and compliance matters, have a key role in developing,
monitoring and reviewing adequate anti-bribery procedures. They should be
independent from commercial and trading functions, in order to avoid potential
conflict of interest situations.
Hence, a dedicated function may be set-up within a company, taking
responsibility for:
all ethical conduct related matters, including any code of
conduct, whistle blowing or speak up policy;
drawing up of the relevant policies, standards and guidelines
including anti-corruption, due diligence, hospitality, political
donations, power of attorneys, appointment of agents, conflict
of interest;
ensuring that all policies and standards are made available to all
employees, company intranet, and that are duly spread across
the various subsidiaries, and local representative of the function
should be considered, if not everywhere, at least for the
subsidiaries present in the most critical countries;
training of new joiners, employees and contractors.
drafting standard ethical clauses for agreements and JV
partnerships;
carrying out audits and investigations within the company and
subsidiaries.
ii. Managing the procurement process
Self-evidently, the procurement process is one of the most delicate aspects,
when it comes to bribery risk, as it deals with spending corporate money and
contracting third parties.
10 Matteo Grassani
First of all, roles of both procurement people and other internal functions, should
be carefully detailed and clarified, in order to avoid future any confusion in the
roles and responsibilities, in case questions are made under a criminal
investigation on “who did what” in the procurement process.
Secondly, the procurement process should assess potential risks or grey area for
the company deriving from a contract to be tendered, which could affect the
ability to operate in accordance with the business principles. Especially, the
analysis should map whole supply chain, including supplier’s sub-contractors
and agents, identify group risk categories, assess the risks (likelihood/probability
and impact/consequence) and mitigate them.
iii. Due Diligence
A complete due diligence standard and an effective series of checks on any
counterparty of the company (a contractor, supplier, JV partner) represents a key
factor to ensure a successful defence, in case of criminal investigation.
Any due diligence activity should seek for red flags and potential risks, highlight
them, assess them (high/low risk) and report them. A good practice is also to
refer to the Transparency International Corruption Perception Index, in order to
classify low risk and high risk countries, in order to differentiate accordingly the
due diligence activity.
It is self-evident that an ethical due diligence must be proportionate and
appropriate to the proposed transaction. In this respect, the value of the
transaction certainly comes into play to strengthen or loose the procedures.
However, even minor contracts should not be underestimated may generate
potentially huge liabilities when it comes to criminal investigation and the
prosecution needs to build his own case against the company.
Another potential trap comes from long established relationships. From one side,
they prove stability and good relationship with the counterparty. But, on the
other, they may hide a slack attitude of the company to find a suitable alternative
and even complacency to certain wrongful behavior of a long established
supplier. Therefore, long established relationships, should be treated carefully
and any red flag should not be overlooked.
iv. Public affairs and public relations
By the very nature of their activity, public affairs and public relations people
represent a source of potential exposure to bribery risks, as they deal with public
officials, ministers, authorities and governmental agencies.
A proper and thorough training on anti-bribery procedure for all the people
working in the public affair function is a key factor. Furthermore, two areas of
their activity must be carefully reviewed:
Hospitality policy will need to be carefully reviewed, aiming to
introduce forms of pre- approval for any gift and hospitality to
third party, whether private or public.
Reporting of public affairs activity must be complete and
transparent. An internal function should be informed of
meetings held with public officials, after each meeting.
The level of internal approval and reporting may be set following a
proportionate approach.
UK Bribery Act 2010 11
v. Trading
The balance between a commercial risk and an opportunity is often a fine line.
Unfortunately, the same applies to assessing and managing legal risks.
Trading functions are quick by definition, as they need to grab an opportunity
just as they spot it. Therefore, pure trading activity need to be reviewed and
analyzed soundly.
Where a market is liquid or regulated (e.g. a stock exchange, a power exchange;
a derivative exchange) due diligence requirement may be fined tuned depending
on the type of transaction ordinarily completed by the company. By the same
token, customized forms of control may be introduced on traders.
To the contrary, in over the counter markets (i.e. where the transactions is
conclude between two parties, in one to one negotiations), instead, anti bribery
procedures may need to be more stringent, as there is a greater market “opacity”.
vi. Standard anti-corruption clauses
It would be very difficult for a company to prove a “zero tolerance” approach to
corruption, if commercial contracts and the day to day business activity remain
impervious to a corruption event concerning a supplier, a customer or a even
business partner.
In other words, proper anti-corruption template clauses should be prepared in
advance. They should then be tailored to address different commercial
transactions, various geographical areas where the agreement may need to be
executed and the level of potential risk associated to the possible transactions.
Finally, they should be negotiated and inserted into every19
agreement signed by
the company.
When drafting standard clauses the following should be considered:
Express reference to Bribery Act and to specific obligations of
compliance upon the parties.
Contractual indemnity against any claims or losses arising from a
breach of the contractual provision.
Undertaking to provide prompt information on any investigation,
criminal prosecution or any public authority may start against the
counterparty.
Right of termination (or even automatic termination) to the
agreement, if the contractual counterparty is involved in any form
of corruption or fraud.
Whether the standard clause is to apply “one way” or be a mutual
clause.
Clearly, at the beginning, it will not be easy to impose anti-corruption clauses to
any commercial counterparties, especially those being less sophisticated.
However, the Bribery Act “menace” will certainly help in rapidly creating a
standard approach into the relevant industry or economic sector.
19 A dedicated and specific analysis should be clearly made for transactions on official trading markets, where
standard terms and conditions apply to each economic transaction.
12 Matteo Grassani
vii. Training
Far too often, companies focus mostly on their own “brand” and “mission”. But,
creating an anti-bribery culture should be a no less important priority.
Hence, all employees need to be trained and the company must set a high ethical
standard (although the level of training and the type of communication may vary
depending on their role within the company).
Put in another way, relationships among people, at any level, within the
company and between the company and any third party will need to undergo a
great deal of a “cultural” change, which is to be managed carefully, as people
will need to adapt to a new environment, where transparency and fairness must
become – to the possible- “traceable” and each employee should be able to
rewind its own actions, to logically explain them.
6. Conclusions
Based on the wide scope of the Bribery Act provisions, once a company has been caught
under the Bribery Act, proving adequacy of its procedures and compliance mechanisms
may prove very difficult. Therefore, adopting a legalistic or formalistic approach to the
new rules, may easily turn out to be a losing strategy for a company.
Hence, companies should rapidly take action to mitigate the new legal risks and liabilities
introduced by the Bribery Act, by reviewing their own corporate governance structure.
In particular, the best way forward is to create a foremost change in corporate culture:
decisions, governance rules and day to day actions have to become “traceable” and
“transparent”.
On the other hand, the cost for implementing a “major overhaul” of the existing corporate
governance may be quite costly, especially for medium and small companies. But, the
principle of proportionality suggested by the Secretary of Justice, according to which
adequate procedures are to be assessed against the scale and complexity of the
commercial organization’s activities, represents the main guide line to follow.
Some proportionate compliance expenditure today would certainly prove itself a good
defensive argument, once it comes to discuss about innocence or guilt.
***
Matteo Grassani is head of legal at BG Italia (gas and electricity), Milan, Italy. He
previously worked as head of legal at Endesa Italia (gas and electricity) for three years.
He spent nine years in private practice, including at Clifford Chance and Chiomenti
Rome. He is an Italian qualified lawyer, specialized in energy, project finance and
corporate finance. He wrote articles on energy matters and since 2010 he holds lectures at
LUISS University of Rome.