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.