TI-UK Submission to MoJ Consultation on guidance about commercial organisations preventing bribery

Ministry of Justice (MoJ) Consultation on guidance about commercial organisations preventing bribery (Section 9 of the Bribery Act 2010) Submission by Transparency International UK (TI-UK)

November 2010

Ministry of Justice (MoJ) Consultation on guidance about commercial organisations preventing bribery (section 9 of the Bribery Act 2010) Submission by Transparency International UK (TI-UK) Contact: Chandrashekhar Krishnan, Executive Director, Transparency International UK (chandu.krishnan@transparency.org.uk) Introduction 1. A description of Transparency International UK is provided in the Annex.

2. After campaigning for many years for the reform of UK anti-bribery law, TIUK has welcomed the 2010 Bribery Act because, when in force, it will make the UK fully compliant with the OECD Anti-Bribery Convention as well as the UN Convention Against Corruption, and will provide prosecutors with an effective legal framework to prosecute bribery. From a corporate perspective, the Bribery Act is one of the best anti-bribery laws in the world. The Act was the product of lengthy and conscientious public consultation and parliamentary scrutiny. It represents the best consensus that can be attained among all stakeholders. It acknowledges that the UK must play its part in helping to combat one the world’s most pernicious evils.

3. TI-UK is disappointed that the commencement of the Bribery Act has been delayed until April 2011. Given the extent to which all stakeholders have participated in prior consultations, the Ministry of Justice (MoJ) is unlikely to learn more from this Consultation.

Moreover, the 'Guidance" which Parliament requested be provided to commercial organisations through section 9 of the Act cannot serve more than a minor role in influencing corporate conduct. However, the Guidance must under no circumstances result in any dilution of the Bribery Act or further delay the Act’s commencement.

TI-UK would oppose any proposals which had these effects.

4. TI-UK and TI engage constructively with UK companies as well as with foreign companies that have a presence in the UK. We believe that the vast majority of these companies wish to conduct their business ethically. The Bribery Act protects such companies because it makes it easier for them to resist demands for bribes including facilitation payments when operating in high risk environments.

It also strengthens their hand in requiring their business partners to observe high ethical standards. Through its extraterritorial application to foreign companies that have or conduct a part of their business in the UK, the Act, like the FCPA, helps to create a level playing field for companies that are committed to zero tolerance of bribery.

GENERAL COMMENTS 5. In July, TI-UK published its own guidance on good practice procedures for corporate anti-bribery programmes1. The TI-UK guidance is designed to assist companies to comply with the Bribery Act by providing clear, practical advice on good practice anti-bribery systems that in TI’s opinion constitute ‘adequate procedures’.

TI-UK hopes that its guidance will help larger companies adopt and apply sensible, practical measures consistent with the Act's requirements. TI-UK hopes to be able to publish a simpler set of measures aimed at SMEs. 6. The best guidance can do no more than offer common sense ideas on how a company can ensure that its policies and procedures may comply with the law. These ideas must be coupled with a clear and specific understanding of how each company conducts its business. Zero tolerance of bribery and support from the top for a robust set of consistent anti-bribery rules will ensure that a company does not find itself in the situation of needing to defend itself from bribery charges. TI-UK’s guidance is based on the premise that a company’s anti-bribery programme is more likely to be regarded as constituting ‘adequate procedures’ if it is based on good practice rather than an approach that solely uses compliance with laws to determine the structure of the programme.

7. TI-UK welcomes the draft Guidance published by the MoJ for public consultation.

The main part of it is concise, and sets out clearly, general principles and considerations that companies might bear in mind in ensuring they have adequate corporate procedures for preventing bribery and are compliant with the Bribery Act. 8. TI-UK agrees that the Government’s guidance should not be prescriptive nor attempt to set standards. It should not provide a ‘safe harbour’ where companies can take shelter against prosecutors on the grounds that they have ‘complied’ with the government guidance.

TI-UK shares the Government’s view that, whether an organisation had adequate procedures in place to prevent bribery in the context of a particular prosecution is a matter that can only be resolved by the courts, based on the particular facts and circumstances of the case.

9. TI-UK has had discussions with other UK charities and NGOs about the implications of the Bribery Act for the voluntary sector. UK NGOs, particularly those involved in overseas development, welcome the Bribery Act because it will help to increase the effectiveness of their development interventions in high risk environments. There is some uncertainty as to whether section 7 of the Bribery Act applies to UK charities and NGOs. It would be helpful if the Government’s guidance could clarify this point.

1

The 2010 UK Bribery Act Adequate Procedures – Guidance on good practice procedures for corporate anti-bribery programmes. Transparency International UK, July 2010. www.adequateprocedures.org.uk

SPECIFIC COMMENTS 10. TI-UK’s comments in response to the specific questions raised in the MoJ’s consultation and related issues are set out below.

Question 1 Are there principles other than those set out in the draft guidance that are relevant and important to the formulation of bribery prevention in commercial organisations? If so what are they and why do you think they are important?

Answer: NO 11. TI-UK believes that the six principles set out in the Government’s draft Guidance are comprehensive. TI-UK suggests that the six principles should be re-ordered so that 'Top level commitment' is the first and basic building block for the rest, i.e.: • • • • • •

Top level commitment Risk assessment Clear, practical and accessible policies and procedures Effective implementation Due diligence Monitoring and review

Companies should start the development of their anti-bribery systems based on a clear commitment to zero-tolerance of bribery. This is a precursor to risk assessment.

Question 2 Are there any procedures other than those set out in the draft guidance that are relevant and important to a wide range of commercial organisations? If so what are they and why do you think they are important?

Answer – NO. However, TI-UK has some suggestions to improve clarity and comments that are set out below.

Page 15, Box text on Principle 4: 12. TI-UK suggests the second sentence be amended as follows: “Policies and procedures take account of the roles of the whole work force from the owners or board of directors to all employees, and all people and entities over which the commercial organisation has control, or who provide services to, or on behalf of, the commercial organisation”. This amendment would reflect the importance of due diligence in relation to persons associated with a commercial organisation, as defined in Section 8 of the Act. Page 15, Policy and Procedure Documentation: 13. In the second bullet, it would be desirable to include ‘sponsorships’ after charitable contributions.

Page 16, Management of incidents of bribery:

14. The text states that, “The organisation will need to decide whether to refer the matter to law enforcement agencies.” Bearing in mind the evolving policy of the SFO to encourage companies to self-report, it would be helpful if this sentence could be changed to encourage prompt consideration of selfreporting and to take account of the SFO's current guidance.

Page 18, External Verification: 15. TI-UK is pleased to see the inclusion of external verification in the Government’s draft Guidance. In that context, TI has just published for public consultation its draft of the TI Framework for Voluntary Independent Assurance of Corporate Anti-bribery Programmes.

Pages 21-23: 16. TI-UK welcomes the inclusion of the section entitled ‘Some specific issues’ in the Government’s draft guidance, which attempts to address legitimate concerns that have been expressed about issues related to local laws, hospitality and promotional expenditure and facilitation payments.

However, we feel that the illustrative scenario on facilitation payments (Annex B, page 28), which makes a reference to the FCPA, does not accord with the TI-UK position that, in compliance with existing UK law and the new Bribery Act, companies should have policies prohibiting such payments.

17. TI-UK is aware of concern that some forms of business promotional expenditure involve a financial or other advantage that might influence a foreign public official in his or her official role, with a view to winning or retaining business for a company, and may thus be treated as an offence under section 6.

18. TI-UK notes that the draft Guidance offers comfort that reasonable and proportionate hospitality or promotional expenditure to improve the image of a commercial organisation, better to present products and services, or establish cordial relations, is recognised as an established and important part of doing business. The draft Guidance also clarifies that, where the prosecution is able to establish a financial or other advantage has been offered, promised or given, but there is no sufficient connection between the advantage and the intention to influence and secure business or a business advantage, then section 6 is unlikely to be engaged.

19. TI-UK hopes that these assurances will meet legitimate concerns.

Companies that incur promotional expenditures that are transparent, proportionate, reasonable and bona fide are unlikely to find that these will be treated as in breach of section 6 or other offences under the Bribery Act. However, companies must think responsibly as to what conduct meets these criteria, and not simply ignore them in the interests of ‘business as usual’.

20. TI-UK notes that the draft Guidance states (on page 21) that, “ “Offset” arrangements, whereby some kind of additional investment is offered or required as part of an organisation’s tender are unlikely to give rise to any difficulties under section 6 where such arrangements are subject to legislative or regulatory provision”.

TI’s experience and research in this area have shown that offsets can often present high corruption risks, particularly in industry sectors like defence. We therefore suggest that the Guidance should encourage companies to apply enhanced due diligence when entering into offset arrangements.

Question 3 Are there any ways in which the format of the draft guidance could be improved in order to be of more assistance to commercial organisations in determining how to apply the guidance to their particular circumstances?

Answer – NO Questions 4 and 5 Are there any principles or procedures that are particularly relevant and important to small and medium sized enterprises that are not covered by the draft guidance and which should be? If so what are they and why do you think they are important?

In what ways, if any, could the principles in the draft guidance be improved in order to provide more assistance to small and medium sized enterprises in preventing bribery on their behalf?

Answer: NO. However, some comments are made below.

21. TI-UK believes that the Government’s draft Guidance contains much that would be helpful to small and medium-sized (SMEs) enterprises in devising effective anti-bribery systems. However, it would be even more helpful if Annex B included some case studies that are relevant to micro-businesses (with staff of less than 10), bearing in mind that the vast majority of SMEs are very small businesses.

22. As TI-UK recognised in its own guidance, SMEs may benefit from more practical guidance that is relevant to their size, resources and needs. TI-UK hopes to produce a separate guidance document for SMEs. We appreciate that the Government cannot produce separate guidance for SMEs under section 9.

However, after the commencement of the Bribery Act, the Government could encourage and support efforts by organisations representing SMEs interests, such as the Federation of Small Businesses, to develop practical guidance for SMEs. TI-UK will be happy to contribute to this process.

Annex Transparency International UK (www.transparency.org.uk), the UK national chapter of TI, fights corruption by promoting change in values and attitudes at home and abroad, through programmes that draw on the UK’s unique position as a world political and business centre with close links to developing countries.

TI-UK: • • • •

Raises awareness about corruption; Advocates legal and regulatory reform at national and international levels; Designs practical tools for institutions, individuals and companies wishing to combat corruption; and Acts as a leading centre of anti-corruption expertise in the UK.

TI-UK’s vision is for a world in which government, politics, business, civil society, domestic and international institutions and the daily lives of people are freed from corruption, and in which the UK neither tolerates corruption within its own society and economy, nor contributes to overseas corruption through its international financial, trade and other business relations.