- uncertainty in the law prior to the act in the case of corporate gifts and hospitality

- Bribery Act 2010- S.7 Corporate Hospitality, how and why it came into existence
- Distinguish expenditure on hospitality in reference to legitimate bettering of relations and
corrupt attempts to secure contracts how is the distinction made and the boundary policed
- Proportionate Procedures
- Uncertainties: Loopholes Fair Warning

- “Hospitality or promotional expenditure which is reasonable, proportionate and made in

good faith is an established and important part of doing business. The Act does not seek
to penalise such activity.”
- From this it can be deduced that there is a distinction between permissible corporate hospitality and hospitality which
is designed to have a corrupting influence. The real question is where does this distinction lie?

- Uncertainty in the law prior to the Act

Various nations were recognizing the need to eliminate bribery and corruption through criminal
and civil sanctions1, the need was instigated by the two leading international anti-bribery
conventions: the Organization for Economic Co-operation and Development(OECD) Convention
on combating bribery of Foreign Public Officials in International Business Transactions 2 and the
United Nations Convention Against Corruption (UNCAC) 3. Neither of these articles provides
substantive guidance on how individual nations should define the scope of corporate criminal
liability, As a consequence, nations that seek to define the specific actus reus (and mens rea, in
some cases) of punishable bribery related conduct are left to their own devices in deciding
whether to borrow from existing language in their own or other nations’ criminal codes or craft
wholly new language. For more than three decades the dominant legislative model for countries
in drafting corporate criminal offenses for bribery has been the United States’ Foreign Corrupt
Practices Act (FCPA)4 .

1
The Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions has forty-three signatories, including all OECD
countries, and eight non-OECD countries. See OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions, OECD, http://www.oecd.org/corruption/oecdantibriberyconvention.htm (last
viewed Sept. 8, 2017). The United Nations Convention Against Corruption has 140 signatories and 181 parties. See
United Nations Convention against Corruption Signature and Ratification Status as of 12 Dec. 2016, UNITED
NATIONS OFF. ON DRUGS & CRIME, http://www.unodc.org/unodc/en/treaties/CAC/signatories.html (last viewed
Sept. 8, 2017)
2

4
See 15 U.S.C. §§ 78dd-1 et seq
 - Bribery Act 2010

A new model for anti-bribery legislation called the United Kingdom Bribery Act received Royal
Assent5 in 2010. The Act was brought about to address a variety of issues in the United Kingdom
Criminal Law system, not only bribery in the aspect of commercial and government contexts but
also corporate criminal liability6. The Act created offenses of bribing another person 7, being
bribed8, and bribing foreign officials, these offences apply subject to certain judicial constraints
on corporate liability9 to corporate entities10. The Bribery Act brought about a new corporate
bribery-related offense called “Failure of commercial organization to prevent bribery”.
Subsection 7(1) states this “failure to prevent” offense as follows:
(1) A relevant commercial organisation21 (“C”) is guilty of an offence under this section if a
person (“A”) associated with C bribes another person intending—
(a) to obtain or retain business for C, or
(b) to obtain or retain an advantage in the conduct of business for C. 11

Subsection 7(2) allows a company, as an affirmative defense, “to prove that [it] had in place
adequate procedures designed to prevent persons associated with [it] from undertaking such
conduct.”12 This subsection is further delineated in Section 9, which requires the Secretary of
State to “publish guidance about procedures that relevant commercial organisations can put in
place to prevent persons associated with them from bribing as mentioned in section 7(1).”13The
potential liability exposure created by Section 7 is addressed in Section 11, which subjects a
company convicted under Section 7 to a fine that has no statutory limit.14 Subsection 7(2) allows
a company, as an affirmative defense, “to prove that [it] had in place adequate procedures
designed to prevent persons associated with [it] from undertaking such conduct.”23 This
subsection is further delineated in Section 9, which requires the Secretary of State to “publish
guidance about procedures that relevant commercial organisations can put in place to prevent
persons associated with them from bribing as mentioned in section 7(1).”24 The potential
5
See U.K. MINISTRY OF JUSTICE, THE BRIBERY ACT: GUIDANCE 6 (2011),
http://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf
6
The Yale Journal Of International Law Online Section 7 of the United Kingdom Bribery Act 2010: A “Fair Warning”
Perlustration Jonathan J. Rusch*
7

10
See Peter Alldridge, The U.K. Bribery Act: “The Caffeinated Younger Sibling of the FCPA,” 73 OHIO ST. L.J. 1181,
1200 (2012).
11

12

13

14
liability exposure created by Section 7 is addressed in Section 11, which subjects a company
convicted under Section 7 to a fine that has no statutory limit.25 The new corporate offence
for ‘failure to prevent bribery’ provision (s.7) places secondary criminal liability for
another’s actions and is a first in the international anti-corruption arena. This new
legislation allows the court to sidestep the limitations of corporate criminal liability
under UK’s common-law identification doctrine (established in Tesco v Nattrass case),
whereby a company is held criminally liable only on the basis of the acts and state of
mind of senior company officials who represent its “directing mind and will”, which is
inadequate in today’s modern decentralised multi-national corporation.  It applies strict
liability to a relevant commercial organisation which carries on a business or part of a
business in the UK, whereby bribery was committed by an ‘associated person’ (defined
as a one who ‘performs services’ for or on behalf of the organisation). The company’s
only defence against this offence is to prove that it had in place “adequate procedures”
to prevent bribery from taking place. In comparison, FCPA’s accounting provision does
not permit compliance programmes to shield a company from liability (Breslin et
al.,2010). Hence, this new measure may not be as draconian as perceived. Notably, it is
irrelevant whether the associated person is unconnected with the UK or the entire
offence takes place outside the UK. For example, a parent company incorporated in
Japan, whose agent based in China bribes a Chinese official for the parent company’s
benefit, could be prosecuted in the UK because one of its subsidiaries is located in the
UK, regardless of the fact that the UK subsidiary was uninvolved in the act of bribery in
China (Harris, 2012). This place a huge burden on foreign companies to have adequate
anti-bribery procedures in place, even though it only carries out a small part of its
business in the UK. Hence, it may deter foreign companies from setting up business in
the UK.

- Distinguish expenditure on hospitality in reference to legitimate bettering of relations and

corrupt attempts to secure contracts how is the distinction made and the boundary policed
- Another concern raised relates to gifts and corporate hospitality, which is used to smoothen
business relationships and is generally accepted to be a legitimate part of doing business.
-

Due to the wide definitions employed under s.1 and s.2 of the Act, both giving and receiving corporate
hospitality could potentially be unlawful if the “improper performance” test is satisfied. However, it will
be subjected to evidence and its surrounding circumstances. This area is further governed by s.7, which
makes commercial organisations responsible in reviewing their policies on hospitality and promotional
or other business expenditure in the selection and implementation of their bribery prevention
procedures. The only defence is to demonstrate that it had adequate procedures in place to prevent
bribery. Notably, certain cases of offence for giving and receiving a bribe may be prosecuted without
proof of intent. According to the ‘expectation test’, it will suffice if a reasonable person in the UK
 consider that in accepting the hospitality, the function was improperly performed as a result. Hence, the
recipient or giver of this hospitality can be guilty of an offence without knowing that this ‘friendly
gesture’ amounted to a bribe. In comparison, the FCPA only applies to person giving or offering a bribe
and not to those accepting one. The ambiguity of the law has created many confusions and uncertainties
among businesses in relation to its application and to what extent is corporate hospitality considered a
bribe. However, due to the lack of trialled cases, the extent of it will depend on the results of future
prosecutions. Nonetheless, the Ministry of justice assured that “Bona fide expenditure which seeks to
improve the image of a companies is recognised as an established and important part of doing business
and it is not the intention of the Act to criminalise such behaviour”

From this it can be deduced that there is a distinction between

permissible corporate hospitality and hospitality which is designed to have a corrupting influence.
The real question is where does this distinction lie?

The Offences
BA 2010 redefines the offences of offering and receiving bribes and in doing so repeals the existing
common law and statutory framework, which governed bribery and corrupt practices. In
essence, BA 2010, s.1 introduces an offence of bribing another person. This involves the offering of a
financial or “other” incentive to provide an “improper activity”. Equally, under s.2, it would be an
offence to be the recipient of such an inducement to act in an improper manner. As such, in some
cases it might seem that a good lunch or other generous hospitality could be testing the boundaries
of bribery.
However, for all but the most gluttonous examples of lunch, this will not be the case. Firstly, it would
need to be shown that the inducement had the effect of procuring an “improper performance” which in
itself requires a breach of good faith, impartiality or trust. As the Ministry of Justice clarified in
the BA 2010 Guidance, the (objective) test is what a reasonable person in the UK would expect in
relation to the performance of that function or activity.
Clearly, it would certainly be an unusual lunch to have such a profound effect. Therefore, it is likely to
create a distinction between hospitality, which is clearly intended to have the effect of a bribe,
and hospitality where the purpose and effect is unclear. Indeed, it is likely that in the less blatant
instances of generous hospitality, it would be very difficult to prove that such hospitality had the
causal effect of inducing the improper activity.
Yet, even if it could be demonstrated that hospitality had such a persuasive effect, the SFO would
have to be satisfied that such a prosecution would be in the public interest. The public interest
requirement has also been subject to clarification in the joint guidance, it has been outlined that:
“A prosecution will usually take place unless the prosecutor is sure that there are public interest factors
tending against prosecution which outweigh those tending in favour.”

(2011) 175 JPN 381 at 382

For the avoidance of doubt, the factors weighting in favour of a prosecution are:

1.  
●     That a conviction for bribery is likely to attract a significant sentence;
1.  
●     pre-meditated offences;
1.  
●     that the offence was committed in order to facilitate more serious offending; that those
involved were in positions of authority or trust and took advantage of that position.
 Whereas the factors deterring a prosecution include:

1.  
●     That a court is likely to impose only a nominal penalty; the harm can be described as
minor and was the result of a single incident;
1.  
●     there has been a genuinely proactive approach involving self-reporting and remedial
action.

A Matter of Proportion
Clearly, each investigation will turn on its own facts. In an attempt to provide clarity, the Ministry of
Justice cites the example of:

“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 organization's field
is extremely unlikely to engage s.1 as there is unlikely to be evidence of an intention to induce
improper performance of a relevant function.”

While this is a helpful example of a specific factual circumstance, it is hard to extrapolate any
consistent interpretation of how far hospitality can be afforded.
Rather, it is evident from the guidance provided by the prosecuting bodies that they will take into
account reasonableness and proportionality when looking at the conduct and then when making the
decision of whether or not to prosecute.

It is also clear that the SFO is continuing to encourage self reporting of offences, as it cites this as a
mitigating factor when considering whether or not to prosecute. However, this does leave scope for
ambiguity and uncertainty.

The concern is that if as a result of the lack of guidance, it is left for the courts to decide what is
reasonable then it makes it very hard for businesses to plan and regulate their conduct — after all,
this seems to be failing the very mischief of the Act.15

15
No Such Thing as a Free Lunch? - (2011) 175 JPN 381