UK Ministry of Justice Guidance on the Bribery Act - an Australian perspective

Publication | 31 March 2011


The UK Ministry of Justice has published its final guidance under Section 9 of the Bribery Act 2010 (the Act) regarding the “adequate procedures” that must be in place if a commercial organisation is to successfully defend a prosecution for “failing to prevent bribery” under Section 7 (the Guidance).

This offence will also apply to any foreign business which carries on part of its business in the UK. As a result Australian corporations which carry on part of their business in the UK need to be fully familiar with what they need to have in place so that they can rely on that defence.

In addition to clarifying the scope of the new corporate offence of failure to prevent bribery by persons associated with an organisation, the Guidance also addresses the question of which foreign companies will fall within the scope of the offence, advises how commercial organisations should approach the provision of corporate hospitality and discusses further the issue of "facilitation payments”.

In addition, the Director of the Serious Fraud Office (the SFO) and the Director of Public Prosecutions have produced joint guidance for prosecutors (Joint Prosecution Guidance) to encourage a broad consistency of approach to the Act between the police, the Crown Prosecution Service and the SFO and to set out the factors to be taken into account when making a decision to prosecute. This joint guidance is equally significant, given that a prosecution may only be brought with the consent of one of the Directors. The Act will come into force on 1 July 2011.

Application to foreign businesses

As the offence of “failing to prevent bribery” will apply to any foreign business which may be considered to be carrying on part of its business in the UK, such organisations should consider the Guidance closely to ensure that the policies and procedures which they have in place to prevent bribery are consistent with what is required by the Guidance. If they do not currently operate policies of the kind suggested by the Guidance, then they need to have these in place by 1 July 2011.

Adequate procedures

The Guidance emphasises that an organisation’s procedures to prevent bribery should be “proportionate” to the particular bribery risks faced by that organisation and to the “nature, scale and complexity” of its activities. There is no “one-size-fits-all” approach for the procedures to be adopted, but all businesses should start by conducting an assessment of the risk of bribery being committed by the organisation or by persons associated with it (associated persons) worldwide. The risk might increase because of the countries where business is carried out, the sector concerned, the type of transaction, the significant value of a particular project, or the business relationship concerned. The Guidance provides examples in each case. Internal factors may also impact the level of risk to which the organisation is exposed, for instance a bonus culture that rewards excessive risk taking, or lack of anti-bribery commitment from senior management.

The Guidance sets out Six Principles for adequate procedures:

  • Proportionate procedures
  • Top-level commitment
  • Risk assessment
  • Due diligence
  • Communication (including training)
  • Monitoring and review.

Commentary and case studies are included in the Guidance to demonstrate how the Six Principles might work in practice.

In a recent speech, the Director of the SFO has publicly addressed a perceived misconception about the defence of adequate procedures. Some people have commented that if bribery occurs it means that the procedures were by definition inadequate – the Director recognises that “it is perfectly possible for a business to have adequate procedures and yet to find that there is a problem about bribery somewhere in its globalised operations.” If that business had adequate procedures in place across its global network, it will have a complete defence to the offence of failing to prevent bribery by associated persons.

Associated persons

The definition of an “associated person” remains a broad one (namely, someone who “performs services” for a business), although the Guidance has provided some much-needed clarification in this respect. For example, the Guidance has confirmed that a subsidiary will not always be the “associated person” of its parent company (for example, if it merely remits dividends to its parent). The Guidance also explains that an organisation is only liable for the actions of its associated person if the bribe was intended (by such an associated person) to benefit the organisation directly. It clarifies that a bribe paid by an employee of a subsidiary is normally intended to benefit the subsidiary and not the parent company, even though the parent may benefit indirectly. Thus a parent will not always be caught by bribes paid by or on behalf of a subsidiary.

There has also been concern among commentators that every entity in a chain of sub-contractors or suppliers might be an associated person of the entity at the top of the chain. However, the Guidance explains that a contractor or a supplier will generally be deemed to perform services only for the entity with which it has a direct contractual relationship.

A further concern for many businesses has been their responsibility in the case of joint ventures. The Guidance considers two different types of joint ventures. In the case of a joint venture through ownership of a separate legal entity, the Guidance notes that an employee of the joint venture entity is likely to be performing services for that entity only and will not be associated with the participants in the joint venture. In addition, a bribe paid on behalf of the joint venture may be deemed to benefit the joint venture entity only, even though the owners may benefit from it indirectly. Thus shareholders may not be held liable for all activities of the joint venture company. The situation becomes more complicated if the employee of the joint venture entity was seconded by (and remains an employee of) one of the joint venture participants.

Where the joint venture is conducted through a contractual agreement, the Guidance states that an employee of one of the parties is likely to be associated with his direct employer only, and a bribe paid by the employee is probably paid for the benefit of that party only. The degree of control that each party has over the joint venture arrangement will be a relevant factor in this respect.

In addition, the Guidance states (and the Director of the SFO has acknowledged) that applying procedures retrospectively to existing associated persons, such as existing joint venture partners or existing contractors, might be difficult, but that it should be done over time. Accordingly, initially they will expect a higher standard of procedures in respect of new joint ventures as opposed to existing ones.

Of course, the question of who is deemed to be an associated person and whether a bribe can be said to have been paid on behalf of the commercial organisation will ultimately depend on the particular circumstances of each case.


The Guidance clarifies which foreign companies will fall within the scope of the offence of failing to prevent bribery. The Guidance states that a foreign company with a subsidiary in the UK is not necessarily “carrying on a business or part of a business” in the UK and so may not, by that mere fact alone, be subject to the jurisdiction of the Act. The Guidance also suggests that a company will probably not be carrying on business in the UK merely because it is listed on a UK stock exchange.

The Director of the SFO, on the other hand, has indicated on a number of occasions that the SFO intends to take a wide view of the extra-territorial jurisdiction of the Act. He has said that in order to protect ethical British businesses and ensure an international level playing field, he wishes to pursue their foreign competitors who pay bribes. The Joint Prosecution Guidance is, however, deliberately high-level and remains silent on this point. Ultimately, the territorial scope of the Act will be a matter for the English courts to decide and the SFO’s future prosecutions will be informed by the first cases to be decided by the courts.


Reasonable and proportionate business hospitality that seeks to showcase products or services or to cement relationships will fall outside the scope of the offence. Hospitality will constitute bribery only if the provision of the hospitality is intended to induce someone to breach a relevant duty defined in the Act or to influence a foreign public official. The Guidance provides examples of acceptable hospitality, such as taking a client to a sporting event, or paying for a foreign public official to travel abroad for a site visit and then providing a meal and entertainment. Most commercial organisations will already have policies in place regarding hospitality, gifts and entertainment and they must continue to exercise their good judgment and common sense as to what is proportionate in the circumstances.

Facilitation payments

The Act provides no exemption for facilitation payments which, in common with the vast majority of international legal systems, will amount to bribery (with the exception of legally required administrative fees, or fast-track services). The elimination of facilitation payments remains a UK Government objective because such payments have a corrosive effect on the countries in which they are paid. However, the Government acknowledges the difficulty of eradicating such payments in the short term and has provided some comfort to businesses by confirming that prosecutorial discretion will be applied where necessary. The Director of the SFO has said publicly that some companies have not yet eradicated facilitation payments and he is prepared to be sympathetic, provided that the company is “genuinely committed to achieving zero tolerance” of facilitation payments and “there is meaningful commitment within a reasonable timeframe.”

Joint Prosecution Guidance

The Joint Prosecution Guidance explains that as with other criminal offences, prosecutors apply the two-stage test of

  • whether there is sufficient evidence to provide a realistic prospect of
    conviction, and
  • whether a prosecution is in the public interest.

So, for example, whereas an act of bribery being committed by somebody in a position of authority or trust may suggest prosecution, minor harm resulting from a single incident of bribery or the adoption of a proactive approach involving self-reporting and remedial action may outweigh the first consideration and tend against a prosecution being pursued.


The message from the Guidance is that a commercial organisation can demonstrate that it has “adequate procedures” by conducting regular risk assessments and implementing proportionate measures to address the risks identified. The Guidance has a strong commercial focus and provides much needed clarification on the issues of corporate hospitality and facilitation payments. However, it remains the case that the Guidance may have limited weight in the English courts: the Guidance does not have the force of law and can be revised by the Secretary of State at any time. The effect of the Act will depend on how it is interpreted by prosecutors and the courts and, ultimately, there remains a risk that they will approach issues such as “associated persons” or the territorial scope of the Act more strictly than the Guidance suggests.

Finally, whether or not a company’s activities come within the scope of the UK Act, strict bribery laws are becoming more commonplace around the world. China, for instance, has recently introduced measures to combat the bribery of foreign public officials and other countries are expected to follow suit (see our March 2011 briefing note on this topic). A further incentive for all companies to address their bribery risks as a matter of urgency is that their business partners, for their own protection and reputation, will increasingly expect to see evidence that a business has in place adequate procedures. If such evidence is not forthcoming, the possibility of certain business relationships being lost, or at least, affected, cannot be ruled out.