Corporate hospitality is a vital part of many businesses - there's nothing like a few drinks to loosen a client's purse-strings. But it may be time to put the champagne and canapés away, because 2011 could be the year that your firm’s client hospitality practices make the news for all the wrong reasons.
The Bribery Act 2010 is currently due to come into force in April 2011. This means that if anyone working for you, even as an agent, is found to have given or offered a bribe you could be liable to pay an unlimited fine unless you can show that you have adequate procedures in place to prevent bribery.
So imagine the scenario: Your team is taking an important potential client for a night out in the West End of London. You decide to go for dinner at a mid-priced restaurant, and then to a cocktail bar. At 12.30a.m., the client suggests a visit to a lap-dancing club. He would like you to pay. What do you do? Could paying for the evening’s entertainment be construed as a bribe?
The official line
According to the Bribery Act, this company will be liable under the Bribery Act only if the hospitality is intended to induce the client to perform a function improperly. In a letter on the Bill as it was going through Parliament, it was stated that ‘the Government is not seeking to penalise expenditure on corporate hospitality for legitimate commercial purposes. But lavish corporate hospitality can be used as a bribe to secure advantages and the offences in the Bill must therefore be capable of penalising those who use it for such purposes.’ (Lord Tunnicliffe, 14 January 2010). No further guidance appears in the Act and it is left up to prosecutors to decide whether to prosecute in each individual case.
The onus is therefore on the company to make sure that its hospitality falls on the right side of the line. According to Transparency International, hospitality must not be excessive, given too often, or have a low level of business content and it must not leave the recipient in a position of obligation. In this context, dinner and drinks are more likely to be seen as reasonable than the trip to the lap-dancing club - although the vague wording of the Act means that judging what is appropriate is a delicate exercise.
The Bribery Act is likely to cause problems for most companies in this respect. What is excessive hospitality for one company or client may be entirely normal for the next. If the wrong judgement is made then the only defence is to show that your organisation has‘adequate procedures’ in place to prevent bribery. Guidance was due to be published on this point by the Ministry of Justice in January. Nothing has been published to date.
This delay can only increase the uncertainty and difficulties for companies who will have to have procedures in place by the timethe Act comes into force. Whether they are ‘adequate’ or not will, ultimately, be a matter for the courts.
Andrew Henley is a barrister at Furnival Chambers and director of Robing Room