Charities and the Bribery Act 2010
29 June 2011
The Bribery Act 2010 comes into force on 1 July 2011. The Ministry of Justice published guidance earlier this year which shows that the Act can apply as much to charities as to other organisations. Charities should therefore consider taking appropriate steps to minimise the risk of liability under this new Act.
Scope of the Act
The Act completely replaces previous laws on bribery and corruption and essentially creates four new offences:
- Giving a bribe: It is an offence for a person to offer, promise or give a financial or other advantage to another person, where that advantage is intended to induce that other person to perform his functions or activities improperly, or reward that person for improper performance.
- Receiving a bribe: It is an offence for a person to request or accept a financial or other advantage if it is intended that, as a result of receiving that advantage, he will perform his functions or activities improperly.
- Bribing a foreign public official: It is an offence to offer or provide a financial or other advantage to a foreign public official with the intention of obtaining or retaining business or an advantage in the conduct of business.
- The "Corporate Offence": An offence will be committed by a "commercial organisation" if any of the bribery offences described above are committed by a person "associated" with (i.e. anyone performing services on behalf of) the organisation, with the intention of obtaining or retaining business or an advantage in the conduct of business for the organisation. However, it is a defence for the organisation to show that it had in place “adequate procedures” designed to prevent persons associated with it from committing acts of bribery.
Application to Charities and Trustees
The first three offences can be committed by an individual or body corporate and are in most cases are unlikely to impose significantly greater obligations on charities and trustees than those which they have been previously subject to.
However, the corporate offence is potentially much wider reaching. The Ministry of Justice Guidance makes it clear that a charity can be a commercial organisation for the purposes of the offence to the extent that it engages in commercial activities. The Guidance goes on to set out a risk-based approach to deciding what will constitute "adequate procedures" in practice.
The main areas of concern for charities are set out below.
If charities working either in the UK or overseas make so-called "facilitation payments" to prompt government action, such payments will constitute the commission of an offence - no exemption is provided under the Act. However, the Ministry of Justice Guidance indicates that the defence of duress is likely to be available in circumstances where there is no alternative to making such a payment in order to protect against loss of life, limb or liberty.
Corporate hospitality and benefits to donors
Charities must consider whether the provision of gifts, hospitality, or other benefits to donors could constitute the commission of an offence under the Act. The Guidance states that gifts and/or hospitality will only fall foul of the Act if they are intended to induce impropriety by the recipient in the carrying on of his or her activities or functions. Accordingly, a gift and/or hospitality which is proportionate and reasonable, and which has no improper purpose or intention, will not be caught by the Act.
The corporate offence
As mentioned above, the Guidance makes it clear that charities can be "commercial organisations" for the purposes of this offence, provided they are carrying on commercial activities (which, of course, many charities do).
This is a very wide reaching offence particularly as "associated person" is defined widely and can include anyone who performs services for the charity, including employees, contractors and independent commercial partners.
However, the Guidance seeks to provide assistance to commercial organisations in order to ensure that they can demonstrate that they have "adequate procedures" in place. The Guidance identifies six key principles which should shape the organisation's preparations:
- Proportionate Procedures
- Top-level Commitment
- Risk Assessment
- Due Diligence
- Monitoring and Review
The reference to proportionality should give smaller charities some comfort about the costs of compliance. The nature and extent of the procedures will depend very much on the nature and scope of the charity's work, the jurisdictions it works in, and the risks of corruption that it faces. For example, a charity operating in high risk jurisdictions such as African, Middle-Eastern or South American jurisdictions will likely require more sophisticated measures than a small UK or regionally-based charity.
All charities should, however, consider what risks of corruption they face and what procedures they need to put in place. Further guidance on how to approach this task can be found in our Self-Assessment Questionnaire. For a copy please email: email@example.com.
For further advice then please contact Nicola Manclark or Thomas Webb.