At this time of year thoughts often turn to the summer when days are longer and the bright mornings and light evenings make for endless opportunities to indulge in summer parties, watch Andy Murray storm to victory at Wimbledon (well, hopefully!) and indulge in a plethora of golfing activities.  Often, keen to develop important relationships, companies extend invites to golf days, golfing weekends or sometimes golfing holidays as well as other corporate hospitality events.  However ever since the introduction of the Bribery Act 2010 (the “Act”), the scope and extent of such hospitality has to be seriously considered to prevent companies falling foul of the Act and being investigated by the Serious Fraud Office.

In the early days …

Initially, when it was introduced, the Act raised concerns given the offences in the Act are so widely drafted and seem, at first blush, to prevent the making and receiving of many types of ‘promotional expense’ including taking a supplier to a sporting event or paying for transport and accommodation for a customer on a trip to a factory during a marketing exercise.  Given a company can be liable for preventing a bribery offence if a person associated with it (including, but not limited to, employees, agents and subsidiaries) bribes another person to either obtain or retain business for it, or to obtain or retain an advantage in the conduct of business, this was quite a scary prospect.  However, the then Justice Secretary Ken Clarke gave some comfort to businesses when he announced in the guidance accompanying the Act that "Bona fide hospitality, promotion or other business expenditure which seeks to improve the image of a commercial organisation, better present products and services, or establish cordial relations, is recognised as an established and important part of doing business and it is not the intention of the Act to criminalise such behaviour ... The guidance makes clear that no one is going to try to stop businesses getting to know their clients by taking them to events like Wimbledon, Twickenham or the Grand Prix … Reasonable hospitality to meet, network and improve relationships with customers is a normal part of doing business."

What hospitality is permitted?

Notwithstanding the guidance clients often struggle to identify what is and isn’t allowed in the arena of hospitality.  As detailed above, in itself, corporate hospitality is legal and permitted so long as it is reasonable and proportionate.  However gifts and hospitality are often vulnerable to being used or perceived as bribes and the only defence is for the organisation in question to show that it had adequate procedures in place to prevent this conduct.

In a commercial context (that is not involving foreign public officials) for there to be an offence, the prosecution must show that the hospitality:

(a)  provided an advantage to another person; and

(b)  was offered or given with the intention of inducing the person to perform a relevant function improperly or in the knowledge of acceptance of the advantage would in itself be improper performance.

The provision of bona fide hospitality, promotion and other business expenditure is acceptable. The intention of the legislation is to catch hospitality which is really a cover for bribing someone.  Consequently, in determining whether the accepting or offering of hospitality will be classed as a bribe, consideration must be had to the intention behind the offer, its value and its timing.

If the underlying intention is to show thanks or to act as a token of a good working relationship, for example by hosting a summer drinks party this shouldn’t be a problem.  However if there is really no business development aspect at all, for example by providing a customer with tickets to Wimbledon for him and his family, without any attendance by a member of the business, this is likely to be open to attack.  Worse still, if, in reality, it is designed to induce improper decision making on the part of the recipient of the gift or hospitality this is highly likely to fall foul of the Act.

Consideration must also be had as to whether the gift or hospitality is of relatively modest value in the context of the industry.  The more lavish the event or gift the more scrutiny it will require.  Finally, consideration should be given as to when the offer is made.  If it’s during a tender procurement process or in the midst of an ongoing dispute over the provision of services etc., this is likely to receive criticism.

Protecting Your Business

To protect your business, it is best practice to have an anti-bribery policy that is reviewed and updated regularly clearly setting out any prohibitions on gifts, expenses or hospitality that might influence a contractual or material matter.  Employees should be clear on the upper limit for gifts, hospitality and/or expenses and ideally all gifts, expenses and hospitality should be documented in a register. Thresholds must be set in the context of the industry to reduce the risk of an investigation by the Serious Fraud Office.

We anticipate intensified anti-bribery enforcement activity by the Serious Fraud Office throughout the year and as such recommend that all of our clients take the opportunity to review and if necessary revise their anti-bribery procedures.  If you have any concerns over gifts or hospitality offered or received please don’t hesitate to contact us.