UK Bribery Act’s ‘adequate procedures’ – guidance for SMEs

25 April 2018

Background

In the recent case of R v Skansen Interiors Limited (unreported), the UK Bribery Act 2010’s (the Act) ‘adequate procedures’ corporate defence was argued in the UK Court for the first time. Skansen Interiors Limited (SIL), a refurbishment fit-out business, was found guilty by a jury of failing to prevent bribery under s.7 of the Act. This case will be of interest to UK corporates, particularly small and medium sized enterprises (SMEs).

 

Argument for the Defence – low risk = limited compliance?

SIL argued that for a small business with a low-risk local client base, limited Anti-Bribery and Corruption (ABC) efforts were enough for the ‘adequate’ procedures defence, making the following key arguments:

  1. It was common sense that one should not pay bribes and the culture of the firm was to act with honesty and integrity.  Staff did not need a detailed policy to explain that.
  2. There was no specific ABC policy, however SIL had a number of policies which stated the importance of dealing with third parties in an ethical, open and honest manner.
  3. There were financial controls which required multiple levels of approval before invoices could be posted on the company’s ledgers and paid.
  4. The contracts to which the bribes related contained clauses prohibiting bribery, based on standard construction industry terms.

The jury rejected SIL’s claim that these measures were ‘adequate procedures’ for the prevention of bribery.

 

Argument for the Prosecution – guidance for companies

In Skansen there was no comment by the judge on what “adequate” may look like under s.7 of the Act, however, the prosecution’s arguments do provide an insight into their expectations as the Act’s enforcer:

  1. Record compliance – there were few records of SIL’s efforts to manage the risks created by s.7 of the Act. It is important that conversations about compliance, including next steps, are documented and kept under review.
  2. Communication and training –whilst SIL did have various policies which were available to all staff there was no evidence of training or any active communication.
  3. Who is responsible and top level commitment – the prosecution highlighted SIL’s lack of a designated individual with responsibility for ABC compliance.  SMEs without resource for a specialist ABC advisor should ensure that there is still someone at a senior level who ‘owns’ ABC compliance.  A record should be kept of this appointment and any key actions this person takes.
  4. Compliance is ongoing and needs to be monitored – SIL had taken no specific steps when the Bribery Act came into force, such as implementing an ABC policy and related procedures.  All companies should use changes in law or circumstances (e.g. starting to operate in a new country, or provide a new service) to ensure compliance controls remain fit for purpose.

It is worth noting that all of these specific points closely mirror what is expected under the Ministry of Justice’s Bribery Act Guidance, which UK officials (both CPS and SFO) are obliged to consider when deciding whether or not to prosecute each particular case.

 

So, where does Skansen leave SMEs?

For businesses hoping to understand precisely what is ‘adequate’ for purpose of the s.7 defence, this is an important reminder that, since this is always ultimately a question for the jury, this will never be a completely certain point of law.

Rejecting SIL’s s.7 defence, the Skansen jury clearly took that view that it is reasonable for companies to have stronger ABC policies and procedures than they had in place, even if the risk of bribery or corruption is low.

In particular the verdict highlights the need for SMEs to understand the Act, assess their risks and educate personnel.  Crucially, no ‘adequate procedures’ defence is very likely to succeed without records and evidence of compliance that can be used in court.

In short, the ‘adequate procedures’ bar is clearly higher than SIL had thought and it is important that other SMEs listen to the Skansen message and take steps to ensure they are not exposed. For some SMEs it may be time to rethink their idea of ‘adequate’ ABC procedures.

 

Chris Cartmell

Chris Cartmell | Senior Manager (Solicitor), Regulatory and Commercial Disputes
Profile | Email | +44 (0) 20 7212 8849

Tom Dale

Tom Dale | Senior Associate (Solicitor)
Profile | Email | +44 (0) 20 7804 7237

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