Corporate Hospitality and the Bribery Act
You may be forgiven if you were to conclude that corporate hospitality is an area which the new bribery act would surely focus upon. After all many people have asked ‘why else would we be invited to such an event’. Up until the publication of the guidelines it was a genuinely held view that the SFO would be interested in knowing where that nice bottle of wine had come from or why you had visited the rugby on a ‘little corporate jolly’.
The director of the Serious Fraud Office, Richard Alderman delivered a speech in April 2011, in which he said;
Normal corporate hospitality is a part of business and is part of building up the relationships that are needed in order to make businesses work... The notion that the SFO would be interested in an extra bottle of wine or the opportunity to watch a match at Twickenham seemed to me to be greatly exaggerated...
The Act does not prohibit bona fide hospitality and promotional expenditure that is reasonable and proportionate. The more lavish the hospitality or expenditure, the greater the inference that it is intended to encourage or reward improper performance or influence an official. As you already we appear to have a number of different tests to apply and steer us through the guidance on this aspect. For remember this, that whilst the Act does not prohibit hospitality, there are instances where such expenditure will form the basis of a bribery offence.
Bona Fide, Reasonable and Proportionate, Lavish - which do you apply?
The MOJ published guidance and said this about the subject;
Bona fide hospitality and promotional, or other business expenditure which seeks to improve the image of a commercial organisation, better to 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 Government does not intend for the Act to prohibit reasonable and proportionate hospitality and promotional or other similar expenditure intended for these purposes. It is, however, clear that hospitality and promotional or other similar business expenditure can be employed as bribes.
Is your definition of reasonable and proportionate, or lavish the same as Richard Alderman, your local police force or crown prosecutor? You certainly would not want to leave the job of deciding to your local crown court jury, ably assisted His Honour...
Joint Prosecution Guidance of the Fraud Office and the DPP
A further view has been offered by the way of guidelines for crown prosecutors to follow (and ultimately the Director of Public Prosecutions). They state that "the more lavish the hospitality or expenditure (beyond what may be reasonable standards in the particular circumstances) the greater the inference that it is intended to encourage or reward improper performance or influence an official."
Of course, ‘lavishness’ is only one factor which would be taken into account, other factors such as was the conduct not clearly connected with legitimate business or was it concealed may also bare weight on the prosecutor’s mind. The bribe must be intended to induce improper behaviour so the outcome and events that followed the hospitality would need to be considered, the timing of the event, the nature of the guest list may become as significant as the choice of event.
Clearly the Act is a significant piece of legislation that affects most UK organisations. It is a complex development for UK corporate governance and must be implemented by each business in accordance with its needs and exposure to such risk.
