A bungload of trouble...
June 1st 2011

Matthew Bridger, associate at lawyers Thomas Eggar cautions that the Bribery Act, which comes into force next month, could require changes in how logistics companies handle international operations

The Government has issued the much awaited Guidance to accompany the Bribery Act 2010 which is coming into force on 1 July 2011.

The Government has sought to emphasise that companies, when reviewing their anti-bribery policies and procedures, should adopt a risk based approach. This effectively puts the onus squarely on the companies to assess the risks of bribery occurring within their business and tailor their policies and procedures to address those risks.

While the Guidance states that a company will not have to have policies in place where it does not believe there is a risk of bribery, the company will undoubtedly need to demonstrate that it undertook an assessment process in the first place.

The Guidance has maintained the Government position that all bribery is corruption and therefore there is no "acceptable" level. In particular the Government maintains that all facilitation payments (i.e. bribes to facilitate routine (often foreign Government officials') actions) constitute bribery and are illegal, in contrast to the US Government's position which makes allowances for small "grease" payments.

One of the most hotly debated subjects arising out of the Bribery Act was how facilitation payments would be treated. The UK Government appears to be unequivocal in its position but it will only be through enforcement that it will demonstrate how robust it is prepared to be.

Given the nature of facilitation payments and the circumstances in which they arise, it would appear that this would be the most prevalent form of bribery worldwide those involved in the logistics industry would be at most risk from.

The risk would appear two-fold – first the risk of the employees making direct facilitation payments; and secondly the risk of facilitation payments being made by a third party in respect of cargo or goods being transported by the logistics company (for instance by the owner or recipient) – and the procedures that a logistics company needs to put in place to combat these threats are very different.

Facilitation payments tend to be payments demanded, often by government officials, to carry out what is effectively their job in any event. Under the Act, unless the payments are permissible under the local written law, then any payment (or other benefit) in these circumstances would be an offence under the bribery act. It is widely acknowledged that in a number of areas in the world it is common practice for officials, such as customs officials, to require a facilitation payment and arguments of local custom or practice is not enough to legitimise the payment for the purposes of the Act.

In these jurisdictions the logistics companies will be subject to an inevitable tension between their obligations; to the client to provide a fast and efficient logistics service and avoiding instances of bribery and corruption, which may delay this service.

The Government's view, particularly in the case of facilitation payments, is that companies should focus on risk assessment and preventative measures so as to avoid being placed in a position where a bribe is demanded in the first place, or the company (or its employees) are placed in a position where not to pay the bribe would prevent the company from carrying out its service.

While the guidance's suggestions such as "advising those demanding payments that compliance with the demand may mean that [the company] will commit an offence under UK law" are unlikely to make such headway in overturning a systemic culture of bribery, suggestions such as using UK diplomatic channels to stop demands for payment may be more helpful. By referring endemic corruptive practices to the local UK embassy companies are able to place at least some of the onus back on the government. If the government fails to prevent the bribery or, even worse, fails to take any action, then it would be extremely awkward for the government to prosecute a company under the Bribery Act where it has taken all reasonable measures to prevent bribery occurring. Effectively the government would be in the position of arguing that the company should have ceased to trade in that jurisdiction due (at least in part) to its own failings.

Different problems are posed by payments made by third parties, which might constitute an offence under the Act. In these circumstances a company may not even be aware that payments are being made, and not have the ability to prevent them.

However, lack of knowledge or the inability to prevent bribery occurring is unlikely to form a sufficient defence if those making the payments are considered to be sufficiently "associated" with the company.

Companies should still therefore analyse the risks and take action to minimise the risk of bribery occurring to its business.

For instance, terms and conditions should be amended to ensure your company is able to terminate its services, without liability, in the event it becomes aware offences are being committed under the Act, which it is in any way facilitating or potentially party to.

Similarly, a sophisticated logistics company will be on notice if it receives illegal payment demands in respect of all cargo through a particular port save for the cargo of one supplier. The logistics company will be expected to deduce that payments may be being paid by a third party and that further investigation (such as to examine its client's or designee's anti-corruption policies and implementation) should take place.

Therefore, if they have not already done so, companies should now start analysing the risk of bribery (under the broad definition of the Act) occurring within their businesses in order that any necessary measures can be taken and put in place in advance of the Act coming into force on 1 July 2011.

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