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Guidance notes on Bribery Act suggest common sense will rule

The Government's guidance on the controversial Bribery Act is to offer an olive branch to business as its publication today kicks off the three-month countdown to the act becoming law.

Stephen Gentle, a partner at Kingsley Napley, said: "The Government is trying to provide a comfort blanket to businesses. It are saying: 'A common sense approach will see you through.'"

City experts who have seen a draft copy of the guidance document drawn up by the Secretary of State for Justice believe the reaction will be mixed. However, one said: "Many thought it would prevent companies doing business. The Government seems to have been responsive to that."

The Bribery Act was given Royal Assent last April and was meant to bring the UK in line with the Foreign and Corrupt Practices Act in the US. It was set to be enacted the same month but was delayed a year as the Government announced a public consultation.

The Justice Secretary Ken Clarke said companies will have at least three months from today before the Act comes into force.

Businesses have been furiously lobbying to soften the guidance. John Cridland, the head of the CBI business lobby, said the legislation was "not fit for purpose" and expressed fears that British businesses' competitiveness could suffer. Yet an institutional investor body feared watering down the act could affect Britain's reputation.

The previous law was based on legislation stretching back to 1889 and was seen as too antiquated to cover bribery today adequately. The updated act brings in a maximum sentence for bribery of 10 years – up from seven years – an unlimited fine, disqualification of directors and potentially confiscation of property. It covers both offering and agreeing to a bribe. Brent McDaniel, the head of anti-bribery and corruption at KPMG, said: "The mandate is to stamp out grand scale corruption in high risk countries."

There had been concern among businesses that they would no longer be able to offer clients hospitality for fear of facing charges, including for example tickets to the London Olympics in 2012.

The Government has moved to calm these fears. The guidance said it recognised "bona fide" hospitality as an important part of doing business, and that the Government did not want to criminalise "reasonable and proportionate" behaviour. It gives some examples, saying that taking foreign clients to a rugby match at Twickenham would be "extremely unlikely" to contravene the law. However flying them to a distant destination with lavish accommodation might be questioned. Geoff Nicholas, the co-head of Freshfields' global investigations practice, said: "It will come down to judgement calls to define the limits, particularly when dealing with foreign government agencies."

The Bribery Act applies to any commercial activity in the UK wherever the business entity is incorporated. Furthermore it extends to activity abroad if carried out by a UK registered business or by an employee who is a UK resident or normally resident here.

However, it is an adequate defence that a company has established a clear anti-bribery framework and embedded it in the business culture according to the six principles the guidance sets out including risk assessment and top-level commitment.

It comes down heavily on the bribing of foreign officials, but the one place where the legislation goes further than in the US is over facilitation payments, or "small bribes paid to facilitate routine government action". Unlike America there will be no exemption for such payments under the Bribery Act, although this was also the case under previous legislation.