The Bribery Act is a significant piece of legislation in the UK’s battle against corruption both at home and abroad, and has potential implications for all businesses, across all sectors in the UK.

The Act came into force today, the 1 July 2011.

In order to determine the extent to which businesses are preparing, or failing to prepare, for the Bribery Act, Russell Jones & Walker commissioned a survey which was carried out over an eight-week period, commencing in mid November 2010.

Most of the responses were drawn from the three main sectors which will potentially feel the greatest impact of the Act’s implementation: financial services, property and construction, and media and advertising.

How prepared are UK businesses?

Despite our suspicions that businesses were not sufficiently geared up for the Act, the level of unpreparedness was still surprising.

11% of businesses surveyed were not even aware of the Bribery Act and 33%, although having heard of the Act, were not aware of the details.

The Act has followed a trend by legislators to increase exposure of corporate entities to criminal liability.

It will be a defence to an allegation of bribery if businesses have implemented adequate anti-bribery policies and procedures.

These policies will be required to address the risk of offences being committed both in the UK and overseas, as well as offences committed by either an employee or third party.

Surprisingly, of those surveyed only 29.4% had an anti-bribery policy in place, and only 16% had put in place training provisions for all relevant staff.

This indicates that the vast majority of businesses are exposed to a risk which can be easily resolved with some simple, proactive advice.

The SFO and the Act

In the event that a competitor makes a complaint that another business has committed a bribery offence, the SFO may investigate.

No doubt for the majority of businesses the burden of coordinating a response to the SFO will fall on the shoulders of in-house counsel who would be best advised to seek external specialist advice as early as possible.

The SFO will want to see a clear statement of an anti-corruption culture fully and visibly supported at the highest levels in the company.

It will expect to see a policy on gifts, hospitality and facilitation payments, as well as a policy on outside advisors and third parties, including vetting and due diligence and appropriate risk assessments.

The company may also need a policy concerning political contributions, lobbying activities and training policies for staff, and be able to demonstrate that its commitment to its anti-bribery code applies to all business partners and that an appropriate and consistent disciplinary process is in place.

Implementing these basic policies are just some of the measures in-house counsel or risk managers should consider if they haven’t already.

Corporate hospitality

Our survey also found, somewhat unsurprisingly, that businesses who were aware of the Bribery Act expressed particular concern over changes to the level of corporate hospitality they could both allow and accept once the Act comes into force.

Businesses of all sizes incur costs in their interaction with clients and business partners and a certain degree of corporate hospitality is a legitimate part of every day business relations.

It is accepted that most businesses need to both retain existing clients and meet new customers through relationship building, which inevitably includes some form of corporate hospitality.

Our research found that 55% of businesses surveyed suspected or were sure that they had lost out to a competitor due to their excessive corporate hospitality, and only 3% believed that this had never happened.

This could suggest that businesses are still attempting to out do their competitors with lavish entertainment in order to create new business or retain clients who may be being wooed by competitors.

It is in this context that the Bribery Act could affect most businesses.

Interestingly, the introduction of the Bribery Act coincides with the Wimbledon semi-finals on 1 July, where ticket prices for the men’s finals on Sunday can be purchased for just over £2,500 per ticket. 43.7% of those surveyed thought that providing Centre Court tickets at Wimbledon for a client’s managing director could be classed as excessive corporate hospitality and could be inferred as an offence under the Bribery Act.

If the invite extended to the MD and his friend, then 79% of those surveyed believed that this could be considered an offence.

Corporate entertaining is a huge feature not just of Wimbledon but also many other sporting events.

The long-awaited guidance put proportionality as the primary principle informing how the Bribery Act will be applied to corporate hospitality, and clearly states that normal and legitimate hospitality will not engage the Bribery Act.

It follows, therefore, that if a company’s policies are clearly thought out and consistent, and the use of corporate hospitality is not excessive, then these proactive measures should afford the business some protection.

If buying Wimbledon tickets, for example, was in line with the policy then there is no reason why this in itself should be seen as an offence.

In the event such entertainment were to attract a complaint to the SFO, then the overall relationship with that client would be examined, taking into account the company’s policies.

Overall relationship management

There is no doubt that under the Bribery Act businesses will be required to conduct all aspects of their working relationships within a more rigorous legal framework - a change for which many, even at this late stage, are still relatively unprepared.

Key demands made on in-house counsel may require a greater contribution in the boardroom to alert directors to the risks of noncompliance, in both a professional and personal capacity, and the need to introduce new systems of work and delivery of training that support compliance.

Our survey clearly illustrates that many businesses were unaware or unprepared for such changes and in some cases are even unfamiliar with the provisions of the Act itself.

Compliance with the Bribery Act for businesses of any size will demand a change in their mindset, policies, procedures, training and risk management tools, and requires the will of the board to implement the results.

Those businesses which have not yet acknowledged the risks may be holding themselves ransom to the actions of untrained employees and connected third parties.

The demands of the Bribery Act fall squarely within an international context that is less and less accepting of both bribery and systems that fail to guard against the risk of bribery.

Craig McAdam is a solicitor in the Business Crime and Regulation team at Russell Jones & Walker