As the Bribery Act revised guidance is finally released, should it be giving retailers sleepless nights or are the risks lower than the media might suggest? Rebecca Thomson reports

The Bribery Act has caused plenty of debate in the retail industry, with the Government’s original plans for tackling corporate corruption being derided as too vague and too draconian. But while some concerns over the legislation may be justified, some experts insist the Act won’t cause as many problems as expected for retailers.

After much controversy over the draft guidelines produced last September, new guidance was released last month with the aim of clarifying issues that caused concern. From July 1, retailers will be liable for any bribes given or received by their own company, and for failing to prevent bribes given or received by anyone they are associated with in other countries. Penalties for failing to do so include possible prison sentences and unlimited fines.

The consequences are certainly serious, but what relevance does this have for retailers? The Act was brought into existence because of cases like that of BAE Systems, which in 2009 was the subject of a Serious Fraud Office prosecution for overseas corruption. UK retailers are, of course, unlikely to become mired in allegations of bribery over arms deals in Saudi Arabia, but the Act does require extra work and greater vigilance and the first draft came in for criticism for being too wide and threatening even basic corporate hospitality.

The response from the retail sector to the new guidelines is mixed. While some highlight the problems it still causes for UK companies that are keen to expand abroad, others praise the Government’s newly pragmatic approach. N Brown chief executive and chairman of the CBI Northwest Alan White says: “It’s another layer of bureaucracy and we’re still waiting to see the fruits of the Government’s promise that there would be no overall increase in legislation.” But, he adds:”I would be surprised to see any prosecutions coming through as a result of normal retail business. Common sense has prevailed and the guidance is more sensible than the first draft, which was a lawyer’s bonanza.”

Parts of the Act relevant to retailers

  • Section 1 Offering or giving a bribe to another person is not permitted
  • Section 2 Receiving or requesting a bribe is not permitted
  • Section 6 It is an offence to bribe a foreign official
  • Section 7 It is a corporate offence to fail to prevent bribes committed by a company or person in partnership with your company In correspondence relating to the guidance on the Ministry of Justice’s website, which clarifies the Act’s stance on corporate hospitality, it states: “Corporate hospitality is an accepted part of modern business practice and the Government is not seeking to penalise expenditure on corporate hospitality for legitimate commercial purposes.”

What’s a breach?

Under the new guidelines, companies must decide themselves, in each case, the likelihood that they are breaching the Act. They need to assess the risk that a certain type of hospitality could be seen as too lavish, or try to avoid getting into a situation where they are required to pay a facilitation payment to get goods through customs quickly - these payments are required regularly in some countries as a normal part of business. “The Government wants them to be proactive,” says David O’Hanlon, associate at law firm Thomas Eggar. “A lot of people were hoping the Government would come out with guidance on policies and procedures that companies can just adhere to. But the onus is on companies to work it out, and to work out the policies they need.”

A British Retail Consortium spokesman says the Act presents some “significant problems” for retailers because it makes them responsible for the behaviour of all the businesses in their supply chain - including those without direct relationships. “Scrutinising every company in the supply chain is impractical,” he says. “Given that retailers are under real pressure now anyway, there has to be some very big question marks over why this sort of extra burden is being added.”

But while the extra work is undeniable, there’s no need to panic, says Mark Abell, partner at Field Fisher Waterhouse. Retailers simply need to make it clear in their agreements with suppliers and franchisees that bribery is not tolerated, and ask their suppliers in other countries to show they’ve done the same. Unwritten contracts also need to be formalised. The work boils down to a stringent plan of risk assessment - to identify which areas need attention - and producing tightly worded agreements and a paper trail that proves you’ve thought about the risk of bribery and acted to prevent it. “By taking the right precautions you’ll be fireproof,” Abell says.

Commercial pressures

Another problem is the absence of a lower limit below which the Act doesn’t apply. There was some talk, O’Hanlon says, of a minimum level threshold being set so that minor payments - such as facilitation payments that are commonly used by retailers to speed up the process of getting product through a port - can go ahead.

But instead, it simply advises retailers to find ways around the problem, and try to avoid being in a situation where these payments are needed. The advice includes working with non-governmental organisations and within diplomatic channels to try to get goods through customs without parting with cash - but if the point of facilitation payments is to speed things up, starting to get embroiled with diplomats might not achieve the desired effect. “The difficulty, then, is the commercial pressures of getting things done. Diplomatic channels are not always quick. There’s a tension between best practice and what, in some areas of the world, will happen,” says O’Hanlon.

Whether the Act does dent retailers’ ability to compete overseas remains to be seen - there are some areas that could cause problems for UK companies. It’s a possibility, for instance, that larger suppliers with more clout will be less keen to work with retailers requiring them to labour over producing evidence of an anti-corruption policy. And what’s seen as bribery and corruption here can be seen as a legitimate way of doing business in other countries - the biggest headache is likely to be the shortage of black and white answers in an area that can be notoriously murky.

But for some, the risks are low. As White says: “I don’t see them hunting out every little bit of bribery going on around the world.” There have been some high-profile cases such as BAE Systems, “so we’ve ended up with a sledgehammer to crack a nut”, he adds. “But I just don’t see this legislation as being targeted at businesses like ourselves, and it’s not something I’m going to be losing any sleep over.”

Issues to consider

  • Lawyers recommend taking a step back and analysing the risk involved in each situation and for each business, and decide whether payments could be seen as bribes
  • Each retailer is different, and the level of risk differs according to factors such as the countries traded in and the number and type of suppliers used
  • Top level commitment is needed, and this needs to be communicated effectively both internally and externally The appropriate policies and procedures need to be put in place, and a system of monitoring set up so they are constantly reviewed
  • Corporate hospitality is unlikely to cause problems for retailers, but anything too lavish could attract attention so risks need to be considered. Retailers will need to figure out ways around facilitation payments and find solutions that don’t involve giving money to officials