The temptation and the problem
London 2012 corporate hospitality packages – on the face of it, fantastic, once-in-a-lifetime opportunities to create an impression and promote business. However, organisations and clients are not necessarily taking advantage of these opportunities and not just because of the hefty cost of tickets (the cost to attend the opening ceremony on 27 July is as high as £7,500 per person).
At a recent Business Ethics debate at the House of Lords, held by GoodCorporation, senior figures in some of the UK’s leading companies confirmed that when it comes to hospitality, Olympic tickets are the most likely to be turned down and the reason for this – the Bribery Act 2010 (the Act) which came into force little less than a year ago.
About the Act
The Act created two offences relevant to the provision of gifts and hospitality in the corporate context including:
- Offering a bribe to an individual in the private sector, or to a UK public official.
- Bribing a foreign public official.
On conviction of either of these offences, individuals will be liable to up to ten years’ imprisonment, an unlimited fine, or both. Companies will be liable to an unlimited fine only. There is in addition, an offence of agreeing to receive or accepting a bribe. Organisations can also be barred from tendering for public contracts.
There is a defence available to an organisation if it is able to show that it had “adequate procedures” in place to prevent bribes taking place. This is explained below at “Steps Organisations Should be Taking”.
Would corporate hospitality at London 2012 be seen as a Bribe?
The difficulty in answering this question comes from the fact that although the Act has been in force for almost one year, there has been little commentary on it. There has been only one reported case where a Court Clerk was imprisoned for three years for accepting £500 to “get rid” of speeding charges by keeping details off a court database.
Other cases where the Serious Fraud Office (SFO) has investigated allegations under the Act have been settled. These cases have included those against BAE Systems and Innospec. The SFO has been criticised for the low level of information that has been made publicly available in relation to these settlements on the basis that there is uncertainty over whether the penalties are proportionate.
Guidance has been issued on the Act by the Ministry of Justice and more recently (30 March 2011) the Director of the Serious Fraud Office and the Director of Public Prosecutions. However, even the most recent guidance does not make specific reference to the Olympics despite the fact that it has been known that London had secured the Games since 2005 and as a result of such an occasion, there could be fertile grounds for bribery.
The most recent guidance states that “Hospitality or promotional expenditure which is reasonable, proportionate and made in good faith is an established and important part of doing business. The Act does not seek to penalise such activity.”
The guidance goes on to state that: “the more lavish the hospitality or expenditure… the greater the influence that it is intended to encourage or reward improper performance or influence an official.” Other factors may also be considered when determining whether an offence has been committed for example, the hospitality/expenditure not being connected with legitimate business activity or being concealed.
In summary, it is a matter of opinion as to whether corporate hospitality at London 2012 could be seen to be a bribe. It would appear that it is nothing short of “lavish”; it is not something that people could do every day of their lives and it could cost thousands of pounds to entertain one guest at such an event. That said, we believe that there are ways for businesses to continue to enjoy this once in a lifetime experience without fearing prosecution for bribery, see “Safeguards for Hospitality at London 2012”.
General Steps Organisations Should be Taking
In view of the offences and penalties contained within the Act, organisations should carry out the following steps as a minimum:
- Carry out a risk assessment – identify the particular risks for bribery within the organisation.
- Actively involve senior employees – bribery usually involves senior employees therefore it is a good idea to involve them in promoting a culture across the organisation that bribery is unacceptable.
- Have a clear culture – zero tolerance to any form of bribery. Encourage a “speak up” culture with no fear of repercussions.
- Due diligence – organisations should carry out due diligence before entering into deals with third parties.
- Have clear, practical and accessible policies to the whole workforce – such policies as corporate hospitality and gifts, register of gifts and events, procurement, anti-corruption and bribery, whistleblowing, grievance and disciplinary. Ensure that the policies are suitable for the organisation’s needs and requirements.
- Ensure effective implementation of policies – having the policies is not sufficient; ensure that they are communicated to the workforce and that training is provided where appropriate.
- Take action – investigate and document every incident of a suspected breach,
- Monitoring and review – ensure that the procedures are reviewed at least once a year.
Going forward, businesses should ensure that hospitality is “reasonable and proportionate” and be prepared to face increased scrutiny. It is good practice for the organisation to retain a record of who is being invited where and the justification for the invite.
Safeguards for Hospitality at London 2012
Organisations intending to take clients with them or attend the event as a guest should ensure that necessary safeguards are put in place to avoid the business being caught out. This would include undertaking the steps set out above and where inviting guests, making the invitation openly and having an audit trail in place to show the intent behind offering or receiving hospitality.
The SFO has made specific comments in relation to the Olympics and stated that “there is nothing wrong with building relationships. Expecting something in return is what is wrong.” It has been indicated that the SFO would look into incidents where for example, invitations to the Games include extras such as extended hotel stays and free travel for friends and families of guests. We would strongly advise you to avoid offering these “extras” to your guests and to support the contention that the purpose of the hospitality is purely business, avoid inviting spouses.
For more information about the Bribery Act 2010 and its potential impact on offering or receiving corporate hospitality at London 2012, please contact a member of the Floyd Graham & Co team on 01604 871143 or email@example.com.
This update is for general guidance only and does not constitute definitive advice.