Cracking down on kickbacks

Come July, the Bribery Act will have been in force for 12 months. This controversial law found its way onto the statute books while Parliament was shaken by an expenses scandal that left MPs reluctant to question the Act’s opaque provisions.

Lawyers warned that legislation littered with loose definitions such as “lavish hospitality” and the notorious stipulation that demonstrable “adequate procedures” must be in place to deter corruption would lead to a rash of chaotic prosecutions. Have these fears been borne out?

Luke Tolaini has witnessed the Act’s gestation and birth. As a litigation partner at international law firm Clifford Chance, he sees this UK law hitting home across the globe. “This covers the world,” he says. “I’ve dealt with international clients on every continent concerning the Bribery Act.”

According to Mr Tolaini, the immediate impact of the UK’s showcase anti-corruption initiative has been indirect. “The real effect has been on commercial relationships,” he says. “It informs a company’s approach to questions of due diligence, acquisitions and divestments.”

Bribery and corruption are now a major part of risk management

The latter point is especially interesting. Mr Tolaini explains that any suspicion of a bribery and corruption issue hovering in the background renders it very difficult to sell a company in the new climate of ethical scrutiny.

He finds that businesses are very aware of the need to exhibit “adequate procedures” and to keep this policy bang up to date. “Because you have to stay alert to the implications of the Bribery Act as your business changes, there is continuous demand for time and resources to be dedicated to this subject,” he says.

The Act has sparked fears that the Serious Fraud Office (SFO) would embark on a blitz of high-profile prosecutions designed to bolster its own status at a time of public spending restraint. This has not been the case, but the ambiguities surrounding the Act’s vaguer clauses continue to haunt businesses and their legal advisers.

If it has had a positive impact, this has been in promoting ethical considerations to the first rank of commercial concerns. As Mr Tolaini observes: “Bribery and corruption are now a major part of risk management.”

Large companies can rely on extensive legal counsel. But how are the small and medium-sized enterprises (SMEs) coping with a new world of bribery awareness?

Myers Lister Price (MLP) is a Manchester law firm that counts a large number of SMEs among its client base. Stephen Attree, head of business services, notes that smaller businesses fear being targeted by bodies like the SFO because they lack the legal firepower of more formidable corporate targets.

While worries over aggressive enforcement have not been realised, the cost of reassurance has been very tangible. “We consult and advise on the Act’s ‘adequate procedures’, but smaller businesses do bear a greater burden of compliance. They have to spend money on this and they’ve not been helped by the lack of clarity,” says Mr Attree.

Not every small business finds the Act an imposition, however. Where a strong ethical framework has been well embedded, the legislation seems to require mere finessing.

Aero Stanrew manufactures electronic control systems for the biggest names in the aerospace sector. With clients such as Rolls-Royce and Raytheon, this north Devon-based company conforms to the highest standards in engineering.

“People buy from us on the basis of our expertise, not our price,” says managing director Clive Scott. This uncompromising approach to quality has been mirrored by a long-term concern with ethics. So, for Aero Stanrew, the Act only means codifying established attitudes.

“Previously, our approach to eliminating any suggestion of corruption was ad hoc,” says Mr Scott. “Now we have put procedures in place.” Staff have formal guidelines for the type of entertainment that is appropriate for customers and the nature of gifts that can be accepted from potential suppliers.

“The Act has not meant any increased workload here; it hasn’t changed anything, but it has helped us to clarify our stand,” he adds.

Has conforming to anti-bribery rules been a chore for Aero Stanrew? On the contrary, says Mr Scott. “If you are ethical, and you deal fairly and consistently with your customers, then it pays off.”