The Bribery Act 2010: dealing with the risks

The Ministry of Justice announced on 20 July 2010 that the Bribery Act will come into force in April 2011.

Bribery in sport continues to hit the headlines. FIFA's ethics committee recently investigated the comments of the former English Football Association Chairman, David Triesman, concerning the bidding process for the 2018 and 2022 football World Cups before taking no action. John Higgins is to appear before a tribunal to give evidence in relation to allegations around alleged payments for affecting the outcome of frames. Meanwhile, the tennis integrity unit has recently fined players for failing to report being asked to throw games, sets or matches.

Investigations into allegations of individual acts of bribery are notoriously complex and finding sufficient evidence can be difficult.

The Bribery Act 2010 replaces and enhances the UK's current patchwork of statutory and common law anti-bribery prohibitions. With increasing regulatory enforcement action against bribery and other forms of corruption, the impact of the Act is already being felt as organisations pre-emptively assess and tighten up their internal compliance programmes to mitigate as much as possible the risk of non-compliance and the severity of any sanctions should they fall foul of the law.

Key provisions

The Act sets out, in broad terms, four categories of offence:

1. bribing another person;

2. being bribed;

3. bribing a foreign public official; and

4. the failure of a "relevant commercial organisation" to prevent bribery by an associated person (the Section 7 Offence).

A relevant commercial organisation includes a company or partnership incorporated or formed in the UK or which carries on business in any part of the UK and an "associated person" is defined widely to include employees, agents and subsidiaries.

Offences (i) to (iii) can be committed by both a corporate entity and an individual, both of whom can be potentially liable for an unlimited fine and/or up to ten years' imprisonment. At the corporate level, action can be brought against "senior officers", such as directors and partners, where it can be demonstrated that the offence took place with their consent or connivance.
 
The Section 7 Offence is punishable by an unlimited fine.

A bribery conviction can have wider implications for both individuals e.g. director disqualification, and business e.g. blacklisting from public procurement exercises.

The UK's approach to bribery law differs significantly in important respects from that of other jurisdictions e.g. that of the US under the Foreign Corrupt Practices Act (FCPA).

The territorial scope of the Act is extremely wide. The corporate offence of failing to prevent bribery can be committed by a relevant commercial organisation irrespective of where the bribe takes place. The other offences apply, and can be prosecuted in the UK, when they are committed in the UK but also where they are committed outside the UK by a person with a "close connection" with the UK. The concept of a "close connection" captures, for example, British citizens/residents and UK incorporated bodies and Scottish partnerships.

What should you do now?

• Carry out risk assessments and audit policies and practices to assess the nature of and to minimise the compliance risks thrown up by the Act, particularly in relation to the use of third parties such as agents, distributors and sub-contractors.

• Ensure adequate prevention procedures are in place - under the Act commercial organisations will have a defence to the Section 7 Offence if they can point to having "adequate procedures" in place to prevent unlawful conduct. The Secretary of State is required under the Act to provide guidance as to what "adequate procedures" actually means and the present government has indicated that it will issue guidance three months before the new law becomes effective. 

• Ensure that any corporate code of conduct or ethics code reflects the Act as well as other relevant law, such as the FCPA.

• Directors and senior management should take a lead on implementing and maintaining an anti corruption culture.

• Brief employees about the Act and train staff on existing and new procedures.

• Check and update detailed procedures on gifts and hospitality, facilitation payments and vetting of external agents and suppliers.

Consultation - September 2010

The Government will launch a short consultation exercise in September on the guidance about procedures which commercial organisations can put in place to prevent bribery on their behalf.

This is expected to be published early in the New Year to allow affected organisations an adequate familiarisation period before the Act commences.

The consultation will be followed by a series of awareness-raising events to ensure everyone is aware of the changes the Bribery Act makes to the current law.

Please contact your regular contact and/or email BriberyActCompliance@shepwedd.co.uk if you require any further details on the Act and the compliance services that we offer.

22 July 2010

Referees win age discrimination appeal against mandatory red card

Four football linesmen (or to give them their official title, "assistant referees") have won their challenge against a default retirement age of 48 imposed by Professional Game Match Officials Limited (PGMOL), the body which provides referees for professional football.

Officials can apply to be retained beyond age 48 but if they are refused (and any appeal is unsuccessful) then they can no longer continue as elite officials. An employment tribunal has found that the practice of retiring officials at age 48 was discriminatory on the grounds of age.

PGMOL was not able to justify the retirement age. The tribunal accepted that PGMOL had a legitimate aim of trying to ensure that younger referees could progress to the elite panel. However, PGMOL was unable to establish that they had deployed a proportionate means of achieving this aim. The tribunal was not satisfied that there had to be a mandatory retirement age and even if it was appropriate, whether age 48 was the appropriate age. No specific scientific evidence was led to show that performance levels of officials deteriorated at that age and PGMOL could not show why age 48 should be chosen, rather than any other age.

The tribunal noted that the Netherlands has had no default retirement age for football match officials since 2000. On the other hand, FIFA has a mandatory retirement age of 45. A further tribunal hearing will determine whether the officials are reinstated or compensated by PGMOL.

22 July 2010

Government call for evidence on UK Data Protection regime

The coalition government has issued a call for evidence seeking views on the data protection law in the UK. The call for evidence presents an opportunity for businesses from all sectors to review their internal information management practices and to consider where legal reform would be of benefit to them.

UK Data Protection regime

In the UK, the collection and use of personal data is regulated by the Data Protection Act 1998 (the "DPA"), which implements a European Data Protection Directive (95/46/EC).

The Directive, which is intended to harmonise data protection law across the European Union, bestows extensive rights upon individuals whose personal data is collected as well as imposing fairly stringent obligations on those who process such personal data.

"Personal data" and "processing" are defined at length in the legislation and related case law. However, in practical terms, any organisation operating in the UK which holds information about individuals (whether employees, members, customers etc.) is covered by the legislation.

Broadly speaking, the DPA requires that all personal data:

1. is processed fairly and lawfully;
2. may be obtained for specified lawful purposes only and not further processed in a manner which is incompatible with those purposes;
3. is adequate, relevant and not excessive in relation to the purposes for which it is processed;
4. is accurate and, where necessary, kept up to date;
5. must not be kept for longer than is necessary;
6. is processed in accordance with the rights of individuals under the DPA; and
7. must not be transferred outside the European Economic Area unless adequate data protection provisions are in force in the destination country.

With certain exceptions, all data processing activity (which includes collecting, using and holding information about an individual) must be notified to the Information Commissioner's Office, the body responsible for overseeing and enforcing the DPA. Notification is a simple and relatively inexpensive process, however failure to notify where notification is required by the DPA is a criminal offence.

Data Protection in Sport

Data protection is an important issue for all sports organisations, from governing bodies to local clubs, as they could not exist without processing information about their members.

The DPA requires that membership and customer databases are kept up to date and do not contain information which is no longer required (e.g. unnecessary information about former members).

The DPA also obliges data controllers to take appropriate technical and organisational security measures to prevent unauthorised data processing, accidental loss of or destruction or damage to personal data. This can be a burdensome duty, especially where personal data is held on mobile devices such as laptops, mobile phones or USB sticks.

Other matters regulated under the DPA include the disclosure of personal data to third parties, (such as sponsors), or any use of data that was not made clear to the individual at the time that the data was collected, e.g. marketing of equipment or related services.

As well as the negative publicity caused by data security breaches, individuals can claim compensation in respect of breaches of the DPA by organisations holding their data. In certain circumstances, breaches can also constitute criminal offences.

Government Call For Evidence

The government call for evidence has been instigated to assist the government to form its position on the European Commission's plans to produce a legislative proposal reforming the Directive during 2010 and to aid negotiations of the new European instrument. The call for evidence invites opinions on inter alia:

1. whether current data protection legislation provides adequate protection to individuals whose personal information is processed;

2. whether data controllers should be required to notify all data breaches to affected individuals;

3. whether the Information Commissioner's powers are sufficient and appropriate; and

4. the effectiveness of current provisions for international transfers of personal data.

Responses to the call for evidence are sought by 6 October 2010.

22 July 2010

Manchester United seek recovery of backdated VAT

Manchester United has joined a long list of organisations seeking recovery of backdated VAT from HM Revenue and Customs (HMRC). United are seeking recovery of around £300,000 compound interest in relation to VAT paid on its flotation in 1991 having already recovered simple interest amounting to £61,000.

Littlewoods recently lost a similar challenge against HMRC before the High Court, which ruled that simple interest only would be paid.

An early resolution may not be likely given that the Littlewoods decision is to be referred to the European Court of Justice. The key issue for the ECJ will be whether an effective remedy requires a member state to compensate a claimant for the loss of the use of money through an award of compound interest.

22 July 2010

Wayne Rooney defends £4.3 million commission challenge

Meanwhile, Manchester United striker Wayne Rooney has successfully defended a claim for unpaid commission in the Manchester Mercantile Court. The case was brought by his former management agency, Proactive, who argued that 20% commission was payable on certain contracts negotiated on Rooney's behalf by his agent before both Rooney and his agent left Proactive without giving the correct contractual notice.

The case turned on the court finding that Rooney's eight-year contract with Proactive amounted to a restraint of trade. In so finding, the court noted that the English Football Association recommends such contracts be of no longer than two years duration.

In a judgment held over until after the conclusion of the World Cup, a restitutional remedy of around £90,000 was awarded to Proactive.

22 July 2010

Listed events consultation decision delayed

Sports and Olympic Minister, Hugh Robertson, indicated on 21 July 2010 that a final policy decision on the listed events consultation could now be deferred until after the switchover from analogue to digital TV. That switch is scheduled to be completed in 2012.

The outcome and impact of the BBC's strategy review and OFCOM pay TV review are also likely to be awaited and considered prior to Government policy being finalised.

The Department for Culture, Media and Sport (DCMS) consultation in respect of the list of events which must be shown on free-to-air television closed on 19 March 2010.

A listed event is described by DCMS as one which "is generally felt to have special national resonance" and has "an element which serves to unite the nation, a shared point on the national calendar, not solely of interest to those who follow the sport in question."

The first list was published in 1956.

An Independent Advisory Panel chaired by David Davies (former Executive Director of the Football Association) published its review of the free-to-air listed events in November 2009. That review recommended that: 

• The current system of two lists (whereby certain events must be shown live on free-to-air coverage available to 95% of the UK population and other events must have some form of secondary highlights coverage on free-to-air) be replaced by one list of events of national resonance.

• The list of protected events is reviewed more frequently.

• In deciding whether to list an event, the costs and benefits to the sports concerned must be considered.

• The recommended list of protected events comprises 12 events, including the Summer Olympics, Home Ashes Test matches, the Grand National, Wimbledon and The Open Golf Championship.

22 July 2010