The Bribery Act will mean harsher penalties for corporate corruption, but businesses are awaiting clarification of the new law. What exactly constitutes a bribe?

It is well recorded that bribery causes a significant drain on business, increasing costs, poisoning commercial relationships and causing deprivation to the poorest in society. But as WikiLeaks' revelations about Prince Andrew's remarks to the American Ambassador to Kyrgyzstan demonstrate, bribery and corruption are alive and well in most parts of the world.

An attitude of weariness among UK firms is to be expected, but there is a simple reason why the Bribery Act, which comes into force in April 2011, needs to be taken seriously: self-interest. Individuals who are convicted of bribery offences can be fined up to £10,000 (and, in some cases, an unlimited amount) and face a prison term of up to 10 years. For companies, the consequences can be equally severe. As well as suffering an unlimited fine, they could be excluded permanently from public procurement contracts and face prosecution for further offences under anti-money laundering rules. The effect of the bad publicity of an investigation or prosecution on a business is difficult to quantify. 

The basic rules are clear: you commit an offence if you give or receive a bribe in order to obtain a business advantage. There is a separate offence of bribing a public official in order to influence or reward him in relation to the performance of his function. There are no statutory defences to these offences. The really significant change is the introduction of a corporate offence of failing to prevent bribery. The object is to compel companies to develop and foster an organisational culture that eschews and prevents corruption. 

Senior officers of the organisation (which includes pretty much anyone with management authority) who consent to or connive with corruption in the business are liable to prosecution and risk unlimited fines and prison sentences. It will no longer be possible to turn a blind eye to corrupt practices.  However, a company will have a defence if it can show that it had in place "adequate procedures" designed to prevent its "associates" from committing corrupt behaviour. An associate is any person or body that provides services to a company, so it could be an employee, agent, distributor, contractor or other representative, anywhere in the world. 

Prosecutions under the Act will only be made if they are in the public interest. Cases will require the consent of the DPP, the Director of the SFO or the Director of Revenue and Customs Prosecutions.  Each of these bodies will be issuing their own guidance, and businesses can look forward to a whole new and costly level of regulatory control. 

The Act requires the government to issue Guidance on the procedures that companies will be expected to put in place. These include, carrying out a risk assessment of the risks of bribery in your business and market sector; top-level commitment to preventing bribery; robust monitoring; and the provision of clear, practical and accessible procedures available to your employees and business partners.

There are many issues yet to be clarified. Companies are concerned about the treatment of hospitality and corporate gifts, which, on the face of it, fall within the definition of a bribe. The anti-bribery laws in other jurisdictions, such as the US and Germany, expressly recognise reasonable and bona fide levels of hospitality. Not so in the UK where, in practice, business will have to second-guess the attitudes of the SFO and other prosecuting bodies as to what they will tolerate. For example, the SFO has stated that where corporate hospitality is reasonable, moderate and not lavish, there may be a technical breach of the Act but there would be no "public interest" in a prosecution. Does this mean that you can take someone to a local restaurant, but tickets to the Wimbledon final are now out of the question? 

What about facilitation payments, which are small bribes made to facilitate a process, for example, a payment of $100 to a port official for a stamp on a document to release goods? Is it a bribe if an armed border guard asks your employee for a bribe to pass through a checkpoint? Will companies be prosecuted (as in the financial services sector) for not having adequate procedures, even if no bribe has ever been given or received? These are all questions that will have to be clarified.

As Prince Andrew said about corruption in Kyrgyzstan, "They themselves have to have a change of heart... No one else can do it for you".  The Bribery Act aims to change corporate behaviour. Companies—and prosecutors—will have to try to implement it in a sensible manner but business leaders are going to have to live with a degree of uncertainty while they continue to do business in an imperfect world.

Stephen Morrall is a partner at Dawsons LLP