New law signals ‘zero tolerance’ of corruption and widens liability to include third parties

A government adviser has warned firms that British prosecuters now have the power to “take them to the cleaners” if they fail to take action against corruption – even if it is carried out by a third party.

The powers were conferred by the Bribery Act, which was squeezed through parliament last week. Its passage has prompted construction firms to seek legal advice. One of the biggest worries is that they will now be open to prosecution for failing to prevent bribery, even by other companies. Penalties will include unlimited fines and 10 years imprisonment.

The act is vague about what companies have to do to prevent bribery, with the law simply requiring “adequate procedures”. Guidance notes to clarify this will be published later this year.

Graham Hand, chief executive of British Expertise, which assists firms working abroad, is advising on the guidance notes. He said: “If companies are doing nothing they will be taken to the cleaners, so to speak. There is a mixture of apprehension and happiness that the bill has passed, but at last something is being done to cut down on corruption abroad.”

Hand said a court would have to decide whether adequate procedures had been in place, but suggested judges will be looking for measures such as training and internal publicity.

Gavin Cunningham, a senior manager in forensic services at accountant BDO, said: “We’re still waiting for a government definition of ‘adequate procedures’, but effectively, if you’re working abroad, you might use an agent and, without you knowing, he pays a bribe. You could now be held liable if you haven’t used adequate procedures to prevent it. And the mood is for zero tolerance.”

Will Kenyon, a partner at Pricewaterhouse Coopers (PcW), said: “Many construction firms have approached us for advice and no doubt the Balfour Beatty episode [in 2008 Balfour Beatty had to pay £2.25m after it was accused of bribery on the £100m Alexandria Library in Egypt] has played a role.”

Corporate hospitality is not covered by the act, but “facilitation” payments may be, which particularly affects firms working abroad.

Enforcement of the act is expected to start in six months.

Meanwhile, a report published by PwC, in which 3,000 senior construction employees across the world were surveyed, has revealed that 47% of respondents in construction reported bribery – nearly double the level reported by other sectors (see graph).

There is a mixture of apprehension and happiness that the bill has passed