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Olympics Newsletter - Welcome to the cheap seats: Olympic corporate hospitality and the Bribery Act 2010

What Ticket Shortage? 

The discovery earlier in the year that a significant proportion of Olympic tickets ear-marked for corporate hospitality remained unsold was revealed with typical outraged zeal by certain sections of the British press [1]. Other, more serious newspapers, looked to find answers as to why, given the clamour for tickets, hospitality bundles weren’t selling.  The Independent’s conclusion: “thousands of the very best Olympics tickets and corporate hospitality packages remain unsold because companies are worried that lavishing so much money on clients will cause them to fall foul of the Bribery Act”[2].
 
Could the slow uptake of corporate seats really be blamed on the fear of non-compliance with the Bribery Act?  This article looks whether inviting guests to the Olympics could put companies in breach of the Act and considers what businesses can do to ensure their hospitality and promotional expenditure is legitimate.    
     

The Scope of the Bribery Act
 
When the Bribery Act 2010 (the “Act”) came into force on 1 July 2011, concerns were raised amongst commentators that due to the broadly drafted offences contained in the Act, providing and accepting corporate hospitality could be potentially illegal. 
 
The Act creates the following offences:
 
  • active bribery[3]: where a person offers, promises or gives an advantage to another where that advantage is given in relation to the improper performance of a relevant function;
  • passive bribery[4]: where a person requests, agrees to receive or accepts an advantage, and that advantage is taken in in relation to the improper performance of a relevant function; 
  • bribery of foreign public officials[5]: where a person offers, promises or gives an advantage to a foreign public official with the intention to influence the performance of that official’s functions to obtain a business advantage; and 
  • failure to prevent bribery[6]: where a person associated with a company bribes another person, intending to obtain a business advantage for the company; it will be a defence for the company to show that it had adequate procedures in place designed to prevent bribery.

Under the Act, “improper performance” occurs where there is a breach of a an expectation that a function will be carried out in good faith or impartially, or that it will be performed in accordance with a position of trust.
 

Active and Passive Bribery
 
For corporate hospitality or other promotional expenditure to constitute an offence under section 1 of the Act, the hospitality must provide an advantage to another person and be given with: (i) the intention of inducing another person to perform a relevant function improperly or (ii) knowledge that acceptance of the advantage is, in itself, improper performance.
 
In order to determine whether there has been “improper performance”, one must consider what a reasonable person in the UK would expect in relation to the performance of that function or activity. Where the function is not subject to UK law, any local custom is to be disregarded unless it is permitted or required by local written law.
 
Guidance from the Ministry of Justice suggests that that, in order to bring a successful case under section 1, based on an allegation that hospitality was intended as a bribe, the prosecution would need to show that the hospitality was intended to induce conduct that amounts to a breach of an expectation that a person will act in good faith, impartially or in accordance with a position of trust. That would be judged by what a reasonable person in the UK thought. So, taking clients to an Olympic event to develop the working relationship or enhance knowledge in their organisation’s field is unlikely to be an offence.  In such circumstances, it would be difficult to show evidence of an intention to induce improper performance of a relevant function.
 
The need to satisfy the improper performance test means that it is also unlikely that accepting corporate Olympic tickets provided in the normal course of business will constitute an offence under section 2 of the Act.
 

Bribing a foreign public official
 
Unlike the section 1 offence, the offence of bribing a foreign public official doesn’t require the prosecution to prove an intention to induce the improper performance of a relevant function and therefore the breach of a relevant expectation.  All that is required is an intention to influence the official in the performance of their official functions with the aim of gaining business or an advantage.

However, the Government guidance acknowledges that bona fide corporate hospitality which seeks to improve the image of a commercial organisation or establish business relationships, is recognised as an established and important part of doing business and it is not the intention of the Act to criminalise such behaviour. The Act is not intended to prohibit reasonable and proportionate hospitality.

In order to amount to a bribe under section 6 of the Act, there must be an intention for a financial or other advantage to influence the official in his or her role and, by doing so, secure business or a business advantage. Even where the prosecution is able to establish a financial or other advantage has been offered, promised or given, it must then show that there is sufficient connection between the advantage and the intention to influence and secure business or a business advantage.  Determining whether this connection can be established will depend on a variety of factors including:

 
  • the type and level of the hospitality provided (the more lavish the hospitality or the higher the expenditure provided then, generally, the greater the inference that it is intended to influence the official to grant business or a business advantage in return);
  • the manner and form in which the advantage is provided; 
  • the level of influence the foreign public official has over awarding the business 
  • the standards or norms applying in a particular sector (would the corporate package be commensurate with that provided by others?); 
  • timing – for example, flying an official to meet business executives in London as a matter of genuine convenience and providing Olympic tickets as part of the trip would be unlikely to raise the necessary inferences; but if the choice of London as the most convenient venue was in doubt because executives could have met the official when they visited the country the previous week, then the necessary inference might be raised; and 
  • connection to relevant business – lavish hospitality completely unrelated to an organisation’s services or business is more likely to raise the necessary inference.


Therefore, it is unlikely, for example, that a standard Olympic corporate package will raise the inference that it was intended to have a direct impact on decision making, particularly where such hospitality is appropriate within the reasonable and proportionate norms for the particular industry.  It may even be, in some circumstances, that additional hospitality in the form of travel and accommodation costs does not even amount to a financial or other advantage to the relevant official because it is a cost that would otherwise be borne by the relevant foreign Government rather than the official himself.

 

Defending an Allegation of Failure to Prevent Bribery

As the Act has been in force for nearly 12 months, most companies should by now have put in place bribery prevention procedures and policies, so as to be seen to be acting competitively and fairly (and in order to provide a defence to the section 7 offence under the Act).  These should include standards for corporate hospitality.

For those who have yet to put these in place, the Ministry of Justice guidance gives some helpful indicators of what a company should do in order to show it had adequate procedures in place to prevent bribery:

  • conduct a risk assessment relating to that business’ dealings with clients, partners and foreign public officials;
  • write a policy statement regarding corporate hospitality and promotional expenditure 
  • issue internal guidance to staff members on procedures that apply to the provision of hospitality and promotional expenditure; 
  • undertake regular monitoring, reviews and evaluation of internal procedures and compliance; and 
  • provide appropriate training and supervision to all staff.


Last year, the Serious Fraud Office published a webinar on its website[7] featuring its former General Counsel, Vivian Robinson QC, discussing the Act and how the SFO plans to enforce it.  Based on “good advice” from Transparency International, Robinson’s view is that in order for companies to ensure hospitality is legitimate, they should:

  • publish clear written policies barring gifts, expenses or hospitality which might influence or be seen to influence a matter;
  • provide guidance on upper financial limits for gifts, hospitality or expenses;
  • communicate the business’ policies and procedures to employees, partners and suppliers; and 
  • perhaps most importantly, fully document what gifts, hospitality packages and expenses of a material value, have been given or received

 

Conclusion

Reading the Act, it is pretty clear that offering Olympic tickets to clients and potential business targets would not constitute an offence, provided that the company has relevant policies in place and can show it has complied with them.  Care should be taken if the Olympic tickets offered are part of a larger corporate hospitality spend which could be seen to be extravagant (for example, first class flights, 5-star hotel accommodation, seats for friends and family of the client, Michelin-starred dining, West End theatre tickets and spending money whilst in London), but without the necessary intention to induce “improper performance” or influence (if a foreign public official).  This shouldn’t affect the average business looking to provide a client or target with an Olympic ticket, though, particularly if the ticket isn’t for one of the main “blue ribbon” events.   

Could it be that the real reason for a comparative lack of demand for Olympic corporate seats is that, for most companies in the present economic climate, the £6,500 required for a top Olympic package at the 100m final[8] could be better spent on the business itself rather than hospitality?  

 

If you have any questions or would like to discuss anything in this article in more detail, please contact Andy Moseby.

 


 

[1] Revealed, the 4,000 unsold Olympic seats going to US fat cats…while millions of Britons miss out Mail Online, 17 February 2012
[2] Fears over bribery law will leave the best seats in the stadium unsold The Independent 17 March 2012
[3] Section 1 Bribery Act 2010
[4] Section 2 Bribery Act 2010
[5] Section 6 Bribery Act 2010
[6] Section 7 Bribery Act 2010
[8] Including a champagne reception and fine dining, as reported in The Independent (see [2] above).