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Ask the team: Does the Bribery Act 2010 apply to public authorities?
Practical Law UK Legal Update 3-502-3033 (Approx. 4 pages)
Ask the team: Does the Bribery Act 2010 apply to public authorities?
by PLC Public Sector
| Published on 18 May 2010 • England, Wales |
PLC Public Sector responds to a subscriber's question querying the application of the Bribery Act 2010 to public authorities.
Answer
Yes, the Bribery Act 2010 applies to people in both the private and public sector.
Offences
Specifically, public sector organisations are covered by the offences in the following sections of the Act (subject to the defences that are available):
- Section 1: the offence of bribing another person.
- Section 2: the offences relating to being bribed.
- Section 6: the offence of bribing a foreign public official.
An obvious example of how an employee of a public authority may commit an offence under the Act is if they accept a payment in return for manipulating the process or outcome of a public procurement in favour of a particular bidder.
Offence of a commercial organisation failing to prevent bribery: section 7
However, the new offence of a commercial organisation failing to prevent bribery (set out in section 7) will only apply to incorporated bodies and partnerships that meet one of the following criteria:
- They are incorporated or formed in the UK.
- They carry on a business in the UK.
The drafting of section 7 is ambiguous and there has been some confusion as to whether bodies created by statute as corporate bodies could fall within the scope of the offence. It is clear from Parliamentary debate and submissions made by the Ministry of Justice during the passage of the Act through Parliament, that the offence was only intended to address failures of governance structures within commercial organisations which allow bribery to be used to secure a business advantage. Therefore, the offence should not apply to the majority of the public sector, including statutory bodies.
Most of the commentary on the Act has focused on the new offence, and also in particular, on the defence available (under section 7(2) of the Act) to an organisation if it can show that it had in place adequate procedures designed to prevent bribery.
On 30 March 2011, the government published guidance under section 9 of the Act about the procedures that relevant commercial organisations can put in place to prevent bribery. The guidance also provided further information on what will constitute a commercial organisation under section 7 of the Act. The guidance states that:
"So long as the organisation is incorporated (by whatever means), or is a partnership, it does not matter if it pursues primarily charitable or educational aims or purely public functions. It will be caught if it engages in commercial activities, irrespective of the purpose for which profits are made" (paragraph 35).
In the light of the clarification offered by the guidance, it is clear that some public sector organisations will fall within the definition set out in section 7 of the Act, for example, a company established by a local authority under the Local Government Act 2003. Such organisations (and the authorities responsible for them) should consider how the guidance can be adapted to reflect their own organisational structures and practices. For more information on the guidance, see Legal update, Bribery Act 2010: Guidance about procedures which relevant commercial organisations can put in place to prevent bribery.
What should public sector organisations do to prepare for the Act?
While many public authorities will not be covered by the section 7 offence, they play an important role in preventing or eliminating bribery in the private sector. Most public authorities will already have bribery procedures in place and all authorities should include various anti-corruption provisions in their public procurement and contractual documents. Therefore, public authorities should ensure they are prepared for the Act coming into force; to do so they should:
- Be aware of the changes to the law that the Act made when it came into force on 1 July 2011.
- Update their procurement documentation and precedent contracts to refer to the new provisions. For example, see Standard clause, Public sector boilerplate: Prevention of bribery.
- Consider any other changes to their procurement practices that they may wish to make. For example, while the section 7 offence will not apply to most public sector organisations, it would, as a minimum, be embarrassing for a public authority if one of its contractors was found to have committed such an offence (particularly if the offence related in any way to the services being provided to or on behalf of a public authority). While still not ideal, an explicit right to terminate a contract in these circumstances would at least show that the public authority:
- had tried to prevent such actions; and
- was able to deal with the actions effectively.
Contracting authorities should note that the government has confirmed that a conviction for an offence under section 7 of the Act will trigger discretionary not mandatory exclusion from competing for public contracts under regulation 23 of the Public Contracts Regulation 2006 (SI 2006/05).
For more information on the Bribery Act 2010, including its impact on public authorities, see Practice note, Bribery Act 2010.