Corporate hospitality - Written by on Tuesday, October 12, 2010 4:31 - 3 Comments

The Bribery Act, corporate hospitality & the burning questions: We answer them

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We have had the advantage of discussing many issues of concern around the Bribery Act with Vivian Robinson QC (General Counsel to the SFO).

Corporate hospitality keeps getting lots of attention and the big question is:

Just how far can corporate  hospitality go before a problem arises under the Bribery Act?

The Guardian has written about it, so has the Telegraph, the Financial Times and even Alex from the Daily Telegraph cartoon strip has attempted to get around it (we don’t think his strategy works by the way as we said here).

Our view (and that of the SFO): the touchstone in this area is “common sense”.

The Ministry Of Justice ‘Consultation on guidance about commercial organisations preventing bribery (section 9 of the Bribery Act 2010)’ is a helpful starting point;

‘Hospitality and promotional expenditure

Hospitality and promotional expenditure can be employed improperly and illegally as a bribe. For example, recent UK convictions for corruption of foreign public officials have documented how contrived ‘professional education’ schemes can use promotional expenditure as a cover for bribery. But reasonable and proportionate hospitality or promotional expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations, is recognised as an established and important part of doing business.’

The definitive Guidance will be issued by the Ministry of Justice in January 2011 following the current consultation process. We are also promised guidance on the Act from the Attorney-General. But we anticipate that both forms of guidance will be based upon general statements of principle.

For the definitive answer to a particular scenario it is unlikely that the government issued guidance will assist.

The best guide, in the absence of principles from court cases, will be common sense.

In our recent interview with Vivian Robinson QC we looked at this area with him. He was clear in his response, re-iterating the passage from the consultation guidance set out above. He gave the example of a corporate providing hospitality by way of tickets to the Ryder cup.  His view of such hospitality was that, so long as it was not wholly disproportionate to the nature of the business, the SFO would be unlikely to be disturbed by such activity.

Golf fans can rest easy.

However, he went on to say that if, at the event, guests were, say, provided with a Rolex watch to commemorate the event then this would likely cross the line.  The SFO would be interested.

Through the various questions submitted to Vivian Robinson QC it became clear that common sense will be the starting point for the SFO, as he is directly involved in establishing the policy of the SFO we take comfort from what he says.

At the outset, while regulators and organisations feel our way in this area, the backdrop should be caution but the guiding light should be common-sense in both the formation and application of ethical corporate policy.

UPDATE:Richard Alderman confirmed to a conference in Washington on Wednesday 20 October that there will not be any “Safe Harbor” accounting thresholds for corporate hospitality.  In other words, there is not a GBP£/US$ amount under which corporate hospitality would be considered acceptable under the Bribery Act.  He raised concerns that if a safe harbor was provided it would not be long before it was tested but confirmed again that “sensible, proportionate expenditure is perfectly lawful and remains lawful under the Act”.

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3 Comments

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Howard@OpenAIr
Feb 16, 2011 17:01

Let me ask this question: how much worry should a company have over the term “ordinary” when it comes to hospitality? The US equivalent is “reasonable,” and hospitality concerns still effect business practice because of the fear that the US regulators will claim that certain hospitality is unreasonable.

Your article seems to indicate so. But once you start down that path, how much comfort can you take? I would think that hospitality tents at Wimbledon might actually be problematic depending on who is invited. Would “ordinary” hospitality allow you to invite family members of government officials to the tent? How would you control for that? These are thorny issues.

I’m also wondering about the intersection between your prohibition on private sector bribery and hospitality. At least under the FCPA, you don’t need to worry about hospitality except for government officials. Do you need to worry about everyone?

I am, by the way, a huge fan of your site. It’s excellent.

thebriberyact.com – The Bribery Act: Coming soon & compliance won’t cost millions UPDATED
Feb 19, 2011 2:36

[…] we have repeatedly said the police will not be swooping at the corporate hospitality tents at Wimbledon and Ascot this year.  Mr. Clarke confirmed that in spite of scaremongering headlines suggesting that corporate […]

thebriberyact.com – Ask Barry & Richard: Corporate hospitality – what does ordinary mean?
Feb 23, 2011 0:11

[…] Howard@openair […]

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