New UK Bribery Act creates potential procurement loophole

The UK government has been criticised for ‘watering down’ its new bribery laws in what is seen by many as a weak interpretation of a European Union directive on the issue and which provides a potential procurement loophole.

Britain’s Justice Department issued new guidance for prosecutors of the country’s delayed new Bribery Act, which included the potential loophole for foreign companies listed or with a subsidiary in the U.K.

Justice Secretary Kenneth Clarke said that companies convicted under the act would face discretionary, rather than mandatory, exclusion from public procurement contracts — a weak interpretation of a European Union directive on the issue.

Clarke said the government had drawn up the guidance document after speaking to business representatives to ensure the act is “implemented fully and in a workable, commonsense way this is particularly important for small firms that have limited resources.”

The consultations have delayed implementation of the new laws. The act will now not come into force until July 1, instead of next week as originally proposed, giving companies time to revise their procedures.

“I hope this guidance shows that combating the risks of bribery is largely about common sense, not burdensome procedures,” Clarke added.

However, the anti-corruption watchdog Transparency International UK accused the government “surrendering” to last-minute lobbying by big business, opening up loopholes it claimed could allow dishonest companies to keep paying bribes.

“The Bribery Act is one of the best anti-bribery laws in the world, but the guidance will achieve exactly the opposite of what is claimed for it,” said the group’s executive director, Chandrashekhar Krishnanm. “Parts of it read more like a guide on how to evade the act than how to develop company procedures that will uphold it.”

The act creates four distinct criminal offenses, including the failure of businesses to prevent people associated with them from using bribery on the company’s behalf.

Businesses had pressured the government to provide greater clarity on a number of issues, including jurisdictional reach, the level of allowable hospitality payments and the legality of so-called facilitation payments.

The Confederation of British Industry — the country’s leading business lobby group, which had criticized previous guidance on the new laws as too vague — said it was happier with the new guidance.

“The government has listened to concerns that honest companies could have been unwittingly caught out by poorly-drafted legislation and has clarified a number of important areas,” said Katja Hall, CBI’s chief policy director.

“These include the extent of liability through the supply chain, joint ventures, due diligence and corporate hospitality.”

But Alexandra Wrage, president of the nonprofit association TRACE International, said the jurisdictional reach of the act has been diminished under purported pressure from the London Stock Exchange. Clarke acknowledged that companies listed or with a subsidiary on the bourse will not necessarily trigger the application of the new law.

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