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Corporate Hospitality and the Bribery Act 2010

Before the Bribery Act came into force, there was much speculation that it would lead to the end of corporate hospitality. There was particular concern that taking clients to sporting or other events might lead to criminal liability under the Act. This was a misunderstanding, both of the Act and of the purpose of most corporate hospitality.

The Government has tried to reassure businesses that the Act will not be used as a stick with which to beat the normal practice of corporate hospitality, which is not intended to influence an individual to do something improper.  The Ministry of Justice Guidance of March 2011 goes out of its way to discuss situations in which business or promotional entertainment should not fall foul of the Act.

Despite this reassurance, firms should bear in mind that excessive corporate hospitality, the purpose of which is to cause the recipient to do something he should not, could be an offence under the Act. 

The general offence of paying a bribe can be defined as the provision of an advantage intending to induce or reward improper performance of relevant activities, or in circumstances where the provider knows or believes that the acceptance of the advantage is itself improper.  It will be rare for firms to intend any impropriety to result from hospitality or to believe that attendance at a promotional event is itself improper. 

A typical firm looking to take a client to a sporting event will not do so on the understanding that their client will improperly favour them in some way.  The intention of hospitality is usually to establish a rapport with a client so as to cement cordial relationships.  In the modern corporate world it is rare for entertainment to be intended to induce a business person or official away from his or her clear duty in relation to an important decision. 

Given this, what are the factors that will likely lead prosecuting authorities to conclude that a bribe has taken place as a result of hospitality? When looking at the intention of the provider of hospitality, the following is relevant:

  1. To whom is the hospitality directed – individual directors, or the client as a whole?
  2. Is the hospitality "lavish"? The relevant business context should be looked at to determine what is "lavish".  A Michelin starred restaurant may be lavish for some but not others.  Whether or not the hospitality is disproportionate is key.  Equally, the MOJ Guidance makes clear that simply because hospitality is in line with industry norms will not always mean that no bribe took place – intention is always the crucial test.
  3. Is the provider of the hospitality present during the function? Suspicions will be raised if the provider of the hospitality is not at the event – how could the hospitality be an attempt to improve relations and rapport in such circumstances?
  4. Does the hospitality take place at a critical point in business relations, current or future?  Entertaining a decision maker during a tender process is plainly risky and will cross the line if such entertainment is banned whilst the process is under way. 
  5. Is the hospitality limited to attendance at the event itself, or is some other form of gift given? 

Entertaining at a sporting event is unlikely to cause difficulty and nor is a provision of a "goodie bag" containing inexpensive corporate gifts; but including a Rolex would do!  Generally, the provision of valuable gifts as opposed to an invitation to an event is much more likely to be questionable. 

Perhaps the last words should be those of the Secretary of State for Justice, Ken Clarke "Rest assured, no one wants to stop firms from getting to know their clients by taking them to events like Wimbledon or the Grand Prix" and that of the Director of the SFO, Robert Alderman "sensible proportionate entertaining or promotional expenditure" is "perfectly lawful" but if a company pays for a prospective client's "month long all expenses paid Caribbean holiday you will not be surprised if the SFO takes an interest".

Nicholas Pike, Partner, Head of Finance and Restructuring, Lawrence Graham LLP

Insolvency Group, July 2011