UK: First Penalty Under UK Bribery Act For Failure To Prevent Bribery

Brand-Rex Limited in the UK has become the first company to be penalised for violating section 7 of the UK Bribery Act 2010. Scotland's Civil Recovery Unit has announced that Brand-Rex had agreed to pay GBP 212,800 under a settlement. The company accepted that it had benefited from the unlawful conduct of a third party acting for or on its behalf, an independent installer working for the company. This settlement emphasises not only the need for companies to have adequate policies in place that include third party conduct, but also to effectively enforce those policies.

Brand-Rex specialises in cabling solutions for network infrastructure and industrial applications. It operated an incentive programme named "Brand Breaks" from 2008 through 2012. By exceeding set sales targets, Brand-Rex distributors and installers could earn rewards, including holidays abroad. Problems arose when one of the installers offered traveling tickets earned under the Brand Breaks programme to a Brand-Rex end-user employee. This end-user employee was in a position to influence decisions in order to obtain or retain a business advantage for Brand-Rex. The installer allegedly gave the tickets to the employee with the intent of inducing him to select Brand-Rex products.

For doing this, Brand-Rex has been penalised under section 7 of the UK Bribery Act 2010. A commercial organisation is guilty of an offence under this section if it fails to prevent bribery by associated persons acting for or on its behalf. Third parties, such as agents or distributors, are considered associated persons. In this instance, the third party was an independent installer.

The incentive programme was not unlawful in itself, and Brand-Rex did not settle for its lack of having adequate policies to prevent bribery by third parties. The terms of the Brand Beaks programme provided that rewards were intended for third party suppliers. The issue was that Brand-Rex did not enforce the terms.

After an internal investigation by outside counsel and forensic accountants, Brand-Rex self-reported the issue to the Scottish Crown Office and the Procurator Fiscal Service. Brand-Rex accepted its responsibility for failing to prevent bribery by an associated person. The case was resolved under an initiative in Scotland that enables companies to avoid criminal prosecution if they self-report.

This settlement emphasises the need for companies to have adequate procedures in place that also cover the conduct of third parties. But this is not enough: the procedures should be effectively enforced, for example by training and monitoring third parties. Having adequate procedures in place also puts companies in a stronger position towards UK enforcement authorities if, despite all efforts, isolated incidents occur. Given the broad international scope of the UK Bribery Act 2010, companies outside the UK should keep in mind that obligations under the Act may also apply to them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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