- The Bribery Act and its Impact on Charities
- December 27, 2010
- Law Firm: Withers Bergman LLP/Withers LLP - New Haven Office
The Ministry of Justice's consultation exercise was designed to help shape guidance about procedures which relevant commercial organisations can put in place to prevent bribery.
The Charity Law Association provided a full response to the consultation setting out various concerns and requesting clearer guidance on the application of the Act to charities.
The concerns are broadly as follows:
- The Act's new corporate offence applies to ‘relevant commercial organisations'. Many charities have quite reasonably assumed that this means the Act does not, or is not intended to apply to them, but our view is that in fact there is insufficient clarity in the Act's definitions, or explanation in the guidance, to be certain.
1. ‘Relevant commercial organisation' is broadly defined in the Act to include any body which is incorporated in the UK and which carries on a business in the UK or elsewhere.
2. Unincorporated charities - such as charitable trusts and unincorporated associations are therefore not included, while incorporated bodies, including charitable companies (for example charitable companies limited by guarantee, Royal Charter bodies and statutory corporations) will be caught if they carry on a ‘business'.
3. There is some confusion at present on what ‘business' means for the purposes of the Act.
4. Legislation applies different tests to determine whether or not an activity is regarded as a business - for example VAT rules, Business Rates rules and landlord & tenant law all apply different meanings. Some definitions of business catch certain charitable activities while others do not.
5. The precise definition of business for the purposes of the Act will also affect the interpretation of the individual offences, where staff, trustees and volunteers may commit an offence for activities ‘connected with a business'.
- The corporate offence applies where a bribe is given to obtain or retain ‘an advantage in the conduct of business'. Even if a charity is a ‘relevant commercial organisation', it does not operate for profit and any ‘advantage' is ultimately used for the charities' beneficiaries. It isn't clear whether practical advantages, for example relating to the safety of workers or the speed with which aid gets to victims, are caught by the Act as well as purely financial advantages. Further guidance is being sought from the Ministry of Justice to clarify the meaning of ‘an advantage' as it relates to charities.
Should it be determined that for the purposes of the Act charities are regarded as carrying out a ‘business', then other concerns for charities include:
whether the defence of duress can be used where there is a personal risk to aid workers;
- how far small charities in high risk areas of work can rely on arguments of proportionality; and
- to what extent the provision of hospitality and benefits to major donors are caught under the Act.
The consequences of prosecution for an offence could be very serious for a charity, particularly for those working in international development, where a conviction could lead to being barred from applying for public contracts and funding from the World Bank and DfID.