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Bribery Act 2010 – Is Your Business Compliant?
Despite the Bribery Act 2010 coming into effect in July 2011 it is estimated that around 70% of small businesses have either not heard of the Act or do not understand its implications.
Whilst the anti corruption legislation will undoubtedly be more of a concern to larger, international companies, with strict penalties of up to 10 years imprisonment (for individuals) and unlimited fines (for organisations) even small business’s cannot afford to ignore the impact of the Act.
What is the Bribery Act 2010?
The Act essentially creates four new criminal offences; being bribed, bribing another, bribing a foreign official and failing to prevent bribery. The final offence means that your business can be liable for the actions of a third party, such as an employee or consultant, if they breach the Act, even without your knowledge.
Is there a defence?
The Ministry of Justice has been clear that provided a business has ‘adequate procedures’ in place to prevent Bribery and corruption then this will be an absolute defence for that business.
Tips for Businesses
- Risk Assessment – you should carry out a risk assessment on your business’s operations to identify areas of risk and concern. Any measure that might then be required can be tailored to specific operations – such as trade in countries identified as being high risk.
- Top level commitment – ensure that all directors and senior management are fully aware of the implications and scope of the Act – ensure that any training is recorded.
- Anti Bribery Policies – have clear anti bribery and anti corruption policies in place.
- Due Diligence – assess the risk of corruption before entering into any new business relationships. Review existing contracts that your business has in place and consider having your business’s anti bribery policies incorporated into future agreements.
- Communication – ensure any anti bribery policies are clearly communicated to any employee’s or third parties providing services to your business. Consider what training is necessary. Any communication should be accurately recorded for future reference
- Monitoring and review – review policies and procedures regularly to allow you to adapt in line with changing risks and threats.
Hospitality and Expenses
The Bribery Act is not intended to prevent genuine, proportionate hospitality and other business expenditure which is required to promote better public relations. However any such expenditure must be reasonable and in line with your business.
For further information or for help protecting your business against breaches of the Act, please contact Lorraine Smith on 01785 223 440 or at lorraine.smith@orj.co.uk.
Fight Now Or Pay Later:
Fight Now or Pay Later:
Litigation costs reforms tilt balance in defendant’s favour.
The government has recently approved a raft of reforms (recommended within Lord Justice Jackson’s green paper) to rules governing civil litigation costs. Whilst the reforms are primarily designed to curb perceived excesses within areas of law such as personal injury and libel, they will also have a massive impact upon commercial litigation.
The current system is based upon the ‘loser pays’ principle, which means that a successful party is entitled to recover all of their reasonably incurred costs, including ‘success fees’ and ATE premiums, from their opponent.
Conditional Fee Agreements (“CFA”) provide for solicitors to recover a ‘success fee’ of up to 100% of their normal costs when a case is won, in exchange for accepting a reduction of up to 100% of their normal costs when a case is lost.
After the Event (“ATE”) insurance covers the insured for the legal costs of their opponent in the event of defeat. Premiums are usually calculated as a percentage of the opponent’s legal costs.
Proposed Reforms
One of the fundamental aims of the reforms is to reduce the overall costs of civil litigation, by redressing the balance between claimants and defendants in favour of defendants. Primary, this goal is to be achieved by the following measures:
- CFA success fees and ATE insurance premiums will cease to be recoverable from defeated defendants.
- Successful claimants will be liable to pay both their lawyer’s success fees and any applicable insurance premium from their own damages. This will be subject to a maximum of 25% of any damages award.
Whether or not the proposed reforms reduce the overall costs of litigation, they will almost certainly increase those costs in respect of claimants, whose recovered damages are likely to be cut, in almost all cases, from 100% to 75%.
Perhaps the most revolutionary (and controversial) feature of the new system is that (when compared with the old system) it will financially penalise successful claimants, whose claims are upheld by the courts, and will reduce the financial burden on those parties who are found by the courts to have been at fault.
It is not intended that the reforms will have retrospective effect; therefore, all CFA’s and ATE policies signed up before they are brought into law will remain effective.
The message to claimants is very clear,
“Act now, because if you have a just claim and delay its prosecution, you run the risk of substantially reducing the overall value of your recovery.”
If you wish to speak to one of our litigation experts in regard to a potential claim, please contact Patrick Tedstone or Michael Smyth on 01785 223440 or e-mail Mike.Smyth@orj.co.uk or Patrick.Tedstone@orj.co.uk.
Bribery Act 2010 – Is Your Business Compliant?
Despite the Bribery Act 2010 coming into effect in July 2011 it is estimated that around 70% of small businesses have either not heard of the Act or do not understand its implications.
Whilst the anti corruption legislation will undoubtedly be more of a concern to larger, international companies, with strict penalties of up to 10 years imprisonment (for individuals) and unlimited fines (for organisations) even small business’s cannot afford to ignore the impact of the Act.
What is the Bribery Act 2010?
The Act essentially creates four new criminal offences; being bribed, bribing another, bribing a foreign official and failing to prevent bribery. The final offence means that your business can be liable for the actions of a third party, such as an employee or consultant, if they breach the Act, even without your knowledge.
Is there a defence?
The Ministry of Justice has been clear that provided a business has ‘adequate procedures’ in place to prevent Bribery and corruption then this will be an absolute defence for that business.
Tips for Businesses
- Risk Assessment – you should carry out a risk assessment on your business’s operations to identify areas of risk and concern. Any measure that might then be required can be tailored to specific operations – such as trade in countries identified as being high risk.
- Top level commitment – ensure that all directors and senior management are fully aware of the implications and scope of the Act – ensure that any training is recorded.
- Anti Bribery Policies – have clear anti bribery and anti corruption policies in place.
- Due Diligence – assess the risk of corruption before entering into any new business relationships. Review existing contracts that your business has in place and consider having your business’s anti bribery policies incorporated into future agreements.
- Communication – ensure any anti bribery policies are clearly communicated to any employee’s or third parties providing services to your business. Consider what training is necessary. Any communication should be accurately recorded for future reference
- Monitoring and review – review policies and procedures regularly to allow you to adapt in line with changing risks and threats.
Hospitality and Expenses
The Bribery Act is not intended to prevent genuine, proportionate hospitality and other business expenditure which is required to promote better public relations. However any such expenditure must be reasonable and in line with your business.
For further information or for help protecting your business against breaches of the Act, please contact Lorraine Smith on 01785 223 440 or at Lorraine.Smtih@orj.co.uk.
Retention Of Title Clauses
Retention of title clauses are easier to avoid than enforce, but if you supply large quantities of tangible goods and give large amounts of uninsured credit then you need;
(a) To have a very good and workable retention of title clause; and
(b) To ensure its incorporation into your commercial agreements (see my blog ‘Incorporating Standard Terms and Conditions’)
A retention of title or ‘ROT’ clause prevents title passing to your customer, even after goods have been supplied; so if you are not paid you can take back possession of your goods. In the absence of such a clause, title is usually deemed to pass on delivery.
The ROT clause included in your standard terms and conditions should be drafted in a manner that is consistent with your business processes.
To enforce an ROT clause, you need to be able to identify the goods that have been supplied and prove that the price for those goods remains unpaid.
Anybody hoping to enforce an ROT clause should further introduce business processes, whereby their products are packaged in such a way that they are identified by batch number and that batch number is further referred to within a delivery note and invoices make reference to both the relevant batch numbers and delivery notes. With such a system, it will be easy to identify the goods that still belong to you when your customer fails to pay. Most liquidators and/or administrators will insist upon such information being clearly given.
If you sell your goods to a wholesaler or retailer and/or distributor and that distributor sells them on without paying you, then an honest purchaser of those goods, without notice of your ROT clause, will buy free from your claim for title.
If you are selling to a designated purchaser acting on behalf of a large company, then it is also good practice to send details of your ROT clause to the end consumer.
A ROT clause will not work where your goods have become attached to the land.
A ROT clause will not work if the goods have become incorporated into another item; so if your sheet metal has been fabricated and incorporated into a machine title will have passed.
Dilapidations
Many large leases are now coming to an end without renewal, and the prospect of significant disputes relating to dilapidations between landlords and tenants is increasing. Dealing with dilapidations is not rocket science, the law is pretty simple. Set out below are some of the things that you need to consider.
Almost inevitably, in the event of a dilapidations claim, there will be an express lease. The terms of that lease will specify the condition in which the tenant must surrender his property to a landlord. Specific reference may be made within the lease to a schedule of condition recorded by a surveyor when it was first signed. Alternatively, the tenant may be required to bring the property back to a specified condition in the lease, often described as a “good” and / or “reasonable” condition.
Lawyers are often consulted by tenants seeking to avoid their obligations and / or by landlords seeking to enforce those obligations. Here are some of the common pitfalls.
If a landlord forfeits the lease (which often happens if he takes possession of the property during the term), the covenants within the lease are frequently discharged and that includes the tenant’s covenants to repair. Tenants seeking to avoid their obligations will often seek to allege forfeiture; landlords need to be careful to avoid accidental and / or unintended forfeiture.
To successfully enforce a dilapidations claim, a landlord must ensure that he follows the procedure set out within the lease, as failure to do so may frustrate his claim.
A tenant should consult his lease before it comes to an end. Most tenants can attend to the reparation of any dilapidations, less expensively than a landlord will. If there is a possibility of a substantial dilapidations claim, it would be wise for a tenant to have the premises prepared prior to inspection by the landlord’s representative.
A landlord cannot claim more for the cost of repair of dilapidations than the dilapidations themselves cause the premises to diminish in value.
By way of example, consider the position of an old warehouse situated on derelict land suitable for redevelopment. The warehouse requires a new roof but the cost of the new roof will not significantly appreciate the value of the property because of its development potential. In those circumstances, the tenant would be absolved from the obligation to place a new roof on the building.
Most commercial landlords are extremely familiar with the law pertaining to dilapidations. Tenants of large premises should consult their leases and their lawyers at an early stage, prior to the end of the lease, if they do not intend to renew and should develop strategies to limit their obligations before the lease comes to an end.
Standard Terms And Conditions
If you are in business, I urge you to take ten minutes to read on. At the end of this note, you will know:-
(a) how well drafted standard terms can limit commercial risks to your business;
(b) which key standard terms you require;
I have been acting for commercial clients for twenty years. The businesses I have represented that have paid attention to this issue have saved millions of pounds and the businesses that have not have been cost a similar amount.
Let’s be clear, standard terms are ‘standard’, not a perfect reflection of your trading relations. However, if you get the important clauses right, they will have an enormous effect in reducing your firm’s contingent liabilities.
I have drafted the national and international terms of business for public limited companies and have even drafted terms of business for the sale of specialist steel to nuclear power stations. Understandably, everyone took a great deal of care in drafting those arrangements, but the basics remain the same and your business can benefit from those basic safeguards, simply and easily.
1. Limit your promises
Legislation imposes contractual promises on a seller. We know many of them well. “Goods will be fit for the purpose and of satisfactory quality”, “services will be supplied with reasonable skill and care”. In the absence of agreement deliveries will be made “within a reasonable time”.
The first thing your standard terms will do is limit these promises insofar as it is lawful to do so.
We all want to give a good service to our customers and clients but when things go wrong and a dispute evolves, limiting your contractual obligations can save you money.
2. Limit claims against you
Good standard terms limit the type of claim that can be bought. They limit the remedies available to your customers, for example, they may say that claims must be limited to the supply of replacement goods or that any claim is limited to a certain figure and / or to the contract price.
3. Deadlines
Standard terms should also impose strict limits on the timeframes within which claims may be bought and / or provide for deemed acceptance of the goods.
4. Set Of
An effective “no set off clause” can prevent your customer refusing to pay whilst a dispute is resolved and in these tough economic times can prove to be extremely useful.
5. Delivery
Your standard terms should say that delivery times are estimates only, because if things go wrong, claims for late delivery can often be avoided.
6. Retention of Title
Retention of title clauses are lengthy and require special processes if they are to be enforced successfully. If you are a business supplying significant quantities of tangible goods and giving large volumes of uninsured credit, I strongly recommend you read my blog regarding retention of title clauses.
7. Jurisdiction
Many of you will be businesses selling solely to the UK market and not making international supplies. Even if this is the case, do not forget that when it comes to the law, Scotland is a different world, and in any event, you should ensure that any dispute that arises is resolved on your home territory.
8. Superfluous language
Many sets of standard terms are printed minutely and contain a vast array of standard clauses that may or may not ever be relevant to your business. It is recommended, insofar as possible, to avoid such terms.
The golden rule is to keep it simple and recognise that these are standard terms, designed to effectively limit your promises and liability in regard to day to day business, rather than to provide for every conceivable situation.
Get your terms incorporated
Do not forget to ensure that your standard terms are incorporated, see my blog.
Avoiding A Bank Guarantee
Lenders do not always treat guarantors fairly in the eyes of the law. When this occurs guarantees may be avoided.
The First Rule
If you have given a guarantee and are called upon to pay it, do not do so until you have taken legal advice. By paying the guarantee, you may waive any right you have to avoid it.
Your obligations as Guarantor
Most bank guarantees seek to make the guarantor a ‘joint obligator’.
If your guarantee does not make this clear, and if arrangements between the borrower and the bank are altered without your permission, then your guarantee may be void.
Has your company been treated badly by the bank?
Most bank lending is covered by a facility letter. This is the contract between bank and borrower which governs the terms of the loan. If the bank breaches the facility, they can be held liable. It can be argued that it is an implied term in any guarantee that the bank will not breach its own facility terms. All too frequently banks act in breach, which may discharge the guarantee.
Banks make mistakes – what they say is not always true
It is often assumed that a bank can be trusted, which is not always the case. In a recent court action, a senior bank manager swore in an affidavit that my client had not been given a £20m banking facility. This was surprising as I had a copy of the document in my possession.
Help yourself
If you are presently the subject of a guarantee, particularly where you are leaving a business, take the trouble to consult the terms of the guarantee and serve notice on the bank to be discharged.
There is always negotiation.
When you have analysed your circumstances, consider negotiation.
A client of mine, who was the subject of a £2m guarantee given to Barclays Bank, recently compromised that guarantee by the payment of 10 monthly instalments of £20,000 .
Unfortunately, commercial litigation and disputes with banks are sometimes a fact of commercial life; never give up hope, even in the toughest of circumstances there is often a way forward.
If you genuinely believe that your case is just, take the time to have a lawyer consider it carefully.