The Bribery Act 2010

The UK's Bribery Act 2010 (the "Act") came into force on 1 July 2011 and introduces a new set of criminal offences for bribery. The Act brings wide-ranging changes to the UK's anti-corruption regime, and has extensive extra-territorial effect. A survey conducted by the City of London Corporation in 2010 identified the shipping industry as "high risk" as regards corruption, and as one of the sectors most likely to be affected by the Act.

The main offences

The Act sets out two general bribery offences: active bribery (i.e. bribing someone) and passive bribery (i.e. offering or taking a bribe). While these offences are not new, and simply clarify the existing law, the Act does create a new offence for companies failing to prevent bribery within their organisation. This is an absolute, strict liability offence: all payments, no matter how small, will be classified as a bribe if made with the requisite intention. The company will be liable for failure to prevent the payments being made on its behalf, even if these payments are made by individual employees without the management's knowledge.

The "requisite intention" referred to above means that the person attempting to bribe another intends that the person being bribed perform his/her duties in an improper manner. Such improper performance will occur if a person performs their duties in a manner which is anything other than impartial, in good faith, or in accordance with a position of trust (if their duties import such a position). It is important to note that such expectations are judged by UK standards. Payments made to a port authority, for example, may result in improper performance even if such actions are routine in that particular area.


A company can face unlimited fines if found guilty of any of the offences under the Act, and any turnover generated by deals involving an element of corruption can be confiscated. A director who is found guilty of active or passive bribery, or of bribing a foreign public official, could be imprisoned for up to ten years.

An accusation of having committed an offence under the Act could also have a serious detrimental effect on a company's commercial reputation.

Defence: "Adequate Procedures"

There is only one defence under the Act for the corporate offence of failure to prevent bribery, which is that "adequate procedures" have been put in place to prevent it. The term "adequate procedures" is not actually defined in the Act: whether a company's procedures are adequate or not will depend very much on the context. The definition of "adequate" will, for example, be very different for a small company than for a large, international one.

It is essential that companies' anti-corruption procedures are carefully designed and implemented. All employees must be made aware of their provisions and of the potential consequences of breaching them. It will be expected that organisations adopt a zero tolerance attitude to corruption, which is supported by those who run the company and which is implemented at all levels of the organisation.

Effect on the shipping industry

The shipping industry has been highlighted as a "high risk" sector for corruption. This is largely due to its considerable activity in corrupt environments, interactions with public officials, provision of services to high risk sectors such as defence and natural resources and the use of intermediaries, such as agents. A shipping company's foreign subsidiaries often act as intermediaries. For example, they may charter vessels for specific jobs, finance trade or buy and sell small amounts of commodities.

The extra-territorial effect of the Act is likely to be of particular concern to the shipping industry. An offence can be committed by any company which carries on business or part of its business in the UK, even if the act of bribery took place outside the UK. The UK part of the business does not have to have been involved in the bribery for the company to be found liable. This emphasises the need for anti-corruption procedures to be implemented throughout an organisation, and not just in the UK-based part of the business.

One particular problem area is that of facilitation payments, which are common in many parts of the world. These may be used, for example, to cross borders quickly, to reduce tariff payments or to ensure that operations at a port run quickly and smoothly. Some companies may consider such payments 'customary', however this is not a defence unless the specific practice is permitted or required by local written law.

Intertanko Model Clause

In June 2011, INTERTANKO launched a model clause for both time and voyage charterparties. This clause is designed to recognise shipping companies' obligations under the Act, together with the practical issues faced by a Master who is asked to make a facilitation payment.

The clause includes requirements for both Owners and Charterers that they will have in place a policy to prevent bribery, as defined by the Act. It also includes a specific definition of facilitation payments. The clause also provides for an agreement by Charterers that their schedules allow time for any requests for facilitation payments to be tested by Owners and/or the Master, and for such requests/demands to be resisted where appropriate.

There are also provisions which enable the Master to issue a protest if required to pay a bribe or make a facilitation payment, and which deal with the consequences of any subsequent delay. Under voyage charters, all time lost as a result of a refusal to pay shall count as laytime or demurrage, as appropriate. Under time charters, any such delay shall not be considered as time lost for the purpose of any off-hire provision.

That INTERTANKO has seen fit to produce a model clause indicates the potentially serious effect that the provisions of the Act could have. Whilst the Act is widely drafted, and subsequent clarification by the courts will be required on some aspects, it is essential that shipping companies look closely at their operations to ensure that they have adequate anti-corruption procedures in place.

Alexandra Allan

Associate in the London Shipping Group

Reed Smith

Our thanks to Reed Smith for permission to reproduce this article from their August 2011 newsletter.

Staff Author