Landmark Ruling In Bribery Act Case Sends Stark Message

Date Added 20.06.18

Earlier this year Skansen Interior Limited (Skansen), a small interior design company, was found guilty under section 7 of the Bribery Act 2010 for failing to prevent bribery. This is the first UK contested case where the defendant had tried to rely on the “adequate procedures” defence against the charge of failing to prevent bribery. Until now, there has been limited guidance available to businesses as to what constitutes “adequate procedures”.

The background to the case is that during a tender process for refurbishment contracts worth in total £6 million, Skansen made two payments to a senior employee within the customer’s tender team. In exchange, Skansen received an advantage and won the tender. A third payment was discovered and stopped by Skansen’s management who reported the matter for investigation. Despite Skansen’s co-operation, it was prosecuted for failing to prevent bribery.

One of the arguments Skansen’s lawyers put forward in defence was that the size of Skansen’s business (being less than 30 employees) meant that sophisticated anti-bribery controls were not necessary. The jury disagreed and Skansen was convicted. The only penalty available in this case was an absolute discharge due to the fact that Skansen was a dormant company with no assets at the time of trial. Many will interpret the decision to prosecute Skansen on this basis as a clear message that even small businesses must still comply with the Bribery Act.

During due diligence and warranty negotiations in merger and acquisition deals, we often hear that the target company couldn’t possibly be involved in bribery and that bribery considerations are irrelevant. This case illustrates that bribery can occur in all sorts of companies, including SMEs and owner-managed businesses and must be considered seriously.

Buyers (and their lenders) are likely to be more cautious to this risk now and accordingly will carry out enhanced due diligence and demand stronger contractual protections. On the other hand, sellers should consider these issues carefully and review their anti-bribery procedures and documents.

Talk to Tollers!

Tollers are able to advise you on the risks associated with the Act and how best to tackle these risks in the context of an M&A deal.

Please contact either Craig Harrison on 01908 306937 and craig.harrison@tollers.co.uk or Ryan Chia on 01908 306948 and ryan.chia@tollers.co.uk.

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