By Claudia Gerrard, Legal Director, Ortolan Legal

Corporate hospitality is generally viewed as an integral part of running a business.

In the leasing industry, like many others, corporate hospitality can take many forms. Some companies treat their franchisees to lavish overseas trips.

Others provide demos to staff. Golfing days, racing at Ascot and annual dinners are considered normal forms of entertaining.

Similarly, suppliers provide corporate hospitality to leasing companies. Not intended to be a bribe, it is simply seen as a way of developing relationships.

Such activities were deemed a legitimate part of a company’s business and, unless a public authority was involved, were not open to scrutiny. The new Bribery Act 2010 seems to change that.

For the first time, the Act will police the way in which companies, and people work-ing for or with them, act in connection with bribes and inducements.

The Act sets up three specific offences: bribery, being bribed or failure to prevent an associated person from committing or receiving a bribe. Associated persons could cover employees, agents, subsidiaries and consultants.

However, recent guidance indicates that liability will be limited to direct
counterparties only.

A fourth offence covers bribing a foreign official and may be of limited applicability to the industry. So called ‘facilitation payments’ to public officials remain unlawful.

Two key aspects for the industry are that, firstly, the law relates to provision of “any other advantage”. Secondly, an offence may occur even where there is no payment or financial advantage.

There is no need for money to change hands or, indeed, for a bribe or inducement to be supplied or received.

The crucial factor is whether the recipient acted improperly as a result of a potential bribe or inducement.

For example, could provision of a demo be viewed as providing an “advantage”? Or does accepting an invitation, but not attending an event, constitute a bribe?

The first conviction under the Act was announced last month, when a court official admitted accepting £500 to “sort out” a motoring offence.

The person concerned was jailed for six years: three years for accepting a bribe and six for misconduct in a public office, to run concurrently.

Penalties are severe, including an unlimited fine on a company and up to 10 years’ imprisonment for an individual.

Leasing companies providing vehicles to public sector clients may be banned from tendering for future public sector work.

The only defence is to ensure that a company has “adequate procedures” in place to prevent corruption.

The Government guidance on what this entails includes six guiding principles which need to be taken into account by companies.

The guidance indicates that most corporate hospitality, in the traditional sense, will continue to be lawful.

The need for approval from the DPP for any prosecution suggests that prosecutions will be unlikely for what the Justice Secretary has called “trivial cases”.

The guidance significantly reduces the compliance obligations on smaller companies.

So long as they provide appropriate and proportionate training to staff and management lead by example, they probably won’t fall foul of the Act.

Larger companies may need to put more detailed procedures in place to avoid liability.

So, since the Act became law on 1 July 2011, it means employees need to be wary of accepting or offering corporate hospitality and companies have to make sure that employees are aware of this.