Memorandum submitted by Federation of
Small Businesses (BB08)
INTRODUCTION
The FSB is the largest business organisation
in the UK representing the interests of the self employed and
small businesses. The FSB has 215,000 members in a range
of industry sectors located across the UK, the vast majority employing
10 people or less.
The FSB is supportive of an effective legal
framework around bribery which clarifies and consolidates existing
legislation and promotes high ethical standards in UK businesses.
It is important, particularly in the current climate, to maintain
the UK as an attractive investment centre given that corruption
has the ability to distort markets, affect a country's reputation
and divert investment.
The reality is that the vast majority of FSB
members do not trade in markets beyond the UK so are arguably
less likely to come into contact with "higher risk"
countries (as listed by the Bribe Payers Index, for example).
Our most recent membership survey in 2008 showed that only
around 6% of members' annual sales go to countries outside the
UK. It also showed that only a small proportion of our members
are engaged in sectors that are deemed to be at higher risk of
corruption; such as defence, oil and gas, mining (0.5% FSB membership),
construction (11%), pharmaceutical and financial services (3.7%).
However, the FSB has an interest in the draft Bill and particularly
around two issues raised by the corporate offence of negligent
failure to prevent bribery, and its impact on small businesses.
DRAFT BRIBERY
BILL: CORPORATE
OFFENCE OF
FAILURE TO
PREVENT BRIBERY
1. Section 5(4): "adequate procedures"
This clause sets out that businesses should
have in place "adequate procedures" in order
to prevent bribery within the organisation which implies that
systems, of some sort, should be in operation for proof. In order
to have a reasonable defence, businesses will, most likely, need
a document trail or evidence of those systems having been implemented.
Will it be enough for "the managing director to periodically
remind the staff of their obligations" (Law Commission
Reforming Bribery report p.122) without having a written
record?
There are both time and cost implications in
terms of reading, understanding and complying with this legislation
even if that simply means a set of principles set out in a staff
handbook or a code of conduct for staff to sign up to. There are
no compliance departments as such in small businesses and it should
be recognised that there are costs attached to this legislation.
The point we want to make is not that small
businesses should not shirk responsibilities but that there needs
to be careful thought around implementation and communicating
this legislation to small businesses. Our research shows (FSB
EU Gold Plating report 2007) that businesses, for example
in the case of Health and Safety legislation, will err on the
side of caution, and do too much to implement for fear of being
taken to court.
ADMINISTRATIVE BURDENS?
The MoJ states "that the draft Bill
will not impose any significant additional administrative burden
on business. The corporate offence is not regulatory in nature
and there will be no monitoring of compliance" (Para
98 of the Bill explanatory notes). We think that there
is a need for more clarity about the fact that there will be additional
costs for businesses as outlined above. It is inevitable that
there will be a cumulative burden across the small business sector
of these costs (ie they might not be huge per business but multiplied
across the small business community will be more significant if
this is not effectively implemented).
Paragraph 99 of the explanatory notes
also goes on to talk about "the benefits of the new
corporate offence include enhanced ability on the part of business
organisations to assess the suitability of their systems due to
increased clarity in the law and efficiency savings through, for
example, reducing the cost of risk assessment". The notes
talk about the benefits for business without setting out clearly
the costs. There are unlikely to be clear "savings"
if a business has already spent money on compliance.
We do note however in the related Bill Impact
assessment which talks about the fact that the Bill is not
designed to be prescriptive and that it allows businesses to adopt
a proportionate approach: "the defence provided to the
offence is such that it would allow a company to adopt a proportionate
approach, with small firms in low risk sectors able to argue adequate
systems on 'light touch' grounds, for example, demonstrating that
anti-bribery principles have been fully communicated to its workforce".
2. Section 5(5): defence in a micro business?
"But the defence is not available if
the negligence referred to in subsection (1)(c) was wholly or
partly that of a senior officer of C or a person purporting to
act in such a capacity".
The FSB has some concern here because, as this
clause is currently worded, it effectively removes the defence
from small businesses. The scenario in a micro business could
be, for example, that five people are working together in a business
with a flat management structure which makes it more likely, that
a "senior" individual is involved. This effectively
implies that small and micro businesses have no defence to the
corporate offence at all. There are also issues around partnerships
when one partner has clearly acted in their own self-interest
to the detriment of the business itself and the other partner/director.
We think that the MoJ need to look carefully at the wording here
and we would be open to working with them to propose suitable
amendments.
FSB recommendations
— Greater clarity is needed around the
costs for small businesses in the MoJ impact assessment along
with a clear and more detailed information about the specific
impact on small businesses.
— Clear and accessible guidance for businesses
is needed which points out in clear, practical terms what sort
of conduct would constitute an offence. Clarity is also needed
around what small businesses would need to do to comply with the
legislation and what constitutes "adequate procedures";
both in low risk sectors but also those sectors more at risk (building
on and adapting industry standards agreed in certain sectors like
the defence industry).
— A review of the impact of the legislation
on small businesses after two years (not five as stated in the
impact assessment).
PENALTIES
— The explanatory notes set out that businesses
will be liable to an unlimited fine. This fine should be a proportionate
one and operate on a sliding scale based on turnover of the business
so that small businesses are not unfairly penalised.
June 2009
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