Junkets may be off the menu

A far-reaching UK Bribery Act will put an end to lavish hospitality events and VIP boxes as acts of bribery are put under the spotlight

Aluminium Bahrain filed a lawsuit alleging that the Japanese trading company Sojitz bribed two of its employees. Phil Weymouth/Bloomberg News.

Lavish corporate hospitality events across the region are being drawn into the spotlight by a tough new law in Britain designed to stamp out bribery and corruption.

The UK Bribery Act, which is set to be enforced in May, will impose prison sentences of up to 10 years and unlimited fines for UK companies or those from overseas with a presence in the country that engage in bribery and corruption.

The far-reaching legislation will make foreign companies with a UK interest liable if staff or third parties pay bribes on their behalf anywhere in the world. It will cover such acts irrespective of whether they are made publicly or privately and both those paying bribes and the recipients will be liable.

The definition of a bribe is also being rewritten to include certain gifts and some kinds of corporate hospitality.

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"A number of British companies that have an interest in the UAE have taken a step back from attending corporate hospitality events," said Stephen Millington, the associate managing director of Kroll in Dubai, the private investigative firm.

"You can forget the corporate hospitality invites and drinks at VIP boxes," he said, adding the law would affect networking that is commonplace at such events.

Acts of bribery could also be defined as paying a fee to expedite customs clearance or even gift-giving, a common practice in some countries. In December 2009, Aluminium Bahrain (Alba), the aluminium smelter majority-owned by the Bahrain government, filed a lawsuit against the Japanese trading company Sojitz alleging the company paid US$14.8 million (Dh54.3m) in bribes to two of Alba's employees in exchange for access to metals at below-market prices.

It reflects part of the proposed legislation that states companies are responsible for ensuring they are aware who they are contracting with and may still be liable if junior staff engage in accepting or paying bribes.

Andrew Tarbuck, a corporate partner at the international law firm Latham & Watkins in Dubai said the jurisdiction of the new legislation "should not be underestimated".

Concern was also voiced on how seriously local companies would take the legislation. "Unfortunately local businesses are taking it less seriously," said Mr Millington.

"It's a cultural thing, why would companies here care about a UK law." The new law was scheduled to be enforced in April, after being put back from October because of an outcry from the UK business community criticising the proposed guidelines for not being clear enough.

A key defence in a case brought under the legislation would be that a company had put in place "adequate procedures" to guard against bribery and corruption, although that could be open to interpretation, Mr Millington said.

"It's only guidance and it is going to be on a principles basis. It's not going to be a fixed, hard-and-fast rule," he said.

The reform coincides with significantly increased enforcement efforts by the UK Serious Fraud Office and responds to international criticisms that UK legislation lagged the Organisation for Economic Co-operation and Development's anti-bribery legislation and the US Foreign Corrupt Practices Act.