Hospitality knocks

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The Bribery Act comes into force in April 2011, yet should corporates think twice about both offering and accepting corporate hospitality. And will it mean the end of a free lunch?

As Stand Out writes, a public consultation regarding guidance on the Bribery Act 2010 is closing. Commercial organisations have been given the opportunity to feedback to the Ministry of Justice (MoJ) on issues relating to the prevention of bribery, and according to reports, clarification will be issued in January 2011, detailing what measures companies should take in order to train employees on how to prevent and recognise bribery, anti-bribery policies and contract management.

Since the Bribery Act was passed in April 2010, there has been much speculation as to what the act will mean for business. Yet, for the events and hospitality industry, its impact could have greater implications. Will the offer of corporate hospitality be deemed a bribe?

The Bribery Act aims to combat bribery in both the public and private sectors, making it an offence to offer or promise an “advantage” and equally request or accept one too. But could corporate hospitality equate to bribery? That’s the question.

An online survey by financial advisers, Grant Thornton suggests that senior management turn a blind eye to “business conducted abroad in order to grease the wheels of industry”. So, could lavish business travel and the best seats at the most high-profile events be quashed?

Under the legislation, it will be an offence if a company fails to prevent bribery. Equally, it will be an offence to offer hospitality, gifts or a facilitation payment to foreign, public officials. Yet, almost a quarter of respondents to Grant Thornton’s survey consider payment of a bribe in order to do business overseas unavoidable.

Tom Beezer, a multi-jurisdictional law expert with Bond Pearce, says ignorance will be no defence and cases are likely to raised, as a result of the actions of companies or their employees or agents in countries where “doing business” is completely different.

“We don’t want to scaremonger but lavish corporate hospitality could fall foul of the new legislation,” explained Beezer. “That will not be taking someone for lunch down the road but perhaps more excessive hospitality like picking a client up in a private jet, wining and dining them with Champagne and caviar en route to a sporting event overseas while spending a week in a six star hotel. Certain industries are more susceptible than others.”

According to Bond Pearce, the Serious Fraud Office will focus on the construction, energy, defence, engineering, pharmaceuticals and outsourcing industries with extreme examples likely to catch the eye of the authorities, rather than hospitality that is proportionate and without intent.

Charlie Hepburn, managing director at Vivid Event Group, commented: “The director of the Serious Fraud Office (SFO) has stated that ‘most routine and inexpensive hospitality would be unlikely to lead to a reasonable expectation of improper conduct’. However, lavish or extraordinary hospitality may lead a jury to reach the conclusion that it was intended to induce the recipient to act improperly.

“In reality what does this mean? Is taking guests for a £35 meal, the same as entertaining them for £350 at Take That or even sending them to the men’s finals at Wimbledon for £3,500? Where is the line going to be drawn?

“Is this going to be relevant for both new and existing clients? For example, if you spend £20,000 on sending an existing client to the Monaco Grand Prix who spends £1 million with your business each year as a thank you, is that bribery. Or what if you have a potential client that could bring you in £1 million and entertain them in the same fashion in order that you can get to know them better, is that the same?

“It will only be possible to see what affect the law will have when and if the Serious Fraud Office actually prosecutes.

“I feel that it if you work to the letter of the law, then the hospitality and events industry is in a dire position as it will simply be impossible to operate. All hospitality and events should have an underlying purpose to them and this is ultimately to generate revenue or build relationships, therefore by this definition it could be considered bribery!

“I think that the SFO has to be realistic and employ commonsense when it comes to the new laws but only time will tell what the real impact will be.”

Adequate procedures

Experts currently suggest that a company will be able to defend itself against any allegations if it can prove that it had “adequate procedures” in place, specifically designed to prevent bribery. Guidance will be issued in the New Year, so that organisations can prepare for April 2011 when the legislation will be enforced.

Draft guidance, issued in September by the MoJ, stated that all businesses will have to keep a record of the hospitality staff receive.

Until final clarification has been issued, legal eagles recommend that companies hold back from implementing new policies, yet it’s been suggested that organisations should consider the following precautionary measures: write an anti-bribery policy; undertake enquiries into new and existing strategic partnerships; conduct a risk assessment and due diligence; create an internal committee to monitor compliance; make sure staff are aware of actions that are prohibited, addressing what action to take if an individual comes across bribery; ensure your anti-bribery policy is addressed in the staff handbook; ensure employees are aware that disciplinary action may be taken if in breach of a policy; and whistleblowing procedures.

Smell of fear

For now, it appears that many companies will approach the next six months with caution, and some have even admitted off record that massive uncertainty and a sense of “what if” is breeding fear; hospitality providers fear that there could be a lull in the take up of packages. Hence, corporate hospitality providers may dip their toes in other areas of industry, spreading the risk and developing alternative revenue streams.

Ben Atherton, events manager at Nortel, says that agencies could be using the issue of whether corporates should think twice about both offering and accepting corporate hospitality as an opportunity to cold-call corporates as a value-prop conversation starter.”

But none are, so are they burying their heads in the sand?

As far as 2011 is concerned, Hepburn says that bookings for 2011 are substantially up compared with this time last year.

“Traditional hospitality such as the Six Nations, Wimbledon and Ascot will always be in demand, but we are also seeing a greater focus on targeted and bespoke hospitality than before.

“One of our big sellers for the beginning of next year has been bespoke reward trips to see the Northern lights. Apart from the flights, basic food, accommodation elements and seeing the lights, there have also been requirements for nights in the ice hotels, dog sledge racing and artic survival training!

“Although I don’t think that the hospitality industry will ever return to where it once was, the future, all things considered, is looking OK. We as suppliers, together with clients, need be open to ideas and options that may not have been considered before.

“It is our responsibly as event specialists to make sure that we are constantly challenging clients with new and creative ideas so that they continue to feel that they are getting a return on their investment, be it financial or psychological.”