When advantage becomes a bribe
With corporate gift giving in full swing for the Year of the Snake, Deacons lawyer Elizabeth MacDonald has a reminder of HK's bribery rules
Hong Kong's Prevention of Bribery Ordinance uses the word "advantage" instead of "bribe". An advantage becomes a bribe when there is an illegitimate purpose linked to the offer, solicitation or acceptance. Advantage is widely drafted to capture all of the usual acts commonly associated with a bribe, including gifts of goods or money, loans, services, contracts, employment, the exercise or forbearance of exercise of certain rights, favours and discharge of liability in whole or in part. There is no minimum threshold.
The ordinance prohibits the following without "lawful authority" or "reasonable excuse":
- Offering an advantage to an agent in connection with his performance or abstaining from performance of any act in relation to his principal's affairs or business.
- As an agent soliciting or accepting an advantage, as above.
The principal-agent relationship includes where a person is employed by another or where a person is acting for another. A principal may therefore include an employer, an investor, a company director or a fund.
Active bribery by giving, offering or promising an advantage, as well as passive bribery by soliciting or accepting an advantage, are both criminal offences under the ordinance. The offer, solicitation or acceptance should take place in Hong Kong in order to be covered by the ordinance.
There is no legal requirement in Hong Kong to have a gifts and entertainment policy.
Although entertainment is specifically excluded from the definition of "advantage" under the ordinance, gifts and even hospitality may be construed as a bribe given the wide definition of "advantage" under section 2 of the ordinance. While the ordinance does not specify a dollar value that would be considered as reasonable, it is important to assess the value of each item individually under the circumstances of each case and consider the purpose behind giving and/or receiving each gift.
At a minimum, companies are advised to maintain a gifts register to help monitor any unusual, or lavish gifts or hospitality received or given by a company employee. A key consideration in minimising liability is whether the company can demonstrate that it has adequate anti-bribery and corruption procedures in place. In addition to a robust compliance infrastructure, staff should have annual training on ordinance requirements and overseas anti-bribery legislation if it applies, for example if the company is a British or US subsidiary or if the gift is to be given overseas.
A robust anti-corruption compliance programme should include:
- Employee training
- Policies and procedures
- Reporting requirements for employees
- Appropriate record keeping (this is important in the event of any investigation on the company)
- Designated compliance personnel to oversee this function; and
- Senior managers to promote a good compliance culture internally
Business partners are a source of potential risk as they may be deemed to be acting as your company's agent. They need to be the subject of independent due diligence. This includes upfront due diligence before entering an agreement or other venture, as well as conducting ongoing due diligence in relation to the conduct of the business partner.
Efforts to mitigate this risk include incorporating a contractual right to conduct regular audits on the business partner, and/or an annual certificate of compliance with your company's anti-corruption policies as well as applicable anti-corruption laws.
The mooncake case in Hong Kong in 2009, in which a company director was sentenced to two months' imprisonment for offering 15 boxes of mooncakes to police officers, highlights how gifts of relatively small value are still caught by local anti-bribery laws. Under section 19 of the ordinance, merely following a custom is not a defence to prosecution.
Section 9 of the ordinance states that an employee of a private company cannot solicit or accept any advantage in relation to his employer's business, without the permission of his employer.
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