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'UK logistics businesses falling foul of bribery law'

09 August 2012

Companies are not doing enough to comply with the Bribery Act 2010 (Act) and may also be failing to meet reporting obligations required under the European Union Emissions Trading System (EU ETS) according to a survey of UK logistics professionals

The research, carried out by industry law specialists at Thomas Eggar LLP, shows that three quarters of respondents are either aware of the EU ETS but find it difficult to understand or not aware of it at all. What this means is that very few logistics companies are properly engaging in the EU ETS or have the proper compliance measures in place.

Also, despite two years passing since the introduction of the Bribery Act in 2010, nearly two thirds of those surveyed admit their organisation could either do more to comply or does not have a bribery policy at all.

Bribery Act 2010

Described by some as ‘the toughest anti-corruption legislation in the world’, the Act covers the crimes of bribery; being bribed; the bribery of foreign public officials; and the failure of a commercial organisation to prevent bribery on its behalf.

The Act is relevant because many companies operate supply chains or form part of a supply chain in countries where there is a high risk of bribery. Also, their activities may include those with a high risk of corruption, such as interacting with public officials or using local agents or partners.

Because the Act has wide extra-territorial jurisdiction, this means any act of bribery by a UK organisation, UK national or UK resident, anywhere in the world, breaks the law in the UK.

“Generally speaking larger organisations, and particularly those with international trading arrangements, have been quite quick to identify and address their compliance obligations under the Act,” says Matthew Bridger, Associate at Thomas Eggar LLP. “But for some, especially organisations at medium sized enterprise level, there may not be the awareness or availablity of resources to meet all of the Act’s compliance criteria”.

“I think this, coupled possibly with a large degree of uncertainty and confusion as to what the Act’s compliance requirements are, explains the results of our survey.”

The legal consequences for committing a crime under the Act are severe. Companies can be struck with an unlimited fine and individuals a fine or imprisonment for the most serious of cases.

Matthew adds: “From a wider commercial perspective, an organisation that is unable to demonstrate compliance with the Act may be prevented from participating in contract tendering opportunities. Organisations in the public sector and those organisations that deal with US corporations that are subject to the requirements of the Foreign Corrupt Practices Act since 1977 are, for the most part, acutely aware of the risks of non-compliance with statutory bribery provisions. Perhaps more needs to be done to educate SMEs about the Act.”

In order to combat bribery, logistics companies should:

Introduce a zero-tolerance policy;
Conduct a risk assessment to evaluate where the organisation is exposed to bribery;
Gather information and fully document offences in order to avoid future occurrences;
Introduce robust anti-bribery systems or ‘adequate procedures’ to prevent bribery; and
Train employees properly to understand the risks of bribery.
For more information and practical advice visit the Transparency International website, found at www.transparencyinternational.org.uk.

EU ETS

The EU ETS aims to combat climate change and covers power stations and industrial sites in 30 countries, whose carbon emissions make up almost 50% of Europe’s total. It caps the total emissions allowed and allowance certificates adding up to the cap are issued to the companies regulated by the scheme.

Companies monitor and report their CO² emissions. If they exceed their allowance they have to purchase extra allowance certificates. However, if a firm’s CO² emissions are less than its allowance, it is allowed to sell the surplus certificates, thus creating a financial incentive for businesses to work clean and stay green.

Matthew Bridger comments: “Unfortunately, the EU ETS has been subject to many revisions and there are now proposals for yet more changes. This uncertainty has made it difficult for logistics companies to properly assess and participate in the system. Also, some have heavily criticised the EU ETS, which will have had an impact on compliance with the system.”

The EU ETS applies only to firms operating installations with a rated thermal input above 20 MW or carrying out certain activities, such as processing ferrous metals. There are heavy penalties for non-compliance so Matthew recommends logistics managers visit the website of the Environment Agency in the first instance, found at http://www.environment-agency.gov.uk for more information and practical advice.

Corporate activity

36% of logistics companies see the current economic conditions as a good time to grow their company/group through acquisitions. However, 38% are not looking to acquire but have an alternative strategy of improving their position in the market place. 26% have no stated corporate strategy relating to acquisition.

Hayley Bevis, Associate at Thomas Eggar LLP comments: “We are still seeing a decent level of transactional activity, albeit not at the levels experienced in 2006/7. Whilst acquisitive cash-rich companies are able to make purchases for less than they otherwise would have done in the transactional boom days, solid companies led by a strong management team are still being sold against good multiples, some with a high percentage of cash on completion. On the seller side, there is also recognition that this is now the norm and the levels experienced previously will not be returning any time soon.”

Thomas Eggar LLP’s survey of logistics companies also showed that:

Temporary workers - 91% of logistics companies hire temporary workers as and when they need them, regardless of the introduction of The Agency Workers Regulations 2010 which give temporary workers the right to the same pay and basic conditions as employees.
Fuel costs - 44% of logistics companies stated that despite fuel rises having some impact, they had been able to manage the costs. However, 52% stated that the rises had significantly reduced their profitability.
Survey results based on responses from 50 logistics professionals, many of whom at big name firms.


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