Legal updates
Employment: Bribery Act 2010 overview
The Bribery Act 2010 will introduce new offences whereby individuals and organisations can be found guilty of failing to prevent bribery. Whilst the Act received Royal Assent in April this year, the Government is yet to enact the commencement order which will bring it into force. Organisations are therefore recommended to take preparatory steps in the time prior to the Act’s implementation.
Under the Act, a direct or indirect request, offer, solicitation, receipt or acceptance of cash or some other form of inducement will amount to a bribe, if the inducement is offered or accepted to:
- gain an advantage;
- reward an individual for securing the improper performance of a business activity or any activity performed in the course of employment; or
- secure the improper performance of a business activity or any activity performed in the course of employment.
Organisations must be aware that entertainment and gifts can be used as a bribe. It will not always be as straightforward as an offer of cash.
There are a number of different offences under the Act. However, convicted individuals can face up to ten years in prison. They will be caught by the Act, whether or not the bribe takes place in the UK, if they are a British citizen or UK Passport holder. If the individual is associated with the organisation and bribes somebody to obtain an advantage for the company, the company will also be guilty of a failure to prevent bribery (regardless of whether the bribe takes place in the UK or abroad) unless it can show that it had adequate procedures in place to prevent bribery.
The Government intends to issue guidance on what will amount to “adequate procedures”. In the meantime, as a minimum, your organisation’s position on corporate gifts and entertainment should be clearly set out in a policy for employees.
Contact James Simpson, employment team, for employment advice on 01865 781193.
The statutory guidance on contaminated land in DEFRA Circular 01/2006 (“the Statutory Guidance”) is being reviewed this year.
There are still a number of areas on which it would be helpful to have clearer guidance for both landowners and developers. For example, a person can be required to remediate contaminated land where it has caused or knowingly permitted the contaminant to enter or remain in the land. Where someone has not caused the contamination but has become aware of its existence (whether due to the outcome of a site survey or otherwise) and had an opportunity to take steps to remediate but failed to do so he or she may be a knowing permitter. What is not clear is how long after it has knowledge must elapse before that person is a knowing permitter. Some commentators have suggested that it should be at least six months but we still await a definitive judicial authority.
That need for clarification on the knowing permitter test in the statutory guidance is long overdue. However there is some help in the way in which it was applied in the appeal by Redland Minerals Limited and Crest Nicholson Residential Plc to the Secretary of State on 2 July 2009 in relation to a remediation notice served in respect of St Leonard’s Court, Sandridge, Hertfordshire.
In that case, Crest had demolished a factory hardstanding some two years before developing the site for 66 houses. In the two year period rainwater effectively flushed the contaminants into the groundwater. Although Crest had not itself introduced the contaminants to the site, the Secretary of State decided that a person can cause contamination by action or inaction. He did not therefore need to consider whether Crest was a knowing permitter. That it is possible also to cause contamination by inaction seems to leave little room for the knowing permitter test.
For general advice on matters contact Lesley Pollock in the commercial property team on 01865 781159, or for advice regarding contamination contact Adrian White in the commercial property team on 01865 781151.
Dispute Resolution: Watch what you say in the run up to London 2012
If the expulsion of 36 Dutch women wearing orange mini dresses from a South African World Cup stadium as part of an unofficial brewer’s “ambush marketing” stunt seemed over zealous, this may seem small beer in 2012, given the powers set out under the London Olympic Games and Paralympic Games Act 2006.
The Act, which came into force in June 2006, and remains in force until 31 December 2012, provides legal protection for words which could suggest an official link to the London 2012 Olympics. The protected words include: “games”; “Two Thousand and Twelve”, “2012”, “twenty twelve”; ”gold”; “silver”; “bronze”; “London”; “medals”; “sponsor”; and “summer”. Other words associated with the Olympic movement, along with the Olympic rings are protected under Olympic Symbol etc (Protection) Act 1995.
To avoid litigation, suppliers and manufacturers should obtain legal advice before entering into any contracts for the supply of non-licensed or unofficial goods (including the packaging of any goods) which suggests a link to the London Olympics through the use of the protected words or symbols. Advertising is also subject to the same restrictions. It is expected that both the London Olympic Committee and the Olympic Committee will vigorously pursue any perceived infringements, and legal advice should be obtained immediately once any threat of litigation is received.
Additionally the 2006 Act provides additional powers to local Trading Standards and the police to deal with infringements. An infringement of the protected words or symbols could lead to a criminal conviction and/or a fine of up to £20,000.
For advice on property disputes, contact Katherine Gregory in the dispute resolution team on 01865 781056 and for advice on commercial disputes, contact Andrew Crocombe in the dispute resolution team on 01865 781059.
IP: The Information Commissioner now has teeth to fine organisations in breach of the Data Protection Act
It is now even more vital for organisations to be fully compliant with the Data Protection Act (DPA), as the effectiveness of the legal power of The Information Commissioner’s Office (ICO) has been significantly strengthened. The role of this independent authority is to ensure organisations comply with the DPA. In early April, the ICO gained the capability to issue significant monetary penalties to organisations in breach of the DPA.
The DPA provides a legal framework to ensure individuals’ personal information is handled appropriately. The Act requires all who process personal information to uphold eight data protection principles. These stipulate that it be handled fairly and lawfully, processed for limited purposes and in an adequate and secure manner. It prescribes that personal data is processed in line with an individual’s rights, should not be kept longer than is necessary by those processing it and should not be transferred to other countries without adequate protection. It is significant that the Act also empowers individuals with a right to know what information is held about them by organisations. Individuals, who believe they are being denied access to their personal information, or consider that an organisation has not dealt with it in line with the data protection principles, can ask the ICO to investigate.
With the ICO now at liberty to fine organisations up to £500,000 for serious breaches of the DPA, organisations are well advised to spend time reviewing their functions and procedures to ensure they are fully compliant. As an employer, businesses must ensure that they process their employees’, and potential employees’, personal information in line with the data protection principles. Organisations must also comply with specific obligations when marketing that affect telephone, e-mail and other electronic marketing methods and marketing materials sent by post. In essence, if a person or business that an organisation targets asks to be removed from the organisation’s mailing list, the organisation must comply. An organisation’s failure to do so permits the recipient to apply to the courts for an order against it under section 11 of the DPA.
If you are considering starting a new business, not only must all the information you process about your clients, employees and suppliers be compliant, (as for all organisations), you must also notify the ICO that your business will be processing individuals’ personal information. The new company will then be entered on the Public Register of Data Controllers. There is a statutory requirement for all organisations that process individuals’ personal information to notify the ICO, unless they fall within a statutory exemption.
It is imperative that organisations have procedures in place to deal with requests from individuals about their personal information, and also the means to deal promptly with any potential complaint about their processing of an individuals’ personal data under the DPA.
For IP-related matters, contact Stephen Brett, corporate/IP team on 01865 781208.
Corporate: The practical implication of guaranteeing a company’s liabilities
When a bank provides a loan to a company, it may require a third-party to act as a guarantor for the loan as security so that if the company fails to fulfil its repayment obligations the third-party promises to do so. It is often the case that a director or shareholder of a company will agree to act in a personal capacity as guarantor for the company’s loan. In doing so, the director or shareholder will take on onerous obligations, the significance of which he should fully understand before agreeing to act.
A guarantee is a promise to ensure a third party fulfils its obligations and/or a promise to fulfil those obligations if that third-party fails to do so. It is a contractual agreement and is legally binding. Often, a guarantee will be coupled with an indemnity which acts to support the guarantee. It is important to identify whether an indemnity is given as well as whether it will extend the guarantor’s obligation to the third-party’s loss. Consequently, if the underlying transaction (e.g. the loan) is set aside, the indemnity remains valid and continues and the indemnifier’s contractual promise to repay the bank’s loss remains ongoing.
Often a bank requires the guarantor to provide a form of security, as a means of supporting its obligation. Typically the bank will take a security on the assets of the guarantor such as a mortgage on the guarantor’s home. The mortgage will contain provisions in favour of the bank and will give the bank the right to sell the guarantor’s home if the guarantor does not pay its guarantee if it is required to do so.
A bank’s standard guarantee agreement (Agreement) also contains provisions favourable to the bank and onerous to the guarantor. It is usual for the Agreement to require the guarantor to guarantee all the liabilities of the company to the bank (loans, overdraft) which will not be limited to the existing loans and facilities the company has from the bank as future liabilities will be covered. The guarantor should be aware that will also be required to pay the bank’s costs, interest on the initial loan (which will become significant when interest rates rise) and any expenses of enforcement. It is of note that if the original debtor fails to meet any of its repayment obligations, the bank need not pursue the debtor first but may simply serve a demand on the guarantor who will be required to pay immediately the outstanding sum owing in full.
Under the indemnity, the bank may also claim any money owed by the company from the guarantor directly, up to the maximum amount of the loan (plus interest and other related costs). Therefore, if the bank is unable to recover its liability from the company for any reason whatsoever (except for certain exceptions stated in the Agreement) it can immediately claim any money owed by the company from the indemnifier directly. Thus, as soon as the company defaults on a repayment, the bank may seek to recover the loan in full from the guarantor and invariably will do so because of the likelihood that the default is representative of the company’s precarious financial position. If the guarantor has provided the bank with a mortgage on his home as security for his indemnify this will allow the bank to sell the guarantor’s home to recover its loss.
With the practical significance of providing a guarantee so great, a guarantor must consider carefully the ramifications before he agrees to act and should take independent legal advice before doing so. Indeed a bank will require the guarantor to have taken such independent legal advice and the guarantor’s signing of the Agreement testifies to that. A guarantor should before agreeing to act:
- be alert to the full practical and legal obligations of the guarantee agreement;
- be satisfied that the company is in a strong trading position with a healthy financial position: this will enable it to meet its obligations to the bank
- be certain that for the term of the guarantee (which continues until the debtor has repaid the loan in full) he will not need to use the security he provides to the bank as security for anything else (ie to raise another mortgage) because the Agreement will prohibit the security given to the bank from being shared.
Contact Malcolm Sadler, corporate team, for further information on 01865 781000.
Forthcoming Henmans events
- We are currently taking a summer break and will resume our seminars in September.
The past month at Henmans
- On 3 June we held an employment seminar at our offices on ‘Harassment in the Workplace’
- On 16 June Women in Property arranged a site visit to the Ashmolean Museum.
- On 17 June we held a property seminar at our offices on ‘Problems with contaminated land: dirty sites and what to do’.
- On 1 July we held an employment seminar at our offices on ‘TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006)’.