If your are a SaaS supplier or SaaS customer you should be aware of the provisions of the Bribery Act when negotiating the terms of a SaaS agreement. The Bribery Act 2010 (“Act”) has been in force since July 2011. It aims to distinguish between hospitality (which is permitted) and bribes which are illegal. A breach of the Act can result in an unlimited fine and a maximum prison sentence of 10 years.
Relevance to SaaS Customers
The Act applies directly to SaaS customers. SaaS customers will be liable under the Act for any breaches of the Act caused by their agents or subcontractors i.e. their SaaS suppliers.
In order to protect themselves against such breaches, SaaS customers are increasingly requiring SaaS providers to include anti-bribery provisions in the terms of their SaaS agreements. Such provisions are generally acceptable if they simply state that the SaaS supplier complies with the 6 principles of the Act and has adequate measures in place to ensure compliance.
Relevance to SaaS Suppliers
SaaS suppliers operating mainly in the UK with UK based customers will generally not be affected by the Act, provided that the levels of hospitality that they offer to SaaS customers are proportionate to the SaaS provider’s business, i.e. the reasonable cost of meals out, tickets and travel expenses to events. No definition of excessive hospitality is given in the Act or the guidance to it. It is therefore advisable to keep records of all hospitality entertainment and its purpose so that evidence can be provided at a later date if necessary.
Note that if you are a SaaS supplier operating outside of the UK or you have SaaS customers based in developing countries you should be particularly careful about complying with the Act, as “hospitality” which is usual or acceptable in a developing country such as paying third parties in order to win a contract, could be considered a bribe under the Act.
Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:
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