The total immunity afforded in some cartel cases is unlikely to ever be considered a satisfactory resolution for a company self-reporting bribery. There are some drivers, particularly in the financial services sector, but more could be done to make self-reporting a more attractive option.
A system that makes self-reporting an attractive option will bring more transparency to the process and will allow co-operating companies to move forward
criminal investigations opened in 2014 – 2015
What are the potential drivers for a company to self-report?
Exchange of information between regulators
A company which uncovers a suspected bribery scheme may consider making a suspicious activity report (SAR) to the National Crime Agency (NCA) to avoid liability for a money laundering offence. Similarly, a regulated financial services firm which has obligations under Principle 11 of the Financial Conduct Authority's (FCA) Principles for Businesses must deal with its regulators in an open and cooperative way. It must disclose to the appropriate regulator anything relating to the firm of which that regulator would reasonably expect notice. A company may take the view that having reported suspicions regarding bribery to the NCA and/or the FCA, it should raise them directly with the SFO at the same time given the formal gateways for exchange of information between regulators.
A Deferred Prosecution Agreement
The SFO's view of an optimal outcome of a self-reporting process is currently focused on a company ending up in a DPA process. In addition, the adequate procedures defence has yet to be tested in court. At some point, a company with sufficient financial resources will take the point, and we can expect appellate court guidance on the issue. In the meantime, however, companies may be loath to be the first test case and await judicial guidance as to how effective such a defence may actually be in practice, therefore self-reporting (and a potential DPA) may be an attractive outcome.
Waiting it out is not a pleasant strategy
Doing nothing in terms of self-reporting on the basis the evil day may never come is psychologically difficult for any board. A company wants a contingency plan and some certainty on its future, particularly if there is any likelihood of a future sale or capital raising. Allegations can be made public or come to a regulator's attention via civil litigation, a whistleblower, investigative journalists or the anti-money laundering regime. At that point, any potential credit of making a self-report may be lost.
Good corporate citizenship
The value of being a good corporate citizen, balanced against potential damage to the company, is a difficult call to make for any board. In a recent speech, a representative of the SFO referenced potential "ethical obligations on corporates to self-report" while noting there is no obligation on companies to self-report. The weight given to the potentially nebulous concept of good corporate citizenship in any decision-making process by a company will vary.
Incentivising self-reporting: Moving forward by looking backwards
Self-reporting companies in England, Wales and Northern Ireland previously had the real possibility of achieving a civil settlement under Part 5 of POCA, which created a non-conviction-based civil recovery scheme. Under the tenure of David Green, such civil settlements have fallen out of favour.
One of the key reasons that civil settlements are no longer considered appropriate by the SFO is the judgment in R v Innospec, given by Lord Justice Thomas (as then was) in March 2010, which stated: "Those who commit such serious crimes as corruption of senior foreign government officials must not be viewed or treated in any different way to other criminals. It will therefore rarely be appropriate for criminal conduct by a company to be dealt with by means of a civil recovery order; the criminal courts can take account of co-operation and the provision of evidence against others by reducing the fine otherwise payable. It is of the greatest public interest that the serious criminality of any, including companies, who engage in the corruption of foreign governments, is made patent for all to see by the imposition of criminal and not civil sanctions. It would be inconsistent with basic principles of justice for the criminality of corporations to be glossed over by a civil as opposed to a criminal sanction."
Following this judgment, the SFO entered into five civil settlements with companies while Richard Alderman was Director of the SFO. Since the appointment of David Green as Director, there have been only two civil settlements, one of which involved a company in 2012 and one which involved an individual in 2014. In both cases, the SFO published reasons for entering into the civil settlement in an attempt to bring more transparency to the process. A particular concern for the SFO regarding civil settlements is that an NGO or campaigner may seek to judicially review the civil settlement.
Why treat the Bribery Act differently?
To date, the SFO has not entered into a civil settlement under the Bribery Act and maintains an emphasis on a Deferred Prosecution Agreement as being the preferred alternative to prosecution.
Deferred Prosecution Agreements are not available in Scotland, and the Scottish authorities continue to use civil settlements as a method of incentivising self-reporting regarding bribery. Two civil settlements have been entered into between companies and the Scottish authorities so far, which clearly reference Section 7 of the Bribery Act.
There is merit to the Scottish approach. At a time when there is much pressure on SFO funding, a system that encourages self-reporting—perhaps with the carrot of a civil settlement for the company—would help to shift the financial burden of investigations away from the taxpayer and onto the company. This would not absolve the individuals, but it would allow reformed, co-operating and recalcitrant companies to move on.
Read other chapters in this report:
The Bribery Act: The changing face of corporate liability
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2016 White & Case LLP