Key Points:
- In the UK, so-called Deferred Prosecution Agreements (DPAs) replaced the self-reporting procedures for companies in 2014 which apply to economic crimes committed by companies;
- Deferred Prosecution Agreements take the form of a statement of facts (which give particulars of offence and include details of financial gain or loss) and agreed terms (whilst fact dependent almost always expected to include fine);
- The first DPA was agreed recently on 30 November 2015. The Agreement involved the UK arm of a financial institution who admitted failing to prevent bribery when its Tanzanian arm raised USD 600 Mio. for the government.
Introduction
In the United Kingdom, corruption in international business is criminalized by two pieces of legislation. The first is the Bribery Act 2010 which is based on ‘intention to induce’ improper conduct or performance and the second is the Proceeds of Crime Act 2002, which governs money and creates an offence of dealing with ‘criminal property’.
The United Kingdom additionally has obligations as a signatory to the Organisation for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Anti Bribery Convention).
Following international criticism of the United Kingdom’s record on prosecuting corporate corruption offences, particularly in the wake of the collapse of the criminal investigation into the British Aerospace Al Yamamah arms deal with Saudi Arabia, the UK government and enforcement agencies have been taking action to increase both the detection and prosecution level of this type of corporate wrongdoing.
In recent years, the investigation of corruption cases with a foreign element has seen marked progress primarily due to the instrumental role played by the International Corruption Group (ICG) in bringing together the experience of the Serious Fraud Office (SFO), the Nation and the increased commitment from the Department of International Development to resourcing specialized units in the City of London and in the Metropolitan Police Service. The purpose has been to strengthen the UK’s capacity to investigate and prosecute corruption that occurs between developing countries (including bribery in business) and to return stolen assets.
Previously, companies could self-report to the SFO and reduce the risk of criminal prosecution in exchange for the likelihood of entering into Civil Recovery Orders.
Position of Negotiated Settlements
This original Guidance on self reporting was withdrawn in late 2012. Deferred Prosecution Agreements (DPAs) replaced the self-reporting procedures in 2014 which apply to economic crimes committed by companies. The DPA regime encourages companies to co-operate with the prosecutor and the new Code for DPAs confirms that a genuine self-report is still important and may represent a public interest factor which will weigh against a decision to prosecute. However, there are now no guarantees that a company will always succeed in negotiating a non conviction from a self-report. The final outcome of the negotiations will depend entirely upon timing and the totality of the information that the company discloses to the prosecutor. This is particularly true about the level and quality of any internal investigation undertaken.
Deferred Prosecution Agreements take the form of a statement of facts (which give particulars of offence and include details of financial gain or loss) and agreed terms (whilst fact dependent almost always expected to include fine). Only the prosecutor can extend an invitation to negotiate. This invitation can be extended when there is sufficient evidence for a reasonable prospect of conviction, or there is at least a reasonable suspicion based upon some admissible evidence that a person has committed the offence. All DPAs must be approved in open court (so the judges retain an important check and balance power in the UK) and the rulings made public.
The first DPA was agreed recently on 30 November 2015. The Agreement involved the UK arm of the ICBC Standard Bank who admitted failing to prevent bribery when its Tanzanian arm, Stanbic Bank Tanzania, raised USD 600 million for the government. As part of the Agreement the Bank has agreed to penalties of USD 32.2 million, including a USD 16.8 million fine to be paid to the SFO. That includes a one-third reduction for self-disclosure and co-operation; a USD 6 million fine plus interest of more primarily due to the instrumental role played by the International Corruption Group (ICG) in bringing together the experience of the Serious Fraud Office (SFO), the Nation and the increased commitment from the Department of International Development to resourcing specialized units in the City of London and in the Metropolitan Police Service. The purpose has been to strengthen the UK’s capacity to investigate and prosecute corruption that occurs between developing countries (including bribery in business) and to return stolen assets. Previously, companies could self-report to the SFO and reduce the risk of criminal prosecution in exchange for the likelihood of entering into Civil Recovery Orders. Position of Negotiated Settlements This original Guidance on self reporting was withdrawn in late 2012. Deferred Prosecution Agreements (DPAs) replaced the self-reporting procedures in 2014 which apply to economic crimes committed by companies. The DPA regime encourages companies to co-operate with the prosecutor and the new Code for DPAs confirms that a genuine self-report is still important and may represent a public interest factor which will weigh against a decision to prosecute. However, there are now no guarantees that a company will always succeed in negotiating a non conviction from a self-report. The final outcome of the negotiations will depend entirely upon timing and the totality of the information that the company discloses to the prosecutor. This is particularly true about the level and quality of any internal investigation undertaken. Deferred Prosecution Agreements take the form of a statement of facts (which give particulars of offence and include details of financial gain or loss) and agreed terms (whilst fact dependent almost always expected to include fine). Only the prosecutor can extend an invitation to negotiate. This invitation can be extended when there is sufficient evidence for a reasonable prospect of conviction, or there is at least a reasonable suspicion based upon some admissible evidence that a person has committed the offence. All DPAs must be approved in open court (so the judges retain an important check and balance power in the UK) and the rulings made public. The first DPA was agreed recently on 30 November 2015. The Agreement involved the UK arm of the ICBC Standard Bank who admitted failing to prevent bribery when its Tanzanian arm, Stanbic Bank Tanzania, raised USD 600 million for the government. As part of the Agreement the Bank has agreed to penalties of USD 32.2 million, including a USD 16.8 million fine to be paid to the SFO. That includes a one-third reduction for self-disclosure and co-operation; a USD 6 million fine plus interest of more than USD 1 million to be paid to the government of Tanzania and USD 8.4 million in disgorgement of profits to avoid prosecution.
Other recent cases and settlements in the UK
- Balfour Beatty plc, a UK listed engineering and construction business whose subsidiary was involved in securing contracts as part of USD 130m UNESCO project to rebuild the Alexandria Library in Egypt between 1998 and 2000.
- Mabey & Johnson Ltd a long established UK registered engineering company manufacturing prefabricated bridges. The company was prosecuted in the UK for paying bribes to secure overseas contracts as well as breaching a United Nations embargo on trade with Iraq, popularly called the ‘oil for food’ scandal.
- British Aerospace (BAE Systems), is one of the biggest military suppliers to the US government and Europe’s largest defence contractor. The 2004 investigation in the UK led by the SFO began following allegations that BAE had secretly paid USD 2b to Prince Bandar bin Sultan, Saudi Arabia’s former ambassador to Washington, in return for inside help selling Typhoon jet fighters to the Saudi government.
- Innospec Limited, was the UK subsidiary of Innospec Inc., a NASDAQ listed company in the US. This case was hailed by the SFO as the first ‘global settlement’ reached with a cooperating Company resolved in cooperation with US Department of Justice (DOJ).
- In September 2015 Scottish authorities announced a civil settlement with Brand-Rex Limited. The settlement is the first concluded settlement for a contravention of the Bribery Act 2010, s.7 – corporate failure to prevent bribery by a third party. It is the third concluded corporate self-report and civil settlement in Scotland. The Scottish system is akin to that operated by the SFO before deferred prosecutions agreements were introduced.
Conclusion
What is emerging in the UK is that some reasonable level of predictability in the forms of collaboration, for companies. Prosecutors, taking such a decision, will now follow a prescribed process set down in law. Furthermore, in the case of DPAs, there is a requirement that, subject to any necessary restrictions due to ongoing or future related proceedings, the Court’s rulings in all DPAs must be made public. In the recent ICBC Standard Bank case, the DPA was approved in a public hearing by Sir Brian Leveson, President of the High Court’s Queen’s Bench division.
It is hoped that this process brings transparency in negotiations between companies and prosecutors.
The Journal of Criminal Law recently compared the developing UK systems with the more developed US model where the emphasis has been on cooperation by the company in prosecution of its individuals and a reform of practices through improved governance in the company.
It will now have to be seen how the enforcement of DPAs changes the legal landscape in the UK. There is a feeling that the SFO will now use this model increasingly to hold companies to account but only if they meet the requirements of the DPA criteria and self report in good time. It will certainly provide certainty to a complex process and will avoid the costs of lengthy trials. But questions remain, foremost of which are, what will happen to the individuals – will there now be more emphasis on prosecuting the individuals rather than the company as appears to be the case in the US when companies self report, and what about more complex cases of trans-national corporate bribery cases where, in the absence of a conviction overseas, and where an investigation may have begun, there would be no clear position as to what the company would do in the UK; why would companies wish to defer prosecution in one jurisdiction only to open themselves to prosecution in others? Time will tell.
Contact:
Alan Bacarese
Phone: +44 797 215 0169
Email: alan.bacarese@streamhouse.org
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