Bribery Act & Proceeds of Crime - Written by on Thursday, October 20, 2011 14:58 - 3 Comments

We report on UK Deferred Prosecution Agreement proposal & consultation

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On Monday we had the pleasure of hosting the first consultation concerning Deferred Prosecution Agreements (DPA’s) with the Solicitor General, Edward Garnier QC MP and the Director of the Serious Fraud Office, Richard Alderman.

This initial consultation process will last 2 months, with the Solicitor General engaging with corporates and experts in the corruption field.

Both the Solicitor General and the director of the SFO made it clear that there is a wish to fill the obvious gap in UK legislation.

The Problems

As the law currently stands there is an inbuilt tension between encouraging companies to come forward and self-report wrong doing proactively to the SFO and the requirements of UK criminal law which recognise criminal prosecution and conviction as the only possible punitive response to such admissions.

This in turn gives rise to further tensions, between offering a corporate sufficient certainty as to outcome to lead to it engaging with prosecutors in the first place and retaining judicial discretion over sentencing offenders. There is also a tension between the requirement that justice be seen to be done in public and the need for corporates considering engaging to have space and privacy to explore this with prosecutors without prejudicing their position publicly.

The tensions occur at several points.

Take the example of a company which has broken the Bribery Act law.

The company self-reports a matter that in reality may have gone undiscovered; it changes the composition of its board; pulls out of the market in which the problem occurred; instigates a full investigation in consultation with the SFO providing a full and detailed report in due course; it puts in place ethical procedures and review processes with full visibility and accountability at board level.

In the US such a company may well benefit from a DPA. Under the terms of a DPA in the US the company may have to pay substantial amounts to those affected by its actions and account for its profits, it may have to agree to working with a Monitor and to account to the DoJ for its future actions. In return the US prosecution is deferred and, so long as it keeps to the agreement, the prosecution will eventually be dismissed.

In the UK under the law at present prosecution is the only option, but is a blunt instrument.

The SFO must either prosecute with the aim of achieving a criminal conviction or proceed under the Civil Law.

To have only the options under the criminal law of seeking to convict (with all of the attendant impacts), or doing nothing, is unsatisfactory.

The UK law must evolve so as to remain effective.

The centre of the problem

If you allow a DPA in UK law “how do you retain judicial oversight and independence” of the process?

A good example of how the current tensions cause the law not to work is Innospec.  The lessons of Innospec have been taken on board by Government and the case was used to illustrate the problem by the Solicitor General.

In that case the offending behaviour by the company was of a gravity that required there to be a prosecution as opposed to a Pt 5 POCA Civil settlement. In an attempt to gain a degree of foreseeability for the company, and based on negotiations with the US DOJ over DPA settlement figures in the US, the SFO agreed to join with the company in suggesting the appropriate sentence to the Court. The Judge hearing the case firmly rejected this approach. In the UK it is a well-established principle that the question of sentence is one solely for the Judge. The prosecution are expected to assist the Judge but only so far as bringing to his attention any similar cases or any guideline publications from the Sentencing Counsel which bears upon the issues to be considered by the Judge. In the UK joint submissions as to sentence are not allowed.

The Basic Solution : DPA

The Solicitor General made clear that this fundamental principle of judicial independence and oversight is not to be changed. Ultimately the Judge must decide. The public interest demands that the Judge is the final arbiter of matters such as the appropriate sentence.

The proposed new DPA legislation, whatever its final shape, will ensure that this does not change.  The key to the problem in diffusing the tensions between the parties has been identified by the Solicitor general.

The solution, in the context of the UK Criminal legal system demands the involvement of the Judge at a much earlier point than is presently possible under UK law and rules of Criminal Procedure.

In outline the solution for the UK involves the engagement of the Judge at the point at which criminal offences have been identified and possible charges drawn up.

At that point the company and the SFO would have access to a Judge.

The function of the Judge, involved and informed as he would then be from an early stage, would be to direct the steps needed to be taken by all parties with a view to enabling the Judge to decide whether the case was suitable to be disposed of by way of a DPA.

The solution goes further as the Judge would be in position to review the proposals of each party as to the appropriate terms of a DPA.

As this process is one of seeking an “agreement” between the prosecuting authority and the company and as this procedure would be fully transparent to the Judge who would be able to intervene, agree or refuse any term, point or outcome there would be no Innospec issue arising should the SFO join with the company in putting forward terms which were viewed as appropriate by each side.

This innovative approach to the obvious tensions which have been highlighted by the corruption cases coming to the UK courts is to be applauded.

We think that the need for DPA legislation is obvious. Its absence has often been remarked upon by the Director of the SFO and for very good reason. It is a serious hole in the UK law.

Its absence has a chilling effect on the attempts to ensure that ethical attitudes become a permanent feature of corporate life in all companies, be they International, SME or small.

There is much more to discuss; many details must be worked through in the coming months but at the end of the process the prospect of greater certainty for those corporates who find themselves in the spotlight of a criminal investigation is essential for all who do business in and with the UK.

Image © Crown Copyright 2011

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Tom Fox
Oct 22, 2011 4:55

This debate is of great interest to US or other non-UK based companies which are subject to the Bribery Act. The one thing that companies strive for is ‘certainty’. Under the current UK such ‘certainty’ is far from assured with judicial oversight after the fact. The potential solution laid out in this post will go a long way towards resolving the well recognized tension in the current UK system. Judicial oversight can bring many benefits so if the British judiciary has a role in the process it may well be a model which can be used in other jurisdictions.

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