Construction, MENA (Middle East & North Africa), Money laundering - Written by on Friday, January 7, 2011 3:53 - 0 Comments

Personal criminal liability, the nuclear deterrent: What every director, senior officer & General Counsel needs to know

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The SFO is fond of saying that criminal liability under the Bribery Act is brought straight into the Board Room.

It is an attention grabbing headline and it’s meant to be.

A key weapon in the SFO’s armoury (akin to a nuclear deterrent) is the focussing of the mind in the Board and senior management levels (including General Counsel) which inevitably flows from the risk they face of a very lengthy (up to 10 years) prison sentence and an unlimited fine if the corporate engages in bribery.

The SFO hopes this threat will motivate the Boards and senior officers of corporates subject to the Bribery Act to adopt and implement Adequate Procedures to prevent bribery.

What is this nuclear deterrent?

Readers who follow the coverage of the Bribery Act will know that Section 14 of the Bribery Act holds the key.

What is Section 14?

Section 14 does not create an offence.

Section 14 is a device enabling a prosecution against senior officers of a corporate to be brought under Section 1 (bribing), Section 2 (receiving a bribe) and Section 6 (bribing a foreign public official) where they have consented and/or connived in relation to that/those offences.

The good news

First, personal liability as a result of Section 14 only applies in relation to the offences under Section 1, 2 or 6.

There is no personal liability if the corporate is “only” guilty of the new (and well reported) failure to prevent bribery offence under Section 7 of the Act.

Second, Section 14 requires the successful prosecution of the corporate for the operative offence under either Sections 1, 2 or 6 of the Bribery Act as a condition to the successful prosecution of a senior officer for the same offence using Section 14.  Put another way, no successful prosecution of the corporate for an offence under Sections 1, 2 or 6 means no successful prosecution of a senior officer for consenting or conniving.

This is an important condition.  The offences of bribing, receiving a bribe and bribing a foreign public official are not strict liability offences.  In order to prosecute a corporate for these offences it will be necessary for the prosecution to show that the controlling mind of the corporate has the requisite level of intent/knowledge etc.

This requirement has historically made it difficult to successfully prosecute corporates (although not impossible see: Innospec and Mabey & Johnson) which was the catalyst for the new strict liability offence of failure to prevent bribery;  an offence created to make it easier for the SFO to successfully prosecute corporates for bribery.

The bad news

We anticipate the Bribery Act will make it easier (although not without obstacle) to successfully prosecute a corporate for bribery under Sections 1, 2 or 6 than was the case under the old law.  This in turn will mean that a prosecution of a senior officer under Sections 1, 2 or 6 is much more than a mere theoretical possibility.

The SFO have made no secret of the fact they intend to use the new Section 14 offence to bring the Bribery Act into the Board Room.

Assuming that there is a successful prosecution of the corporate under Sections 1, 2 or 6 readers may have read that for a senior officer to be prosecuted under the same sections using Section 14 he/she must have “consented” or “connived” in the same offence.

The difficulty with this is that the concept of consent or connivance is not fixed.

On the face of it consent is simple enough.  A senior officer should know if he/she consented to the act of bribery.

However, connivance is trickier.

While it is clear that connivance does not include negligence (which was specifically excluded from Section 14) as the Law Commission has put it, “it is possible for someone to ‘connive’ at the commission of an offence (to know it may occur but to do nothing to prevent its commission) without providing actual assistance or encouragement. Secondly connivance may occur through reckless conduct (knowing that there is a risk of offending but doing nothing)…”

What does connivance mean in practice?

When does evidence of negligence reach the tipping point in the mind of a judge and jury and become reckless, wilful blindness or similar to bribery.

For example,  imagine your business operates in some countries with poor reputations for corruption.  You have read about the Bribery Act and have spent several thousand dollars on legal advice relating to it.  Your compliance manual is up to date.  However, the person tasked with dealing with the Bribery Act compliance has a million and one things on his plate which are thought to be equally if not more important resulting in patchy ongoing monitoring and due diligence to the extent there is any at all.  The business considers that the chances of being prosecuted are, on balance, low.

A bribe occurs and the Adequate Procedures put in place to prevent bribery (if any) fail to meet the standard for Adequate Procedures.

Could this scenario create a personal liability for senior officers?

While the answer will depend on the facts, could this fact pattern be construed as (the Law Commission put it) as “knowing something may occur but to do nothing to prevent its commission”?

The answer, is yes.

A failure to have Adequate Procedures could form the basis for a successful prosecution of senior officers for their connivance in bribery.

Directors, senior officers and General Counsel should take care to ensure that proper Adequate Procedures to prevent bribery are put in place.  More is potentially at stake than the defence of Adequate Procedures not being made out for the corporate.

Be careful out there.

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