In this article we examine the key differences between the self-reporting initiative operated by the Crown Office and Procurator Fiscal Services (COPFS) in Scotland and the deferred prosecution regime now operating in the rest of the UK. Any business that uncovers corruption within the organisation should make sure it understands the differences between the two regimes before deciding which authority to approach.
The COPFS recently extended the Scottish scheme for companies to self-report bribery offences. Updated guidance published by the COPFS confirms that the scheme, which is reviewed annually, will continue on the same terms until 30 June 2017.
South of the border, the Serious Fraud Office (SFO) was recently granted its second application for a Deferred Prosecution Agreement (DPA) in respect of a UK SME that cannot currently be named due to ongoing related litigation against its former employees. The indictment for bribery offences relates to contracts to supply products to customers in a number of foreign jurisdictions between 2004 and 2012. The SFO found that 28 of the 74 contracts it examined had been procured as a result of bribes. Under the DPA, the company will pay financial orders amounting to £6.5 million.
The self-report came to light after the SME’s US-registered parent company implemented a global compliance programme in late 2011. This compliance programme resulted in the SME raising concerns in August 2012 about the way in which a number of contracts had been obtained. The SME immediately instructed a law firm to undertake an independent internal investigation. The resulting report was delivered to the SFO in January 2013, which led the SFO to conduct its own investigation.
The self-reporting regime was introduced on 1 July 2011 when the Bribery Act 2010, a UK-wide statute, came into force. The Scottish self-reporting regime applies solely to offences under the Bribery Act or analogous offences which applied before the Act came into force. COPFS will usually have jurisdiction where the alleged offence took place in Scotland.
A self-reporting business can seek to negotiate a settlement with COPFS with a view to avoiding a full criminal prosecution before the courts. To be eligible to participate in the scheme in Scotland, a solicitor must submit a report on behalf of the business to the Serious and Organised Crime Unit (SOCU) before 30 June 2017. This must:
- include details of a thorough investigation, with the business agreeing to share any resulting report with SOCU;
- agree to disclose to SOCU the full extent of criminal conduct that has been discovered;
- describe what action has been taken within the organisation to prevent repetition of the offending conduct (ie to ensure that the business has in place adequate procedures to prevent bribery);
- include a commitment from the business to engage in meaningful dialogue with the Crown in its investigation of the case.
SOCU staff are willing to engage in early discussions on the content of any report and to provide an early indication of whether it will be accepted. This will include an indication of the likely length of any investigation and whether a forensic accountant should be engaged by the business. However, SOCU will only enter into dialogue with a solicitor representing a business if the solicitor agrees to divulge the name of the business that is considering whether to make a report. Although the information will be treated in confidence, it may be used in any subsequent criminal investigation and prosecution or in any civil recovery investigation (whether by the COPFS or another cross-border regulator).
When deciding whether to refer the case to the Civil Recovery Unit (CRU), SOCU will have regard to a number of criteria. These are:
- the nature and seriousness of the offence;
- the extent of the wrongdoing within the business (including, for example, the seniority of the offender in the organisation);
- whether action was taken as soon as the matter came to the attention of senior management (rather than when it becomes clear that the matter may come to light);
- whether the business (or the individuals involved) has any previous record for the sort of conduct being investigated (both criminal convictions and regulatory enforcement action or warnings);
- whether the individuals involved in the wrongdoing have left the business and whether a new Board has been put in place where the problems were at Board level (this will include consideration of the timing and reasons for departure);
- whether the business had adequate anti-bribery procedures in place when the conduct occurred and what steps the business is taking to address the conduct; and
- the consequences of prosecution for the company’s employees and stakeholders.
Following an investigation, SOCU may decide either:
- Not to prosecute and instead refer the case to the CRU for civil settlement – Following a referral, CRU may require the business to pay for an independent forensic accountant to investigate and report to it on the appropriate level of any settlement and to provide any recommendations for further investigation. These costs will be taken into account in any settlement figure. Publicity will follow settlement unless a compelling reason for confidentiality exists.
- To prosecute the business – This decision will be made where the offence is sufficiently serious for there to be an overriding public interest in prosecution. However, the fact of self-reporting and cooperation by the business will be significant mitigation factors taken into account by the court.
Although each case will be considered on its own merits, companies considering whether to self-report can take some assurance from the fact that COPFS have so far settled all bribery cases that have been reported to them under the scheme without resorting to prosecution. That is not to say that there is no risk of prosecution, but the history of the initiative to date demonstrates COPFS’ commitment to the initiative. Of course, any business considering a self-report should take legal advice at the earliest opportunity.
England, Wales and Northern Ireland
The Scottish self-reporting scheme is separate from the regime that the SFO operates for England, Wales and Northern Ireland. COPFS has entered into a Memorandum of Understanding (MoU) with the SFO for cases involving both jurisdictions. In essence, a self-report made to one organisation will be passed to the other organisation where the offence was conducted (or predominantly conducted) in the other organisation’s jurisdiction. Once an agreement has been reached between the SFO and COFPS as to which organisation has ‘primacy’ (and therefore jurisdiction), the other organisation will recognise this fact for the purposes of the case. This reduces the risk of inter-authority competition for the case arising at a later date.
Unlike the Scottish regime, the SFO can enter into a DPA with the organisation that could be prosecuted. A DPA, once successfully completed, enables a corporate body to make full reparation for criminal behaviour without the collateral damage of a conviction (eg, sanctions or reputational damage that could put the company out of business and impact on jobs and investments). Although a DPA avoids lengthy and costly trials, it is (unlike the Scottish regime) conducted under the supervision of a judge, who must be convinced that the DPA is ‘in the interests of justice’ and that the terms are ‘fair, reasonable and proportionate’. It is also worth bearing in mind that a breach of a DPA can lead to prosecution.
Comparing the approaches of the authorities
The approaches of the COPFS and the SFO can be contrasted in two ways.
Firstly, there is a real difference in the speed and certainty of the Scottish self-reporting procedure compared to the system of DPAs in the rest of the UK. While the Scottish scheme offers certainty within a matter of months of the self-report having been made, a business subject to a DPA can be subject to ongoing monitoring and interference with the possibility of prosecution remaining for a number of years.
Speed and certainty of outcome are very important considerations given the serious reputational risks that an organisation can face when subjected to a potential prosecution. The perception that a company may have committed an offence may lead other companies, which are seeking to minimise their bribery and corruption risk profile, to avoid doing business with the company that is subject to an ongoing threat of a successful prosecution.
The second difference between the two regimes is the approach of prosecutors north and south of the border to settlement. The Scottish guidance on self-reporting states:
‘SOCU staff will be willing to have early discussions with the solicitors of any business considering making a report, to discuss the content of any report and to provide an early indication of whether or not such a report would be accepted.’
This willingness of COPFS to engage, coupled with its track record of reaching settlements in all bribery cases that have been reported to it, and the recent decision to extend the self-reporting regime, shows that the door is very much open for settlement in Scotland.
By way of contrast, the SFO, under the leadership of David Green, has placed a significant emphasis on the importance of investigating and prosecuting cases. While the SFO recognises that there will be circumstances where there is no public interest in prosecuting a company, the official position, which has been made clear to business and the public at large, is that:
‘The SFO encourages corporate self-reporting, and will always listen to what a corporate body has to say about its past conduct; but the SFO offers no guarantee that a prosecution will not follow any such report. The SFO is primarily an investigator and prosecutor of serious and/or complex fraud, including corruption.’
Of course, there will be instances where the COPFS concludes that the public interest is served by prosecution. Nevertheless, the difference in emphasis – between an active willingness to engage in Scotland compared to the more hard line approach in England – is instructive.
Businesses that uncover behaviour that falls foul of anti-bribery laws have the opportunity to proactively self-report to the COPFS in Scotland or the SFO in England, Wales or Northern Ireland.
The common factor between the two regimes is the importance of acting quickly and having a positive story to tell the relevant prosecuting authority. However, there are also a number of key differences. While the Scottish self-reporting regime is characterised by an emphasis on engagement and speed of reaching a decision on whether to settle and therefore on certainty, the English system of DPAs can be prolonged and adversarial.
Any business considering a report to the UK authorities – whether north or south of the border – should make sure, following discussions with their legal advisers, that they fully understand not just the bribery issue they are faced with but also the differences in the two reporting regimes before making a decision on which authority to approach.
If you would like to discuss bribery concerns, self-reporting or if you would like assistance with implementing an adequate anti-bribery regime within your organisation, please contact your usual Brodies contact or a member of our Business Ethics team.
Paul Marshall is a partner and Stephen Wright is a senior solicitor in the public law & regulatory team at Brodies LLP. For more information, please contact Paul on 0131-656 0062 or at email@example.com, or Stephen on 0131-656 0006 or at firstname.lastname@example.org.