The impact of the Bribery Act 2010 has been a key focus for business across the UK over the past year. The Act came into force on 1 July 2011 in Scotland as it did in the rest of the UK, but there are real differences in how the new anti-corruption regime will operate north of the border. A crucial, practical, difference is that Scotland will operate its own self-reporting initiative distinct from the Serious Fraud Office (SFO) regime in place in England and Wales. The Scottish initiative was introduced on 1 July, at which time guidance was issued by the Crown Office and Procurator Fiscal Service on how it would operate. See guidance on the approach of the Crown Office and Procurator Fiscal Service to reporting by businesses of bribery offences: http://www.copfs.gov.uk/sites/default/files/Self%20reporting%20guidance%20FINAL%20_3_.pdf.
INVESTIGATING AND PROSECUTING CORRUPTION IN SCOTLAND
The SFO investigates and prosecutes corruption in the rest of the UK, but not in Scotland where this responsibility rests with the Crown Office and Procurator Fiscal Service (the Crown). Unlike the specialist SFO, the Crown is responsible for the prosecution of all crime in Scotland.
In March 2011, the Serious and Organised Crime Division (SOCD) was launched by the Crown to focus on tackling serious and organised crime in Scotland. It is envisaged that SOCD will take on the primary responsibility for enforcing the Bribery Act north of the border.
CROSS-BORDER: THE IMPORTANCE OF ‘CLOSE CONNECTION WITH THE UK’
The Crown’s self-reporting initiative in Scotland will be distinct from the SFO’s self-reporting regime in England and Wales. That said, according to the Crown, an agreement has been reached so that if the SFO receives a report ‘from a business which clearly relates to conduct in, or predominantly in, Scotland’ it will refer the matter to SOCD. In the same way, SOCD will refer on any report that appears more appropriate for the SFO to deal with.
The Crown’s guidance recognises ‘cross-border issues’ may arise. In such cases, in addition to the wrongdoing taking place in Scotland, having business headquarters in Scotland or carrying on business in Scotland would make a report to SOCD appropriate.
However, this discussion on cross-border issues does not refer explicitly to the international reach of the Bribery Act. Section 12 of the Act allows prosecution for conduct that takes place entirely overseas where an accused person has a ‘close connection’ with the UK, which includes a body incorporated under the law of any part of the UK. Close connection does not include carrying on business in the UK. What then should a company do when the offensive conduct takes place overseas and the company carries on business in Scotland, but is not incorporated in the UK? Given that s12 would not extend to such a company, no offence would be committed under the Act, and so it would appear that a company carrying on business in Scotland but not incorporated in the UK would have no reason to self-report.
BRIBERY OFFENCES OLD AND NEW
Under the terms of the self-reporting initiative, the Crown will accept reports in Scotland from businesses that have discovered:
‘… conduct within their organisation which may amount to an offence under the Bribery Act, with a view to consideration being given by the Crown to refraining from prosecuting the business and referring the case… for civil settlement’.
It is interesting to note that, in discussing a ‘business’, the guidance refers to both companies and partnerships. What is not clear is whether or not public authorities are excluded from the Crown’s initiative.
To take part in this initiative, a business will need to submit a report, through its solicitor, to SOCD before, or in any event no later than, 30 June 2012. It is said that the self-reporting initiative will be reviewed at the end of the first 12 months. However a warning is attached: the initiative may not be extended. If it is, and you do knock on the Crown’s door after June 2012, you should be able to explain why you did not do so sooner.
On closer inspection, it is clear that the initiative is not limited to offences under the new Act. The Crown will also consider a report relating to conduct that occurred before the Act came into force and would have constituted an ‘analogous offence’ under the old law.
What will happen if a business makes a report in relation to conduct that had occurred – and had been identified by the business – a number of years previously? Will the Crown be unwilling to consider civil settlement as an alternative to criminal prosecution because a business failed to make contact at the earliest opportunity? Or will the Crown take a more sympathetic view in light of the fact that until now there has been no self-reporting regime? We will only discover the answer to this question if a business takes the decision to come forward to report conduct that pre-dates the Act.
REPORTING REQUIREMENTS
The Crown has set out a series of ‘minimum requirements’ for self-reporting organisations to follow as a condition of accepting a report. These requirements appear designed to ensure that an organisation is fully committed to complete co-operation with SOCD. The minimum requirements for acceptance of a report will be that the business:
- has conducted a thorough investigation of the circumstances, which may include an assessment by forensic accountants. The business must be willing to share any resulting report with SOCD and must acknowledge that the report is being provided to SOCD on its behalf;
- agrees to disclose to SOCD the full extent of criminal conduct that has been discovered;
- describes what has been done to prevent a repetition of this conduct in the organisation; and
- is committed to meaningful dialogue with the Crown in its assessment of the case and in any investigation.
CROWN PROSECUTION CRITERIA
As noted above, on receipt of a report, the Crown will consider whether or not to prosecute. In making that decision, the guidance explains that the Crown will take into account a number of factors including:
- the nature and seriousness of offence and extent of harm caused;
- the extent of wrongdoing within the business, including whether or not senior management consented or connived;
- early action taken by senior management on the matter coming to light;
- the business’s previous record for bribery conduct;
- what has become of any wrongdoers;
- whether or not the business has engaged fully and meaningfully with the Crown;
- whether or not a business has anti-bribery systems in place; and
- the impact of prosecution on employees and stakeholders.
DIRECTORS IN THE DOCK
It is a condition of the initiative that reports will only be accepted on behalf of a business. Reports will not be accepted from individuals. Instead, an individual who wishes to make a report:
‘… without the knowledge of the business… will be directed to the appropriate law enforcement agency who will investigate outwith the terms of this initiative’.
As we’ve seen, the initiative relies on full disclosure by the business of ill-gotten gains with a view to civil recovery of funds. It is readily understandable that allegations by one individual cannot be managed in the same way in the absence of full co-operation of the business. However, the absence of support for individuals does feel like a missed opportunity. The whistleblower – who may have been party to the wrongdoing – is left to take their chances with the appropriate law enforcement agency, with no guidance as to what to expect in return for full co-operation. This is not fertile ground for individuals speaking up, and recent criticism of SFO sentencing agreements by the English courts will do little to ease the mind of the potential whistleblower (see R v Innospec Ltd [2010] and R v Dougall [2010]).
However, the Crown recognises that a self-reporting business will want to reach some agreement on how directors and other individuals will be dealt with. The self-reporting guidance suggests that the Crown may have sympathy with the view that, where an organisation has been ‘allowed’ to self-report and reach a civil settlement, it would not be in the public interest to prosecute individuals connected with the business. And yet, as with the SFO regime, where the Crown decides that a self-reporting business should be investigated, there will be no guarantees of safety given to individuals in the business.
CONFIDENTIALITY
Confidentiality will be at the forefront of the minds of business leaders when considering whether or not to self report, and so it is important to look carefully at how the Crown says it will treat information provided by the business. The Crown’s guidance indicates that the initial report and other information provided to SOCD will be treated in confidence but goes on to say that it may be used by the Crown in any criminal investigation/prosecution or any civil recovery investigation. In the context of civil settlement, the Crown advises that ‘publicity will follow any settlement unless a compelling reason for confidentiality exists’. Against this background it would be prudent to proceed on the basis that information provided to the Crown will not be treated as confidential.
SELF-REPORTING: LOOK BEFORE YOU LEAP
Self-reporting does not guarantee immunity from prosecution for a business. According to the Crown, there will be cases where ‘the public interest’ requires the report to be passed to the authorities for criminal investigation and, ultimately, prosecution.
We’ve looked at the host of factors the Crown will consider in deciding whether or not to prosecute. However, the consideration of these factors, and ultimately the question of what the public interest requires, is entirely at the Crown’s discretion. The act of self-reporting might be the key to achieving an alternative to prosecution, but it might also be the foundation stone for a prosecution. In these circumstances, how can a business ensure that by self-reporting it is making an informed decision, and not the ultimate leap of faith?
Prudent business leaders will want to take advice from their legal advisers from the outset and that means from the moment that any suspicion of bribery comes to light. The guidance requires that any report is made through ‘a solicitor acting on behalf of the business’. However it is crucial to ensure that external legal advisers are retained from the outset to ensure that legal privilege is maintained in the event that the business decides not to self-report.
30 JUNE 2012 – A HAPPY BIRTHDAY?
The institution of a self-reporting initiative is a welcome development for businesses operating in Scotland. Will the Crown’s design work in practice, and has the Crown done enough to make clear how the scheme will operate in practice? The initiative is up for review after 30 June 2012. The number of instances of self-reporting recorded by the end of the first year will give an early indication of the answer to these questions, and presumably go some way to helping the Crown to decide whether the initiative will see 2013, and beyond.