In the first part of this series Paul Marshall looked at the ways in which the UK Bribery Act 2010 increased the risk of prosecution for corruption in the oil and gas sector. In this second part, Paul discusses the steps which businesses who discover bribery connected to their organisation can take with the authorities to reduce the risk of prosecution.
Self reporting in Scotland
Both Crown Office and the Serious Fraud Office (SFO) are in the process of introducing regimes to encourage businesses to talk to them by offering the prospect of alternatives to prosecution.
The Crown Office in Scotland has introduced an initiative, now in its third year, whereby self reporting may lead to civil sanctions as opposed to a criminal prosecution. You can find the initiative guidelines here. The Crown has taken care to communicate that there can be no guarantees of immunity from prosecution. Two important qualifying conditions for taking part in the scheme are that any report (1) must be made on behalf of the company as a whole, rather than by an individual whistleblower, and (2) must be made by a solicitor.
We have not witnessed a flood of self reports to the Crown Office to date. That may change, but the year by year extension of the scheme may be a drag on self reporting. It can take a business some time to get from the stage of first suspecting that bribery has occurred to actually confirming that suspicion. This will usually involve an internal investigation, conducted with the support of lawyers and forensic accountants, followed by the preparation of a report to the Crown Office. It would be understandable for businesses to feel a touch uneasy about opening such a can of worms when there is no certainty that the Crown will still be open to considering civil outcomes a year down the line. And recent developments south of the border may have an impact on the rate of self reporting in Scotland…
Deferred Prosecution Agreements
The SFO, the bribery authority for England and Wales, introduced a self reporting regime when the Bribery Act came into force. However self reporting is now being superseded by a regime of deferred prosecution agreements (DPAs) currently out to consultation and due to come into force in early 2014 under The Crime and Courts Act 2013. The essence of the DPA regime is that, having decided a matter is fit for prosecution, the prosecutor exercises his discretion to suspend the prosecution, and offers the accused organisation the alternative of entering a DPA. The prospect of prosecution is raised, and then suspended, for the business to show that it can satisfy the conditions contained in the DPA, which are formally agreed with prosecutors.
Discretion of the prosecutor
On one view the DPA approach, with the formality and clarity of a legal agreement, would seem to provide more certainty for business than the current Scottish self reporting initiative. And yet, as with the Scottish self reporting initiative, DPAs will require the prosecutor to exercise discretion in deciding when a DPA will be offered in place of a prosecution. As with the Scottish self reporting initiative, the English prosecutor is required to follow centrally drafted guidelines in exercising its discretion not to prosecute. Business which is concerned that the current Scottish regime lacks certainty because the alternative to prosecution is controlled by a prosecutor with discretion to bar the gates should beware: the new regime south of the border retains that very feature. If the prosecutor does not consider that a matter is appropriate for a DPA then a prosecution will follow. The initial, crucial uncertainty of the Scottish regime remains.
A two speed approach
But there are important differences between the two regimes which may in fact commend the current Scottish regime to some businesses. The Scottish regime requires businesses to hold up their hands to the prosecutor. The Crown Office then decides whether to proceed by way of civil recovery or to prosecute. It may not be painless but it is relatively quick. And if the Crown decides not to prosecute it is bound by that decision, and barred from trying to come back at a business in respect of the same matter in the future. On the other hand DPAs give the prosecutor the ability to place demanding conditions on a business, and then make a decision on whether or not that business has satisfied those conditions. It might be the case that a year after a DPA has been agreed that it becomes clear that a business simply cannot comply with the demands of the agreement. In that case the business would face the risk of prosecution having spent a great deal of time and money trying to fulfil the prosecutor’s demands.
Self reporting v DPA – taking the High Road?
Where conduct takes place predominantly in one part of the UK then the relevant authority is likely to take the matter forward e.g. bribery which is alleged to have taken place in Aberdeen is likely to be considered by Crown Office. However, where alleged bribery concerns activity in both Aberdeen and London, the relevant authority is less clear. In those circumstances a business might prefer the relatively quick outcome of the Scottish self reporting initiative where you make a clean breast of past conduct and either secure a civil outcome or take your medicine. Under the Scottish initiative the decision is made one way or the other and the business can move on. Some businesses may find that more appealing than having a DPA hanging over its head, as a judicial sword of Damacles, for months or possibly years – all the while knowing that one false step could send it back to the criminal courts. Where the corrupt conduct is spread across the UK, it is expected that the Crown Office and the SFO in London will put their heads together and decide who should take matters forward.
The prospect of a business avoiding prosecution when it identifies and reports bribery to the authorities must surely be a good thing for the oil and gas sector and for prosecutors. However the emergence of differing approaches north and south of the border has the potential to create uncertainty for businesses who will want to act quickly and responsibly when corruption is uncovered. The introduction of DPAs in the rest of the UK may impact on the Scottish regime in time – it will be interesting to note whether Scottish self reporting will continue in its current form beyond June 2014. In the meantime, businesses should tread carefully and take appropriate advice when deciding if, and to whom, to self report.
For more information please contact Paul Marshall, an Associate in Brodies’ Public Law and Regulatory team on 0131 656 0062 or paul.marshall@brodies.com
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