The Bribery Act provides for a range of criminal offences covering individual and corporate liability, including the creation of the new offence of a commercial organisation failing to prevent bribery. The focus of the Bribery Act is very much on establishing liability for corporate wrongdoing and has extra-jurisdictional reach. However, the identification of corporate wrongdoing, especially where it takes place outside the UK, is quite often very difficult with heavy reliance placed on whistle-blowers. This state of affairs puts the prosecuting authorities in a difficult position: how do they go about discovering corporate wrongdoing? One way of doing so lies in encouraging the commercial organisation to self-report and the provisions of the Bribery Act and the Guidance surrounding it has lent itself well to the promotion of this principle where the commercial organisation potentially gains a number of benefits by being prepared to "grasp the nettle". In this article we identify the key provisions that govern self-reporting and comment on the principles that will help commercial organisations to steer a path through the minefield that arises once potential bribery is discovered.
Self-Reporting – The Guidelines
The Act itself says nothing about self-reporting. The Guidance issued by the Ministry of Justice pursuant to s.9 of the Act only touches on it peripherally in the context of commercial organisations having procedures in place that aim to prevent bribery occurring in the first place. It is well recognised that no bribery prevention regime is capable of preventing bribery at all times. Hence, at paragraph 12 of the Guidance, it is stated that:
"The application of bribery prevention procedures by commercial organisations is of significant interest to those investigating bribery and is relevant if an organisation wishes to report an incident of bribery to the prosecution authorities."
The point the Guidance is making is that the adequacy of the anti-bribery procedures is key not only to the prevention, but also the discovery, of bribery.
The substantive guidance for commercial organisations on the dynamics of self-reporting emanates from the rules that govern how the prosecution authorities approach their charging decision. The SFO is a designated prosecuting authority and it has issued guidance, albeit brief, on corporate self-reporting. That guidance is based in large part on the following:
- The Full Code Test in the Code for Crown Prosecutors;
- The prosecution Guidance on Corporate Prosecutions; and
- The joint Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010.
- The Full Code Test
The Full Code Test has two elements; (a) the evidential test, followed by (b) the public interest test. The prosecutor must first be satisfied that there is sufficient evidence to provide a realistic prospect of conviction against each suspect on each charge. They must consider what the defence may be and how it is likely to affect the prospects of conviction. If the case does not pass the evidential stage, it must not proceed, no matter how serious or sensitive it may be. Finding there is a realistic prospect of conviction is not, however, based on the same test that applies in the criminal courts .
If, and only if, the prosecutor is satisfied that the evidential test is met can it proceed to consider whether the public interest test is met. The public interest test is subject to 7 primary, but non-exhaustive, questions which the prosecutor needs to consider in order to identify and determine the relevant public interest factors for and against prosecution. Not all the questions will be relevant in all cases and the weight to be attached to them will vary depending on the facts and merits of each case. Further, it is not simply a balancing act; one factor alone may outweigh a number of other factors which go the other way. The questions are these:
- How serious is the offence committed?
- What is the level of culpability of the suspect?
- What are the circumstances of and the harm caused to the victim?
- Was the suspect under the age of 18 at the time of the offence?
- What is the impact on the community?
- Is prosecution a proportionate response?
Do sources of information require protecting?
The Full Code test is the test that applies to the decision to prosecute all criminal offences and, therefore, some of the questions set out above would not appear particularly relevant to the decision to prosecute commercial organisations.
- Guidance on Corporate Prosecutions
This guidance contains additional and more focused public interest factors to be considered in the decision to charge commercial organisations with criminal offences. It also emphasises the factors in play in considering the question of the seriousness of the offence specific to commercial organisations:
"The more serious the offence, the more likely it is that prosecution will be needed in the public interest. Indications of seriousness include not just the value of any gain or loss, but also the risk of harm to the public, to unidentified victims, shareholders, employees and creditors and to the stability and integrity of financial markets and international trade. The impact of the offending in other countries, and not just the consequences in the UK, should be taken into account."
This is important guidance which would tend to indicate that bribery offences would always be at the more serious end of the scale and thus would be more likely that not to be in the public interest to prosecute.
The additional public interest factors are categorised as factors in favour and against prosecution, as follows:
Click here to view the Table
Although these additional factors are not specifically tailored to bribery offences (they remain of general application to the prosecution of commercial organisations) they are clearly more relevant to the question of prosecution of a commercial organisation for bribery offences.
(iii) SFO/DPP Joint Prosecution Guidance on the Bribery Act
It is recognised, in this joint guidance, that there is an inherent public interest in bribery being prosecuted "in order to give practical effect to parliament's criminalisation of such behaviour". The following are identified as being particularly relevant public interest factors in favour of prosecuting bribery offences:
- A conviction for bribery is likely to attract a significant sentence;
- Offences will often be premeditated and may include an element of corruption of the person bribed;
- Offences may be committed in order to facilitate more serious offending;
- Those involved in bribery may be in positions of authority or trust and take advantage of that position.
However, there are further factors that are identified which, in the context of bribery, may operate against prosecution. This includes where the harm caused can be described as minor and was the result of a single isolated incident and also where there has been a genuinely proactive approach involving self-reporting and remedial action.
The combined effect of these three strands of guidance very clearly encourages commercial organisations to be proactive in dealing with incidences of suspected bribery, to self-report and to take steps, when bribery is established, to remedy the harm caused on a voluntary basis. There is also a focus on the extra-territorial reach of the Act and specific account is taken not just of the impact in the UK, but the impact in the country where the criminal conduct took place.
What is involved in Self Reporting?
The decision to self-report is itself surrounded by uncertainty. The SFO expects commercial organisations to make a report at an early stage. However, identifying the appropriate time to do so is not easy. Too soon and the commercial organisation risks scrutiny in circumstances where the conduct may not be established, or the allegations might simply prove to have been false or unfounded. Too late and the commercial organisation may lose any benefit associated with doing so.
The SFO does not want the commercial organisation to carry out an exhaustive internal investigation before making a report. The commercial organisation is expected to have done enough to establish at least that there is real suspicion that a bribery offence has occurred. The SFO will then want to be involved in how any further investigation is carried out in order to establish the suspicions. In this context, the commercial organisation is going to want to have legal advice and legal input to the initial investigation stages as well as in the decision to self-report and, importantly, when that report is made. Time is clearly of the essence at this early stage.
Once a decision is made to self-report, the actual report must be made to the SFO's intelligence unit through the secure reporting form. The commercial organisation must provide copies of the report setting out the nature and scope of the internal investigation carried out and provide all supporting evidence, including emails, banking evidence and witness evidence. Care needs to be taken in collating evidence in order to maintain confidentiality in legally privileged material. The SFO has made it clear that it will not provide a commercial organisation with any guidance on what form a report should take and it will not provide any guidance on the likely outcome of a self-report until the completion of that process. The commercial organisation is, therefore, taking something a leap of faith in self-reporting.
The Outcome of Self-Reporting
The short answer is that there are no guarantees on the outcome. The hope and expectation is that the commercial organisation will receive some leniency, but what does this mean? Looking at the worst case scenario and working backwards is a good way to approach this question. If a bribery offence is established and it is found that the commercial organisation knew about and failed to take steps to deal with it or to report it then the following issues arise:
- A criminal prosecution will undoubtedly follow;
- Individuals involved in the bribery would be prosecuted under s.1 or s.2 of the Act, the commercial organisation may be prosecuted under s.7 of the Act and the commercial organisation may be prosecuted under s.14 of the Act where an offence is proved to have been committed with the consent or connivance of its senior officers;
- Individuals would face maximum penalties of up to 10 years imprisonment and an unlimited fine and the commercial organisation would face an unlimited fine;
- Individuals working in regulated sectors may be banned from doing so and commercial organisations risk facing regulatory scrutiny and separate fines;
- Commercial organisations may be prevented from tendering for certain types of work in a European setting;
- There would be severe reputational damage which could put the future of the commercial organisation in doubt.
However, where the commercial organisation reports itself, and the SFO accepts that it did so at the appropriate time, it retains a greater level of control of the outcome. Prosecution may not follow. Instead, the SFO may be content with the commercial organisation proceeding to take remedial action which includes compensation of victims, disgorgement of any gain, enhancements to its anti-bribery systems and controls, further training and a period of monitoring and further reporting.
Reputation Management in Self-Reporting
There will always be a level of publicity around self-reporting. The SFO will require an announcement to be made, and media attention and scrutiny should be expected.
The advantage of self-reporting from a reputation management point of view is that it enables the commercial organisation to retain more control over the narrative around the incident. Rather than being a passive actor and simply responding to the actions of the SFO, the commercial organisation can get in front of the news.
By proactively reporting suspected bribery and taking steps to remedy it, the organisation can position itself as a responsible corporate citizen, rooting out any bad actors within its ranks. This stands in stark contrast to the image that has been portrayed of commercial organisations that have been subject to SFO investigations, which have not taken such proactive steps.
Given the high stakes, it is crucial that commercial organisations develop their public relations strategy around self-reporting in tandem with their legal strategy, ensuring that they are shaping the story rather than responding to it.
The decision to self-report will never be an easy one to make. It will always be in the commercial organisation's interests to act swiftly when bribery is suspected. Preliminary legal analysis is essential so that the commercial organisation can make a fully informed decision as to whether the circumstances warrant consideration of self-reporting and if a report is to be made, it is made at the right time and in the right way.
Submitted by Eva Barboni at Mercury LLC, in partnership with DAC Beachcroft LLP.