More than four years since the offence of failure to prevent bribery was introduced through s7 of the Bribery Act 2010, the UK’s first s7 resolution has taken place in Scotland. Following a self-report in June 2015, the Crown Office has agreed a civil recovery order with Brand-Rex Ltd, a company that develops cabling solutions for network infrastructure and industrial applications. The self-report related to an independent installer who had passed on to a customer the benefit of an incentive scheme which was aimed at Brand-Rex’s installers and distributors.
Under the terms of the civil recovery order, Brand-Rex was ordered to pay £212,800 which was based on the company’s gross profit related to the misuse of the incentive scheme.
English companies should not presume that a self-report to the SFO would result in the same outcome. Although civil recovery orders are available in England, the SFO no longer considers them appropriate save in exceptional cases. Brand-Rex took advantage of a Scottish “self-reporting initiative” designed to encourage good corporate governance and transparent corporate culture. Under this initiative – which was available until 30 June 2015 – businesses could self-report Bribery Act offences following a thorough investigation and, provided they disclosed the full criminal conduct, took steps to prevent recidivism and committed to a meaningful dialogue with the Crown Office, they would be referred for civil settlement rather than prosecution.
If this conduct had taken place in England, it would not have been resolved so favourably. It is likely that Brand-Rex would have met the criteria for a deferred prosecution agreement (DPA) given the self-report, cooperation, absence of previous similar conduct and the fact that the offending was isolated to an independent third party. The terms would likely have included the payment of a financial penalty (which would be 30% lower than a court would have imposed on conviction), the implementation of a training and compliance programme and cooperation in any investigations relating to the offence (such as any prosecution of the individuals involved). If a DPA were not agreed and Brand-Rex was prosecuted successfully then their self-reporting and cooperation would be mitigating factors when it came to sentencing.
Companies can learn lessons from the Brand-Rex case:
- The pitfalls of corporate hospitality and incentive schemes: Brand-Rex incentivised its installers and distributors with holidays and travel tickets. This was not in itself unlawful but the failure to prevent offence arose when one of Brand-Rex’s independent installers offered his company’s travel tickets to an employee of one of his customers, that employee being in a position to influence purchasing decisions.
- The importance of adequate procedures: had these been in place, Brand-Rex could have availed itself of the adequate procedures defence which is a complete defence to s7. The key principles of adequate procedures are proportionality; the tone from the top; regular risk assessment; due diligence; communication and training; and monitoring and review.
- The broad definition of “associated persons”: Brand-Rex self-reported on the basis of an independent third party’s conduct. The meaning of “associated persons” in the s7 context extends beyond employees to any person who performs services for or on behalf of a company, including agents and subsidiaries.