On 25 September 2015, the Civil Recovery Unit of the Scottish Crown Office, Scotland’s prosecutor, announced a civil settlement with Brand‑Rex Limited.1 The settlement was not large – only £212,800, paid as confiscation – but the case is significant as it is the first confirmed enforcement action based on a violation of section 7 of the Bribery Act 2010: the so‑called “corporate offence.”
Under this offence, commercial organizations carrying on a business in the UK can be found liable for failing to prevent bribery on their behalf by an employee, agent or other “associated person,” regardless of whether the company or company officials had knowledge of the bribe. The offence, which came into force on 1 July 2011, marks a significant expansion of corporate criminal liability under British law but it has taken more than four years for a company to be found in violation of it.
The facts of the Brand‑Rex case, and the way the Scottish authorities dealt with it, have some noteworthy features.
Brand‑Rex is an infrastructure and industrial cabling company with some 300 staff across 10 global offices and a presence in over 50 countries.2 Between 2008 and 2012, the company ran a sales incentive scheme called “Brand Breaks.” Under the scheme, Brand‑Rex gave rewards to well‑performing installers and distributors of its products, including foreign holidays. One of these successful installers offered his holiday tickets to an employee of a Brand‑Rex customer. Importantly, the employee had influence over the customer’s acquisition of Brand‑Rex products. As a result, staff from the customer, along with friends and family, went on several foreign holidays in 2012 and 2013 courtesy of Brand‑Rex.
Brand‑Rex discovered this issue during an internal review, and self‑reported to the Crown Office in June 2015. Brand‑Rex accepted that the facts amounted to a contravention of the corporate offence, and agreed to the confiscation of the associated benefit gained in a civil settlement. There was no criminal action and no fine.
The Brand‑Rex settlement is interesting both from a substantive and procedural perspective. Substantively, it is a good illustration of one kind of behaviour for which companies can be deemed liable under the Bribery Act: an insufficiently controlled incentive scheme. What’s more, it demonstrates that companies can be held responsible for the actions of their contractors: the installer was not employed, controlled, or directed by Brand‑Rex. The case is therefore a concrete reminder to companies to ensure that their policies and procedures are aimed at preventing corrupt acts not only by employees, but also by third‑party contractors acting on their behalf.
It is also noteworthy that Brand‑Rex does not appear to have argued that it had “adequate procedures” to prevent bribery, which is a complete defence to the corporate offence. It is not known whether Brand‑Rex had an anti‑bribery and corruption policy in place at the relevant time.3
Procedurally, the Brand‑Rex settlement illustrates several distinctive features of the Scottish self‑report system, and the ways in which it is different from the English system prosecuted chiefly by the Serious Fraud Office (“SFO”).
Brand‑Rex made a self‑report pursuant to the “Guidance on the approach of the Crown Office and Procurator Fiscal Service to reporting by businesses of bribery offences” (“the Guidance”). Under the Guidance, the Scottish Crown Office accepts self‑reports from businesses “with a view to consideration being given by the Crown to refraining from prosecuting the business and referring the case to the Civil Recovery Unit (‘CRU’) for civil settlement.”4 This explicit reference to a civil settlement is reminiscent of a policy the SFO maintained from July 2009 until October 2012, entitled “Approach To Dealing With Overseas Corruption.” The policy was cancelled by SFO Director David Green QC within a year of his appointment, and was replaced with a more prosecution‑focused policy. The Scottish Lord Advocate, however, renewed the Guidance in 2012 following an initial 12‑month trial period after the Bribery Act’s entry into force.5
Also of note in relation to the Brand‑Rex settlement is the apparent speed with which it was concluded: a mere three to four months between self‑report and settlement.
The Guidance provides for an ambitiously short eight weeks for the Crown Office to provide an “initial evaluation” of a self‑report.6 It also provides for “early discussions with the solicitors of any business considering making a report,”7 that is, before such a report is made. The Guidance further provides that the CRU may participate in these discussions, not least to give an indication whether it is content with the benefit figure identified by the business.
Another likely factor in the speed of the Brand‑Rex settlement is the manner in which the benefit figure was arrived at. The Guidance states that when a self‑report is referred to the CRU for civil settlement, third party forensic accountants will be instructed at the expense of the self‑reporting business.8 However, the Guidance also provides that the CRU may dispense with this step if the business has submitted a forensic accountancy report with its self‑report.9 Brand‑Rex’s internal investigation made use of forensic accountants, and their findings appear to have been deemed adequate by the CRU. For larger cases – particularly those run by the SFO south of the border – acceptance by the authorities of results produced by accountants hired by the self‑reporting company may not be accepted so readily. Although small in comparison to most major corporate resolutions of recent vintage, the Brand‑Rex case is a reminder to multinationals with UK operations that the SFO is not the only relevant authority to whom a self‑report may be aimed.
The examples given in the Guidance of factors to be considered when a self‑report should be made to the Crown Office include: “where the business predominantly carries on its business in Scotland; or, most importantly, where the wrongdoing that the business has identified has taken place in, or mostly in, Scotland.”10 As the Guidance emphasizes, the Crown Office and SFO will co‑operate to determine the most appropriate forum in cross‑border cases. Perceived attempts at forum‑shopping will probably not be viewed positively. Nevertheless, particularly given the authorities’ different approaches to self‑reporting, any company with significant operations in Scotland should carefully consider whether the Scottish Crown Office would be the more appropriate recipient of a self‑report.