Earlier this month, the court approved the SFO’s third and largest ever Deferred Prosecution Agreement (‘DPA’), which will require Rolls Royce Plc to pay over £600 million in fines and costs to various agencies.
As Sir Brian Leveson was hearing the application to approve the DPA, across the road a group of lawyers and anti-corruption watchdogs were having breakfast in the shadow of the RCJ, and discussing the concept of corporate criminal liability.
With the government having published its call for evidence on potential corporate liability for failure to prevent economic crime, which would extend corporate criminal liability for a failure to prevent to offences such as fraud, money laundering and false accounting, the discussion inevitably fell to the adequacy of the ‘failure to prevent’ scheme as a mechanism for imposing corporate criminal liability. This has previously been described by the SFO as the ‘control model of liability’, although it is plain that the conduct for which corporates are to be held to account under the existing and proposed legislation goes far beyond mere control.
What was striking, listening to some of the eminent speakers around the room, was just how far apart the two schools of thought are in their positions on corporate crime and accountability. On the defence side, it is said that no conscientious board member is going to hinge everything on the ‘adequacy’ of its procedures and take the risk of defending a ‘failure to prevent’ charge, if it can negotiate a DPA for the company which brings the matter to a swift end. In general, listed companies’ share prices tend to take a hit when an investigation is announced; when a DPA (whether with the US or the UK) is concluded, shares often remain stable, or may even rise if the final penalty is less than that originally provided for. So the incentive to eliminate uncertainty is a powerful one, and the commercial argument in favour of accepting a DPA is likely to overpower those voices who feel that the company had done all that it could and should stand by that.
Some go so far as to argue that criminal liability is not necessarily appropriate in a corporate context, and that issues of corporate wrongdoing, in most cases, should be a regulatory and not a criminal issue. The call for evidence certainly seeks to take existing regulatory regimes into account, but the most powerful driver in this sphere is the vast sums of money the US Department of Justice has extracted from US and foreign corporates alike, occasionally requiring them to plead guilty to criminal offences where previous DPAs are found to have been breached. It is this model that the UK government and the SFO seek to emulate.
For the anti-corruption watchdogs, the DPA does not go far enough. The fact that a corporate can escape public debarment by accepting a DPA is not appropriate in an anti-corruption regime. In their view, the corporate prosecution regime should act, not just as a deterrent, but to punish corporate wrongdoing where corruption has been proven. The political will is certainly with them; however odd the new offences may appear to criminal lawyers, and however much they may actually look like regulatory law, they are drawn as criminal offences, and will be adjudged and sentenced in criminal courts.
There is broad consensus for the idea that corporations should be held responsible for corporate wrongdoing. The Criminal Finance Bill – still going through Parliament – already expands that notion substantially. But there is real concern that yet further expansion may have unforeseen consequences. Nonetheless, the government seems determined to press ahead. The call for evidence closes on 24 March 2017.