On 18 July 2016, Nippon Yusen Kabushiki Kaisha (NYK), a Japanese global shipping giant, pleaded guilty to criminal cartel conduct charges laid against it by the Commonwealth Director of Public Prosecutions (CDPP), on a reference by the Australian Competition and Consumer Commissions (ACCC),in the Federal Court of Australia.
This marks Australia’s first criminal cartel prosecution since the introduction of the criminal cartel provisions 7 years ago - and is unlikely to be its last. The ACCC’s Chairman, Rod Sims, announced in his address to the Law Council of Australia’s workshop in August 2016 that the ACCC has “10-12 in-depth criminal investigations and [the ACCC are] aiming for a steady stream of one to two criminal cases per year.”
The criminal offences to the cartel provisions under the Competition and Consumer Act 2010 (Cth) (CCA) are meant to achieve a significantly greater level of deterrence for potential cartel participants than the traditional civil penalty prosecutions run by the ACCC. Indeed, that is the effect that the ACCC hopes the prosecution against NYK matter will bring to light, as stated by Sims:
“Hopefully this will send a clearer signal on cartel conduct; there is too much of it occurring in Australia today to the considerable detriment of the Australian economy.”
With this decision, we are starting to see a trend of commercial criminal cases in not only the competition space, but also in other areas of financial activity including tax or revenue fraud, insider trading, foreign bribery and domestic and foreign corruption.
This means that whilst companies and individuals may be familiar with the civil legal process, they will now also need to be conscious of some of the critical differences between a civil and a criminal prosecution, in the event a company or any of its executives, directors and/or officers are faced with a criminal charge.
In this article, we examine the NYK guilty plea and its implications from a competition perspective and secondly, the key features of a criminal investigation that companies and individuals should be aware of in determining how to best respond to a criminal investigation and/or prosecution.
Guilty plea: what does this mean?
NYK was charged with cartel conduct in connection with the transportation of vehicles, including cars, trucks, and buses, to Australia between July 2009 and September 2012.
NYK’s guilty plea obviates the necessity for any substantive liability consideration, meaning:
- the Court will not consider the cartel offences in any detail;
- NYK will not be exposed to any greater financial penalties that it would have faced if the matter had run to trial and a conviction; and
- NYK’s guilty plea will not result in any executives being jailed (one of the key deterrence factors of the criminal cartel provisions).
Despite the existing exposure to criminal consequences in other jurisdictions, the outcome of NYK’s guilty plea is that the current status of the competition criminal cartel provisions is no greater than that which already exists under the current civil regime. The case will conclude with a sentencing judgment that might illuminate how the Court will assess the penalties to be imposed on NYK.
The jury is therefore still out on how the ACCC (in conjunction with the CDPP) will run criminal cartel cases under the CCA in the future and whether prosecutions will achieve the level of deterrence that the ACCC wants to achieve.
Criminal Prosecution and Civil Prosecution: What is the Difference?
Given our corporate crimes experiences, below are the key features of a criminal prosecution that, in our view, should be considered when responding to a criminal investigation and/or prosecution.
- The CDPP: The CDPP is an independent statutory prosecutor responsible for the prosecution of Commonwealth criminal proceedings. Unlike the ACCC and ASIC, it is not an investigator and only acts when a matter is referred to it for the purpose of advice on a matter and whether there are grounds to commence a prosecution consistent with the terms of the Prosecution Policy of the Commonwealth (Prosecution Policy).
The Prosecution Policy requires the CDPP to be satisfied of two threshold criteria:
- whether there is admissible, substantial and reliable evidence that a criminal offence known to the law has been committed by the alleged offender; and
- if yes, whether there is a reasonable prospect that a jury, properly instructed, will convict the alleged offender.
The CDPP is unlikely to initiate a prosecution if there is no reasonable prospects of a conviction being secured.
- Standard of Proof: The jury in criminal prosecutions needs to be satisfied beyond reasonable doubt that the accused is guilty of the relevant offence(s). A civil contravention of the CCA needs only to be established on the balance of probabilities.
- D&O Insurance Cover: As a preliminary point, before any significant legal defence costs are incurred, the existence and potential cover under any D&O insurance policies should be resolved, both for a company and any directors and officers covered by such policies.
- Negotiating with the ACCC and/or CDPP: A civil contravention of the CCA can be the subject of negotiation and resolution between a company (and any individuals) and the ACCC. With a criminal cartel offence, the CDPP will act in accordance with Annexure B to the Prosecution Policy in determining the giving of any immunity from prosecution and the extent to which derivative immunity might apply to related corporate entities and/or former or current directors, officers and employees. Given the application of the criminal law, it is highly desirable that individuals receive independent legal advice (not from the company’s lawyers) about their rights.
- Agreements to Settle a Criminal Charge: Under the existing criminal law, the CDPP cannot agree on sentences or penalties to resolve a criminal prosecution1. The task of sentencing an accused remains that of the sentencing judge and that judge alone2. The prosecutor’s role is to do no more than make submissions on general sentencing principles, not on what a sentence or range of sentences should be. While the CDPP has some flexibility in terms of charges and accepting a plea of guilty to a lesser charge, or a rolled-up charge reflecting a pattern of conduct, the Director cannot submit an agreed sentence and penalty to the Court. It is for the sentencing judge to determine the sentence.
- To Admit or Not to Admit?An offender is innocent until proven guilty and is under no obligation to prove it, his or her innocence. An accused person does not need to prove innocence. The accused may stay silent and it is for the prosecutor to prove the case as alleged.
- Charge Sheet: Rather than being faced with a lengthy statement of claim as one would be served in a civil proceeding, the accused in a criminal prosecution is served with a charge sheet, and if committed to trial, an indictment, setting out the offences with particulars. Although the charge sheet does not go into specific particulars, it is similar to a statement of claim as it shapes the agenda of a contested trial or, where there is no contest, it shapes the criminal culpability of the accused who pleads guilty.
- The Prosecutor’s Duty of Disclosure: Under Court practice directions and State criminal procedure statutes, a prosecutor is now largely required to properly disclose (before trial) the case put against an accused. While an accused has a traditional right to silence, there are now obligations in Victoria, Western Australia and New South Wales on an accused to disclose the defence and a failure to do so may by the subject of comment, rulings or directions by the trial judge.
- Barristers: When engaging counsel, it is important to not only engage counsel with expertise in the relevant area of law the prosecution relates to, but also counsel with criminal prosecution expertise so that companies and individuals can be properly represented through the criminal prosecution process. This can be achieved by either engaging a counsel with both attributes (which in Australia is rare) or engaging two counsel, one with expertise in the area of law and one with expertise in the criminal prosecution process.
- Judge v Jury: A criminal prosecution generally occurs before a judge and a jury3, and it is the jury who decides if the accused is guilty or not guilty. The jury will take into the courtroom their individual experiences and it is important to remember that a jury, unlike a judge, may be swayed by factors that are not always logical or reasonable yet arise because human nature being what it is, are often a product of individual circumstance. This can be so even though a judge will always direct a jury to determine the case solely upon the admissible evidence and the law (as set out by the judge).