SFO must publish more information about bribery settlement cases, report says

In a recent report (79-page / 773KB PDF) into anti-bribery measures introduced in the UK an international economic advice body criticised the use of 'civil recovery orders' in the UK and said that the Serious Fraud Office (SFO) was not disclosing enough information about cases. The SFO is an independent Government department that investigates and prosecutes serious or complex fraud and corruption.

However, anti-corruption law expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said that the problem stems from the UK having an unsatisfactory system for resolving corruption cases.

"The Organisation for Economic Cooperation and Development (OECD) report highlights the need for DPAs to be introduced in the UK as well as the inadequacies of the present system where there is a straight choice between civil recovery orders and prosecutions," Vitou said.

"There is absolutely no need to amend the rules for civil recovery, which broadly follow the same rules as civil litigation, but there is an absolute need to change the rules around criminal prosecution agreements which do not offer sufficient guarantees to corporates and their directors," he said. "Often these companies and individuals form plea bargain-style agreements in other jurisdictions as a result. This is why civil recovery orders are often used instead."

UK prosecutors can negotiate a form of plea agreement with organisations, but those companies still face criminal punishments that can harm their reputation and restrict their trade. Businesses that do make plea agreements also have no guarantees that courts will accept those agreements in sentencing and that the admissions will not later be used as evidence against them in a trial.

In other jurisdictions, such as the US, organisations can negotiate settlements with prosecutors with a degree of certainty over the scope of their punishment.

The UK's Solicitor General last month said that a new framework for DPAs would give courts the power to approve penalty and compensatory payments agreed between firms and prosecutors and would be legislated for "later in the current Parliament".

A spokesperson for the Attorney General's Office (AGO) told Out-Law.com last year that the DPA regime being discussed at the time would enable companies to avoid criminal sanctions for unlawful activity, such as fraud or corruption, by owning up to the conduct and signing judiciary-approved DPAs with prosecutors.

The settlements could involve companies paying fines and agreeing to make changes to policies, practices and structures. Companies would face a form of probation period where criminal prosecutions could still be brought against them for non-compliance with the terms of the settlement or if a second incidence of unlawful activity is discovered, the spokesperson said at the time.

In its report the OECD said that the SFO was not providing enough information about civil settlements and that in some cases it was "unclear" how penalties agreed between the SFO and defendants had been "arrived at".

"The Working Group is concerned that, to settle foreign bribery-related cases, UK authorities are increasingly relying on civil recovery orders which require less judicial oversight and are less transparent than criminal plea agreements," the OECD said in its report. "The low level of information on settlements made publicly available by UK authorities often does not permit a proper assessment of whether the sanctions imposed are effective, proportionate and dissuasive."

"This also misses an opportunity for the UK to provide guidance and raise public awareness on foreign bribery-related issues. It is equally concerning that the SFO has in some cases entered into confidentiality agreements with defendants that prevent the disclosure of key information after cases are settled," it said.

"Whenever the UK authorities conclude a foreign bribery enforcement action via a criminal plea agreement, they should make public as much information as possible to demonstrate that the sanctions imposed are effective, proportionate and dissuasive," it said.

The OECD said that the SFO should avoid forming confidentiality agreements with defendants in civil cases that prevent key information being disclosed. "Lead examiners" at the OECD were reviewing the UK's anti-bribery enforcement and its compliance with the OECD's international Convention rules on such enforcement.

"The lead examiners are extremely concerned that many key details about the SFO’s civil settlements of foreign bribery cases remain private," the OECD's report said. "SFO press releases about these settlements contain skeletal information. Confidentiality agreements with a defendant may also prevent full disclosure."

"The lead examiners repeatedly requested but did not receive information on how the precise amounts of the civil recovery orders were calculated. They therefore could not ascertain whether the sanctions in these cases are consistent with the [OECD] Convention. In short, the settlement process is opaque, lacks accountability, and thus fails to instil public and judicial confidence," it said.

"The lead examiners therefore recommend that the UK authorities, where appropriate and in conformity with the applicable procedural rules, make public in a more detailed manner sufficient information for determining whether civil settlements of foreign bribery cases are consistent with the Convention. This should include all of the key facts, court documents, and the settlement agreement in each case," the OECD said.

"The UK authorities should also avoid confidentiality agreements with defendants that prevent the disclosure of such information," the report said. "Confidentiality agreements undoubtedly encourage companies to resolve investigations. However, they minimise the settlements’ deterrent impact. Furthermore, confidentiality agreements preclude the UK from demonstrating that the settlements are consistent with the Convention. In the lead examiners’ view, not only must justice be done; it must also be seen to be done."

The OECD also called on the Government to ensure that the SFO receives sufficient funding in order to account for a greater workload as a result of the Bribery Act coming into effect. The SFO's budget has reduced £53.3 million in 2008/9 to £35.9 million in 2010/11.

"The UK’s enforcement of its foreign bribery laws has increased significantly in recent years," it said. "Much of this improvement may be attributed to the decision in 2004 to designate the SFO as the lead criminal law enforcement agency for foreign bribery."

"The SFO’s recent improvements in efficiency are partly due to the use of pre-trial resolutions, requiring companies to self-investigate, and allowing cases to be investigated by the FSA instead of the SFO," the OECD said. "However, litigation may well increase in the future because of the new Bribery Act, and if the SFO re-focuses on investigations and prosecutions. The lead examiners therefore recommend that the UK take steps to ensure that SFO and police resources for foreign bribery cases are adequate."

The Bribery Act came into force last summer and states that foreign companies which operate in the UK can face prosecution for bribery regardless of where the alleged activity has taken place, unless the suspect activities are permitted locally. The Act also creates the offence of bribing a foreign public official, even if that person has demanded a bribe.

A company can also responsible for bribery carried out by its employees without its knowledge or consent under the Bribery Act. The Act creates a new offence of failure to prevent bribery by people working for or on behalf of a business, but companies can escape liability if they show that they have 'adequate procedures' designed to prevent bribery in place.

Under the Act, the maximum penalty for individuals found guilty of bribery will rise from seven to 10 years' imprisonment and an unlimited fine.