A Committee of the House of Lords has published a report reviewing the Bribery Act 2010 and making recommendations for change in its implementation and enforcement.
A Committee of the House of Lords has published a post-legislative scrutiny report (see here) on the Bribery Act 2010, following nine months of evidence gathering. Post-legislative scrutiny is usually conducted by a committee of the House of Lords three to five years after an act comes into force, but a longer period was allowed for the Bribery Act, as investigations tend to take time and can commence years after the conduct in question. However, by March 2018 it was felt that sufficient cases had been dealt with involving bribery occurring after 01 July 2011, when the Bribery Act came into force, to assess its effectiveness.
The Report concludes that, as an overall assessment, the Act “is an excellent piece of legislation which creates offences which are clear and all-embracing” and that it is “an example to other countries… of what is needed to deter bribery”. Not one of the witnesses called had any major criticisms of the Act. Nonetheless, the report contains some important recommendations as to its enforcement and on wider issues relating to economic crime.
Ministry of Justice Guidance
The Committee compared the March 2011 Ministry of Justice statutory Guidance on the Bribery Act with the guidance issued for businesses by HMRC on the Criminal Finances Act 2017. Both statutes created an offence of “failing to prevent” a crime, with a defence of having “adequate procedures” in the case of the Bribery Act and “reasonable prevention procedures” in the Criminal Finance Act. The HMRC Guidance drew upon the MoJ Guidance, in particular adopting the 6 principles for effective prevention measures. Both also use the format of example scenarios, but the HMRC guidance goes further in suggesting where in the scenarios the procedures would not fulfil the statutory test of being reasonable in the circumstances.
Several witnesses expressed the view that the HMRC Guidance was more helpful for businesses, and that there needed to be clearer examples in the MoJ Guidance of what would, and what would not, be adequate, particularly for SMEs. The Committee adopts this view and recommends that the MoJ Guidance be reviewed and updated and the MoJ’s parallel “Quick Start Guide” be withdrawn. Businesses should watch for developments in this area to ensure their anti-bribery measures comply with any updated guidance.
One area in which the Report found that the MoJ Guidance had left businesses unsure was corporate hospitality, with some respondents claiming that it could lead companies to adopt an overly cautious approach to gifts and hospitality. The Committee found that the MoJ Guidance was as clear as could be expected in the absence of any judicial interpretation of the relevant provisions, but expressed concern that businesses may have gone too far in restricting the giving and acceptance of corporate hospitality. It concludes that the MoJ should give clearer examples on the boundary between bribery and legitimate corporate hospitality.
Corporate criminal liability
Several witnesses argued before the Committee that the current law of criminal liability in the UK, based on the “controlling mind” theory (whereby a company is only criminally liable if someone who has control over the company was aware of the conduct and had the necessary mens rea) required changing, as it makes prosecution of smaller companies far easier than the prosecution of larger corporates. Some suggested the adoption of the US system of vicarious liability, whereby a company is liable for the acts of its employees in the course of their employment. The Committee made clear that this was beyond the scope of its work.
The report considers whether the Bribery Act should be amended, so that the defence for a company accused of failing to prevent bribery was of having “reasonable” rather than “adequate” procedures to prevent bribery. Some witnesses argued that a company would rarely be able to show its procedures were “adequate” where bribery had then occurred. Only one company has attempted to deploy the “adequate procedures” defence to date and was unsuccessful (see here for more). The Committee was unpersuaded that the Bribery Act needs amendment and felt any uncertainty could be dealt with by improvements to the MoJ Guidance for companies.
Where the Report makes a strong call for action, however, is on the long-standing proposal for a general offence of failing to prevent economic crime. The MoJ issued a consultation paper on reform of the law on corporate liability for economic crime in January 2017 (see Simmons’ response here), but has never acted upon the responses it received. The tone of this report is unmistakably in favour of such reform and it urges the Government to delay no further in reaching a conclusion on whether to introduce a broader offence of failing to prevent economic crime. This may now reignite this debate, with potentially far reaching consequences for businesses.
The report suggests that enforcement levels could be increased through a central reporting mechanism for bribery, in the model of the Action Fraud centralised reporting channel for fraud. The Home Office has already committed to establishing such a mechanism, according to the Government’s first annual update on its Anti-Corruption Strategy, published in December 2018.
Pace of investigations
One major criticism made in the Report is in relation to the speed of bribery investigations and the level of communication between the Serious Fraud Office or Crown Prosecution Service and the parties placed under investigation.
Many witnesses criticised the length of time taken for charges to be brought and for cases to reach trial. Evidence provided to the Committee pointed to SFO bribery investigations taking an average of four and a half years, and up to five or six years, to conclude. There was also evidence that some parties placed under investigation had not heard back from the SFO for 12 to 18 months after being interviewed. Similar evidence was heard in relation to the pace of investigations conducted by the CPS.
The Committee was concerned about the significant financial and operational burden placed on companies by delays and poor communication. It recommended that the SFO and CPS publish plans to outline how they will speed up bribery investigations and increase the level of communication with those placed under investigation for bribery. However, while communication could certainly be improved, the typical causes of delay are not likely to go away. These include the sheer quantity of evidence to be reviewed, the international nature of bribery often requiring the involvement of overseas agencies, and the turnover of staff at the SFO and CPS.
The Crown Prosecution Service Inspectorate has recently commenced a review of case handling by the SFO which will examine the timescales for investigations and communications with suspects.
Deferred Prosecution Agreements
Although DPAs are not governed by the Bribery Act, three out of four DPAs concluded to date have related to bribery offences, so it was natural that the Committee should consider their use and effectiveness.
The Committee found that DPAs have proved to be an effective way in which to handle corporate bribery, incentivising self-reporting. It was not persuaded that a greater discount is needed than the 50% allowed in some DPAs so far in order to encourage self-reporting. However, the Committee expressed its view that if self-reporting is to be encouraged, “a distinction should be drawn between the discount granted to a company which has self-reported and one which has not”.
The Committee also emphasised that a DPA with a company is not and should not be a substitute for the prosecution of any individuals who are implicated in bribery and other corrupt conduct. In his evidence, Sir Brian Leveson, who has overseen the hearings of all DPAs approved to date, told the Committee that he could not “contemplate agreeing a DPA if the people who were responsible for the corrupt payments or other criminality remained in the company”. The Report concludes that the co-operation expected of a company entering a DPA “must include provision of all available evidence which might implicate any individuals, however senior, who are suspected of being involved in the bribery being considered”.
The Report also proposes an amendment to the statutory regime for DPAs, abolishing the “rigid” requirement to hold one hearing in private and then a short time later to hold a further hearing in public, both effectively deciding whether the DPA is in the interests of justice and that its terms are fair, reasonable and proportionate. Sir Brian Leveson said in his evidence that more flexibility is required and that “there is no reason why one judgment is not sufficient”. This may lead to a change in the court process for DPAs.
What to watch for
While the Government is obviously currently distracted by Brexit issues, there is much in this Report that could lead to change. Any amendments to the MoJ Guidance will need careful consideration and could lead to a relaxation of compliance steps on corporate hospitality. The emphasis on companies providing evidence against individuals as part of the DPA process is also worthy of note. It is perhaps the Committee’s demand that the Government stop delaying its decision on the issue of a new general criminal offence of failing to prevent economic crime that indicates where organisations may need to be focusing in the coming months.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.