Developing a holistic and coherent defence strategy is paramount; at minimum it must be consistent, uphold priorities and minimise the risk that action taken in one forum undermines the position in another.
How should a company encountering parallel proceedings balance its strategic interests?
A company facing ongoing or prospective parallel proceedings has a number of different objectives and priorities, some of which may conflict. It prepares itself best to address these areas of conflict by developing a holistic and coherent defence strategy from the outset, which uphold the company’s priorities and minimise the risk of action being taken in one forum which inadvertently undermines its position in another.
Conflicts can arise as a result of differences in applicable legal and procedural rules, or the purposes and outcomes of each of the proceedings. They may also be triggered by differences in the interests of key stakeholders, including enforcement authorities, individual defendants and witnesses, and the company itself.
For example, a decision by the company to self-report and co-operate with a criminal or regulatory investigation can have a significant impact on both its and others positions in related proceedings. Such a decision may be the right one, but must be taken with a full understanding of its consequences.
- Establishing priorities
It will be important for the company to assess its priorities at the outset and at regular intervals throughout the period during which the parallel proceedings are ongoing. Where those responsible for leading the defence of the various, different actions (who are often members of separate teams with different areas of focus) have a shared understanding as to its wider priorities, a holistic and coherent defence strategy can be implemented.
Each situation will differ, but a company’s priorities in a parallel proceedings scenario can include:
- mandatory reporting or disclosure obligations, where a failure to comply would result in the company committing a criminal offence or serious regulatory breach
- the desire to avoid a criminal conviction which, for some offences, will lead to the company being debarred (excluded) from participating in EU public contracts. For further commentary on this, please review our article
- related to the above, the need to either:
- voluntarily report wrongdoing to the relevant authorities and/or co-operate extensively with their investigations in order to give the company the best chance of securing a DPA or other negotiated resolution, or
- robustly defend the criminal proceedings in Court, particularly where the evidence presented by the relevant prosecution authority is weak or the allegations made are legally flawed
- the defence of civil claims from third parties who have allegedly been affected by the company’s actions and/or mitigation of the risk that such proceedings will be brought
- the taking of remediation and/or compliance measures (including disciplinary action, where necessary), to ensure that an issue or event is not repeated in the future and to re-establish confidence in the company’s ability to do business effectively
- the restoration of the company’s reputation in the eyes of the general public, and the resumption of normal commercial activity, and
- the way in which the company wishes to manage any press/media interest.
- Anticipating conflicts
Various conflicts can arise in a parallel proceedings scenario, some of which can have a significant impact on a company’s defence strategy.
The potential for conflicts should be identified and addressed (insofar as it is possible to do so) when establishing the company’s strategic objectives and priorities. For more information, refer to Balancing strategic interests: Establishing priorities.
These conflicts can be triggered by a number of factors, including:
- variances in the applicable standard of proof, procedural rules, purpose and outcome of the various civil, criminal or regulatory proceedings to which the company and related parties may be subject
See also Handling case material and Addressing related decisions
- the approaches of the different investigation and enforcement authorities that may be examining the circumstances of a particular issue or event
See also Managing multiple stakeholders: Enforcement authorities
- differences in the defence strategies for each of the proceedings. For example, a company seeking to enter into a DPA may accept as true certain information published in a Statement of Facts which damages its ability to mount a successful defence to related civil proceedings
- overlapping deadlines and timetables imposed by the investigating authorities and/or the Courts
See also Utilising procedural mechanisms: Seeking a stay
- differences between the interests and priorities of the corporate defendant and the individuals involved in the relevant issue or event, including suspects and witnesses
See also Liaising with witnesses
- the requirement (in particular for listed companies) to make public certain information which could damage the company’s position as a party to existing proceedings and/or fuel further action, and
- the allocation of limited financial and other resources.
See also Utilising procedural mechanisms: Seeking a stay
- Impact of co-operation
Enforcement authorities, including the SFO, the FCA and the CMA, encourage corporates to self-report suspected wrongdoing and to co-operate fully with any resulting investigation.
Potential benefits for companies that take this approach include the possibility of a swifter resolution, a reduced penalty and/or suspended charge (by means of a Deferred Prosecution Agreement, for example), and (in cartel cases) even total leniency. Such an approach is also likely to mitigate any reputational damage suffered as a consequence of the wrongdoing identified.
Whilst it may be the most prudent course of action for a company, a decision to self-report and co-operate with a criminal or regulatory investigation can impact significantly on any related proceedings and may result in:
- an increased amount of information in the public domain, at an earlier stage, alerting potential civil claimants to possible claims
- a loss of control over the internal investigation, including when and whether a company can interview relevant witnesses
- pressure to waive privilege over certain classes of material including interview notes and self-reports, that may then be vulnerable to disclosure to third party claimants
- the creation of other potentially disclosable material, including communications with the enforcement authorities and responses to document production notices, and
- a public decision or statement of facts which the company does not contest, which can provide a basis for subsequent civil claims.
Nick Benwell, Partner
Self-reporting is a daunting prospect for any company. There are a wide range of issues to be considered in determining how to engage with authorities. How that process is conducted can significantly impact on the outcome for the company.
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.