The Organisation for Economic Co-operation and Development last month (March 2017) published a report which assessed the effectiveness of UK and Scottish law enforcement agencies in detecting and prosecuting bribery and corruption of foreign public officials. Of note was a recommendation that Scotland introduce US-style deferred prosecution agreements (DPAs) to deal with corporate offending.
A body with 35 member countries, the OECD concluded that the UK was a major enforcer of overseas public sector bribery, but that the total number of enforcement cases relative to the UK economy remains low. The report highlighted Scotland's oil and gas sector, which operates in parts of the world where there is a high risk of bribes being paid to public officials, and therefore identified the need for effective bribery enforcement in Scotland.
The report recommended that Scotland should introduce US-style corporate DPAs, which have recently been introduced into England & Wales. The successes of the Serious Fraud Office (SFO) in securing DPAs in foreign bribery cases against Rolls-Royce (penalty of £510 million); ICBC Standard Bank (penalty of $33 million); and XYZ Ltd (name withheld due to ongoing proceedings: penalty of £6.5 million) were commended.
Scotland's Crown Office & Procurator Fiscal Service (COPFS) currently has a civil settlement regime which is designed to encourage companies to self-police and self-report failures to prevent bribery for which companies are criminally liable under the Bribery Act 2010. Under that regime, enforcement action has been taken against companies which have self-reported failings to prevent potential bribery, and those cases have resulted in the recovery of significant sums of money: Abbot Group (£5.6 million); Braid Group (£2.2 million); Brand-Rex (£212,000); International Tubular Services (£172,000), and TGNS (£138,000). Those cases have involved suspected bribery of persons working for companies rather than of foreign public officials, therefore the settlements were not taken into account by the OECD in its analysis of Scottish enforcement.
Under Scotland's civil settlement regime, a company that self-reports to COPFS may enter into an agreement to pay over any profit earned from a bribe and to remediate, in return for COPFS not prosecuting the company for any bribery offences. DPAs in England are similar, but a DPA includes a penalty which may be up to four times the profit earned from a contract that is tainted by bribery, the entering into of the agreement is overseen by a judge, and the case details are published.
The OECD considers that foreign bribery should attract significant penalties and that Scotland's regime is potentially too lenient. The OECD also prefers the more transparent nature of DPAs and the fact that there is judicial oversight.
Both the Scottish Government and COPFS will need to report back to the OECD in two years' time on the steps taken to implement its recommendation. It therefore seems likely that DPAs in some form will be introduced into Scotland.
Reasons to be different
The English or US model is unlikely to be right for Scotland because we have a far clearer separation between the role of the prosecutor in exercising prosecutorial discretion and judicial responsibility for sentencing. Scottish judges may not welcome DPAs, as they conflate the role of prosecutor and sentencer.
Care is also needed not to undermine the substantial success that COPFS has achieved in encouraging self-reports in Scotland. At the heart of the OECD's recommendation there is an inconsistency – it supports a regime to encourage companies to self-report, but it also wishes to make the penalties in Scotland for resolving cases more severe. As the OECD also points out, the real mischief is the UK-wide failure to detect most cases of overseas bribery. Over half of the cases brought are a result of corporate self-reports. That is disproportionately high, and it leads to more ethical companies being subject to enforcement action than criminal enterprises. While a kilted form of DPA may now be inevitable, if the scourge of international bribery is to be tackled, increasing the risk of detection should be the real priority. That can only be achieved through funding specialist investigators and prosecutors, and by greater inter-agency co-operation within the UK and internationally.
While DPAs are under consideration for Scotland, the civil settlement regime remains open. Perhaps more companies will take the opportunity to clean out any skeletons before the enforcement regime hardens?
In this issue
- Pursuers' offers: proceed with care (1)
- Article 50: today, tomorrow and the two-year myth
- Tackling bribery: follow the US?
- Small holdings, big complexities
- Brexit: white paper, muddy waters
- Reading for pleasure
- Opinion: Caroline Kelly
- Book reviews
- President's column
- Land Register applications – the inside view
- People on the move
- Help on our shores
- The importance of thinking differently
- A new crime scene
- Embarking on the UK-EU negotiations
- Pursuers' offers: proceed with care
- From discount to premium
- The law, standing accused
- Equality – the global agenda
- The Discount Rate – what next?
- It's not over until it's over!
- Sheriff and jury – the big changeover
- Rates? Sorry, can’t help you there
- Looking beyond the U-turn
- Planning gain all round?
- Scottish Solicitors' Discipline Tribunal
- Nil rate IHT and the family home
- Voice of experience
- Quality Assurance Criteria amended
- Law reform roundup
- Ask Ash
- All change in the PRS
- I think you would like this
- Master Policy – what will be different?
- Scottish Arbitration Survey: please help
- Q & A corner: client due diligence at a distance
- Cybersecurity demystified
- Confidentiality and third-party complaints
- 1,000 student associates!