Described earlier this year by the House of Lords Select Committee as having created “an international gold standard for anti-bribery and corruption legislation”, the coming month will mark the eight year anniversary of the Bribery Act 2010 coming into force. It is also expected to mark the further annual extension of the distinct Scottish “self-reporting” and civil settlement regime for bribery offences.
Eight years on, how has the Bribery Act 2010 fared in Scotland and what are the key considerations for a business self-reporting in Scotland?
The Scottish self-reporting regime
The self-reporting initiative in Scotland was introduced when the Bribery Act came into force in July 2011, initially for a period of one year, and it has since been extended on an annual basis. In return for self-reporting, businesses that self-report may avoid a criminal prosecution, and instead be referred to the Civil Recovery Unit for civil settlement.
The self-reporting scheme is operated by the Crown Office and Procurator Fiscal Service (COPFS), and is separate from the regime operated by the Serious Fraud Office (SFO) in England & Wales, where deferred prosecution agreements (DPAs) were introduced in 2014. DPAs are not currently available in Scotland and it appears, following the House of Lords Select Committee review, that there are no immediate plans by the Scottish Government to consider these further.
Although the Bribery Act 2010 is a UK wide piece of legislation, the investigation and prosecution of bribery offences are dealt with by different authorities north and south of the border and the approach to enforcement is not the same. Here, we look at the regime in Scotland, highlighting some key considerations for businesses contemplating a self-report.
Who should self-report in Scotland?
Although each case will be considered individually, factors that suggest that a business should report to COPFS, rather than the SFO, include that:
- the business has its headquarters or registered office in Scotland;
- the business is predominantly carried on in Scotland; or (most importantly)
- the wrongdoing took place in, or mostly in, Scotland.
Where cross-border issues arise, COPFS will liaise with the SFO to decide who will deal with the case.
What is required for a self-report?
From the outset, COPFS made clear that self-reporting is no a "soft option"; minimum requirements must be met before a self-report is accepted. The business must:
- conduct a thorough investigation, which may include engaging forensic accountants;
- disclose the full extent of any criminal conduct discovered;
- describe the steps put in place to prevent a repeat; and
- commit to meaningful dialogue with COPFS in its assessment and any ensuing investigation.
The report must be made by a solicitor, and the business must be clear that the report is made on behalf of its board (or the partners, in the case of a partnership), and that the business has received legal advice before making the report or disclosing information to the authorities. COPFS will not accept reports made by individuals; where an individual wishes to make a report without the knowledge of the business, he will be directed to the appropriate law enforcement agency who will investigate outwith the terms of the initiative.
A civil settlement is not guaranteed following a self-report; every case is considered on its own merits, and there may be cases where a criminal investigation is deemed appropriate. COPFS will take into account factors such as the seriousness of the offence, the extent of wrong doing within the business, whether senior management took action quickly, whether the business had adequate anti-bribery measures in place at the time of the conduct - and whether it has reviewed these procedures in light of what happened. Where criminal proceedings are instigated, the maximum penalty is 10 years’ imprisonment and an unlimited fine for individuals, and an unlimited fine for businesses.
While COPFS is willing to have discussions with the business’s solicitor about whether a report is likely to be accepted, it will not give any guarantees about how the business, or former or current officers and employees will be dealt with. There may be cases where the conduct is sufficiently serious that COPFS will decide that it is in the public interest to prosecute either the business or individuals connected to the business – or both. Although perhaps cold comfort, the business would be able to rely on the self-report as a mitigating factor in any subsequent prosecution.
Confidentiality and legal privilege
When deciding whether to make a report, confidentiality is also a key consideration. It’s important to be aware that COPFS will not enter into discussions with solicitors about a possible report unless the identity of the client is disclosed. In addition, any information provided, including the report, may be used by the authorities in any subsequent action, whether civil or criminal, and may be shared with the SFO or law enforcement agencies in other jurisdictions where they request assistance with investigations. As legal advice is protected from disclosure, businesses should consider engaging solicitors early. This is particularly important if the business ultimately decides not to make a self-report.
Finally, even where a civil settlement is reached, publicity will generally follow unless a compelling reason for confidentiality exists, and our experience suggests that careful management of this aspect with customers and suppliers is required.
What has happened to businesses who have self-reported in Scotland?
Of the five cases in which a self-report has been accepted by COPFS, no corporate prosecutions have as yet followed for that entity in Scotland. In one case however, the former managing director was subject to individual prosecution.
Where the self-report is accepted, the case will be dealt with by the Civil Recovery Unit who will quantify the appropriate level of settlement by reference to the gross profit obtained by the business as a result of its unlawful conduct.
Five companies have agreed civil settlements with COPFS since the Bribery Act came into force, four of which have attracted publicity. The first company to self-report in Scotland was Abbot Group, an oil & gas company, who paid £5.6 million in 2012 in relation to corrupt payments made by an overseas subsidiary in 2007. Other settlements have varied from around £200,000 to around £2 million. As further practice develops north and south of the border, it will be interesting to observe whether the market perceives any benefits to reporting in either jurisdiction, as a result of the distinct schemes.
Although there are no guarantees, the self-reporting initiative provides an opportunity for the business to avoid various repercussions arising from a criminal prosecution, such as the debarment provisions under Article 45 of the EU Public Sector Procurement Directive 2004, which prohibit the business from tendering for public sector work. Other implications for businesses convicted of bribery include:
- Financial penalties;
- Serious Crime Prevention Orders - designed to prevent, restrict or disrupt activities that might involve serious criminal activity; and
- Financial Reporting Orders, which compelling regular financial reporting.
A self-reporting business may also be able to retain an element of control over the investigation and ensuing publicity, and may have a greater degree of certainty in relation to its financial exposure, bearing in mind the unlimited nature of the fines on prosecution.
Deciding to self-report is a difficult process for any business and there is no one size fits all solution. The reality for a self-reporting business is often a lengthy investigation, which may uncover further criminal conduct as it progresses, and can broaden in scope if COPFS decides additional investigation is required. Investigations tend to be expensive, and distracting for management – and may also lead to litigation. Notwithstanding these important considerations, self-reporting may still be the right option for the business; taking independent legal advice as soon as bribery comes to light is a sensible precaution.
For advice on self-reporting in Scotland, or regarding anti-bribery and corruption policies and training, please contact the CMS Scotland Risk & Investigations team in Scotland: Colin Hutton, Graeme MacLeod, Emma Boffey and Joanna Clark.