Directors are worried that they could end up in the docks, writes Neil Swift
Heralded as one of the toughest pieces of anti-bribery legislation in the world when it was introduced, a House of Lords Select Committee is currently considering how effective the Bribery Act 2010 has really been and last week received further evidence from, amongst others, the NCA.
When the Act entered the statute books, there were concerns about its impact on the competitiveness of British businesses, particularly as competitors overseas were not subject to such far reaching legislation. Going beyond the scope of the US Foreign Corrupt Practices Act, until then regarded as the gold standard in anti-corruption legislation, the Act introduced a wholly new model of criminal liability for companies, exposing them to risk of serious criminal sanction if they failed to prevent those associated with it from paying bribes anywhere in the world.
The Act provides companies with a defence if they have adequate procedures designed to prevent bribery in place. Understandably this sent many companies to their lawyers to devise compliance programmes based on the six principles promulgated by the Ministry of Justice. Although the offences created by the Act have been prosecuted in cases large and small, with a reasonable degree of frequency and success, perhaps the biggest success of the Act is the increased focus by companies on identifying risks and introducing compliance programmes to address them.
But not all have got the message. Small and medium sized enterprises were surveyed in 2015, and a significant minority claimed either to be unaware of the Act or did not appreciate what they needed to do to afford themselves a defence. These alarming gaps in awareness included many exporting to countries where corruption is rife and the risks high.
The difference between large multinationals and SMEs is one of the key areas being considered by the Committee. Others include the inconsistency between the offences of failing to prevent bribery, and failure to prevent the facilitation of tax evasion. Both offences have the same premise: criminalising companies for failing to stop criminal acts, whilst encouraging behavioural change by providing a defence to those with an acceptable approach to compliance. The significant difference is one of language. Whereas a company needs to have adequate procedures to prevent bribery, its procedures to prevent the facilitation of tax evasion must be reasonable. The Committee is considering whether procedures can ever be considered adequate if they failed to prevent something, or if reasonable is a better basis for both defences.
This debate is of particular interest given the oft-repeated desire from senior prosecutors and government to introduce a general offence for companies who fail to prevent economic crimes. The Committee is considering two additional and fundamental questions: the first is how to ensure that companies who are victims of crime are not punished again for failing to prevent it. The second is whether making it easier to prosecute companies is actually in the public interest.
As the law stands, it is extremely difficult to prosecute a company for other economic crimes. A prosecutor has to prove the guilt of a “directing mind and will” of the company – usually someone at director level. The challenge for prosecutors, absent an incriminating email chain, is finding the evidence. However, rather than making it easier to prosecute companies, the public interest might be better served by aiming instead at the highest levels of management, by offering reduced sentences to those who cooperate and give evidence against their former colleagues, or financial incentives to whistle-blowers. The fear that directors might find themselves in the dock is perhaps the most effective incentive for companies to do the right thing.
Neil Swift is a partner and Peters and Peters