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The U.K. Enters The Facade Era

In my 2010 article “The Facade of FCPA Enforcement [1],” I warned that this was going to happen.

Under the heading “why the facade of FCPA enforcement matters,” I noted, among other things, the “increasing frequency by which other nations are modeling enforcement of their own bribery laws on U.S. enforcement methods and theories” and stated that “these methods and theories, unless addressed and corrected here in this country, will continue to be replicated elsewhere, perhaps leading to a global facade of enforcement.”

Today, the U.K. formally enters the facade era as deferred prosecution agreements become available to U.K. prosecutors.  (See here [2] and here [3] for relevant documents recently released by the Serious Fraud Office (SFO) and Crown Prosecution Service (CPS)).

To anyone who values the rule of law, reading these documents is truly distressing and I imagine Sir William Blackstone (the famed English jurist best known for his Commentaries on the Laws of England) has flipped in his grave.

Why did the U.K. adopt DPAs?

In short, the SFO and CPS tell us that doing things the old-fashioned way (i.e. proving a criminal violation in an adversarial system) is too difficult and takes too long.  The SFO Director’s language on this issue is blunt as he states that “one of the principal purposes of DPAs is to bring resolution to cases of corporate criminality more quickly.”

The U.K.’s justification for DPAs is really quite sad as ease and efficiency are not concepts normally associated with the rule of law and justice.  Yet, when politicians and civil society groups are clamoring for more prosecutions this is the end result.

Before highlighting certain troublesome features of the U.K.’s new system, it is important nevertheless to recognize the following.

When the U.K. was considering its approach, it rejected U.S. style non-prosecution agreements and stated that such agreement

 “[Are] unsuitable for the constitutional arrangements and legal traditions in England and Wales.  We have concluded that [NPAs] are not suitable for this jurisdiction due to their markedly lesser degree of transparency, including the absence of judicial oversight.”  (See here [4] for the prior post).

Moreover, even though the U.K. is adopting DPAs, the DPA regime is most certainly different from the U.S. regime in that the U.K. regime contemplates active and early involvement by the judiciary.

U.K. DPAs will be used to resolve a variety of corporate criminal actions, not just actions under the Bribery Act.  My opposition to the U.K. adopting DPAs has been limited to application to Bribery Act offenses (see here [5] for my prior submission to the U.K. Ministry of Justice as well as prior posts here [6], here [7] and here [8]).  The questions I posed have never been answered.

“Why does a law with an adequate procedures defense require the third option of a deferred prosecution agreement (the first two options being prosecute vs. not prosecute)? If a corporate has adequate procedures, but an isolated act of bribery nevertheless occurs within its organization, the corporate presumably would not face prosecution under the Bribery Act. This seems like a just and reasonable result and there is no need for a third option in such a case. On the other hand, if a corporate does not have adequate procedures (thus demonstrating a lack of commitment to anti-bribery compliance) and an act of bribery occurs within its organization, it presumably would face prosecution under the Bribery Act. This seems like a just and reasonable result. Does a third option really need to be created for corporates who do not implement adequate procedures? I submit the answer is no and urge the MoJ to reject use of DPAs in the Bribery Act context.”

For years [9], I have been highlighting how the DOJ picks and chooses which aspects of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions [10]it chooses to follow.  When the DOJ wants to justify a position it is taking and feels like the OECD Convention supports this position, the DOJ cites to the OECD Convention.  However, when the DOJ is acting inconsistent with the OECD Convention, it simply ignores the Convention.

For instance, OECD Convention Article 5, under the heading “Enforcement,” states that investigation and prosecution of bribery offenses “shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved.”  Every time the DOJ enters into an NPA or DPA and justifies its decision through reference to potential collateral consequences that may result to a particular company, the DOJ is considering the “identity” of the “legal persons involved” in violation of Article 5.

The U.K.’s Code of Practice for DPAs does the same thing.

Section 2.7 of the Code of Practice states:

“Prosecutors should have regard when considering the public interest stage to the U.K.’s commitment to abide by the OECD Convention on ‘Combating Bribery of Foreign Public Officials in International Business Transactions’ in particular Article 5.  Investigation and prosecution of the bribery of a foreign public official should not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved.”

Yet a page later, at Section 2.8 under the heading “additional public interest factors against prosecution,” the Code of Practice sets forth the following:

“[whether] a conviction is likely to have disproportionate consequences for [an organization], under domestic law, the law of another jurisdiction including but not limited to that of the European Union …”

“[whether] a conviction is likely to have collateral effects on the public, [an organization’s] employees and shareholders of [an organization] and/or institutional pension holders.”

In other words and contrary to Article 5, the U.K., like the U.S., will take into account the identity of the legal person involved.

Notwithstanding the above, the most troubling feature of the Code of Practice concerns the evidence sufficient for U.K. prosecutors to resolve an action via a DPA.  In defending adoption of the “lower evidential test” in the Code of Practice and addressing concerns that this standard “was so easily satisfied as to have very little substance,” the SFO’s response is, in pertinent part, as follows.

“One of the principal purposes of DPAs is to bring a resolution to cases of corporate criminality more quickly.  […] If a prosecutor had to be satisfied that the evidence against an organization was sufficient to meet the Full Code Test [11](“Prosecutors must be satisfied that there is sufficient evidence to provide a realistic prospect of conviction against each suspect on each charge”) without the alternative of the ‘lower’ evidential test before considering whether a DPA was in the public interest, a key purpose of DPAs, as was the express intention of parliament, would become redundant.  In order to achieve one of parliament’s key intentions in legislating for the introduction of DPAs a ‘lower’ evidential test is necessary.”

“Satisfaction of the Full Code Test, particularly in view of the well documented difficulties in proving corporate liability, would in most circumstances require a complete an full scale investigation, sometimes spanning many jurisdictions, which inevitably is time consuming and expensive.  It is not intended for there to be such an investigation before a DPA is entered into.”

This response is nothing short of laughable and truly distressing to anyone who values the rule of law.  The SFO is defending the DPA regime by saying that the old regime of proving corporate criminal liability required a complete and full scale investigation that took too long.

At the end of the day, the U.K.’s adoption of DPAs is a political response to show results.  Because this new system expands the market for legal services, you will find few opposing it.

What a sad state of affairs the U.S. has started and is now spreading across the world.