11 PENALTIES
184. Clause 11 introduces the following penalties:
- A maximum ten year sentence
of imprisonment for individuals who commit an offence under clauses
1 (bribing), 2 (being bribed) and 4 (bribing a foreign public
official); and
- An unlimited fine for any company or partnership
that is convicted of an offence under clause 5 (negligently failing
to prevent bribery).
Unlimited fine
185. The explanatory notes that accompany the draft
Bill do not explain the way in which the unlimited fine will be
assessed. This has caused significant concern amongst the members
of GC100, who call for clarification on "the way in which
the Courts should approach the level of the fine i.e. would they
be referable to turnover, the value of the contract, the profit,
the quantum of the bribe or some other criterion[?]"[292]
The Confederation of British Industry states that the fine should
be assessed in a way that is proportionate and "based on
turnover of the business so that small businesses are not unfairly
penalised".[293]
Confiscation
186. A bribery conviction under the draft Bill triggers
the court's power to impose a confiscation or civil recovery order
under the Proceeds of Crime Act 2002. These powers can be used
to recover all the proceeds of a crime, which can have a particularly
punitive effect in relation to bribery offences. Take for example
an individual who makes a buyout offer worth £15 million
to a company's shareholders, and who pays a bribe of £50,000
to a Chief Executive to secure their endorsement of the buyout.
That individual risks losing the entire value of the company and
its assets if he acquires it due to the bribe succeeding. That
is, the penalty for paying a bribe of £50,000 could be as
high as £15 million.
187. The 2003 Joint Committee on the draft Corruption
Bill considered a similar example and concluded: "both Houses
may wish to consider whether this [penalty] is wrong in principle
and whether it would be a violation of the First Protocol to the
ECHR". [294] The
Ministry of Justice stated that the courts could be relied upon
not to operate confiscation powers in a way that contravenes human
rights legislation. However, GC100 re-iterated the importance
of the combined powers to fine and to confiscate being exercised
in a way that remains "proportionate and reasonable".
Debarment
188. Under the Public Contracts Regulations 2006
(which give effect in the UK to EU law) a company will be automatically
and perpetually debarred from competing for public contracts where
it is convicted of a corruption offence. While debarment can be
an effective penalty in appropriate circumstances, the rigid policy
that is imposed by the Regulation creates problems. For instance,
GC100 stated that the penalty risks being disproportionate since
neither the seriousness of the offence nor any mitigating factors
can be taken into account.[295]
The consequences of debarment can be severe, as Jeremy
Cole of Lovells explained:
Some of these businesses survive on [public sector]
procurement work. If they get a criminal conviction, their business
could collapse overnight.[296]
189. GC100 further states that there is no scope
for "self cleansing" under the Regulation, which means
that a company might face debarment for acts that took place many
years in the past.[297]
We note that debarment is discretionary in the United States
and that there is a process for "self-cleansing" to
remove the skeleton from a corporation's cupboard. This is established
by Presidential Direction and Executive Order No 12549 and 12689.
In particular, suspension and debarment determinations are made
by the Suspending Official of the relevant government agency subject
to consulting a Department of Justice prosecutor.[298]
No such discretion exists in UK law.
190. A broader impact concerns the Serious Fraud
Office's intention to encourage companies to self-report bribery
with the aim of accepting a civil recovery order in place of a
criminal conviction.[299]
The recent conviction of Mabey & Johnson Ltd reflects this
policy beginning to work.[300]
However, Jeremy Cole of Lovells and the UK Anti-Corruption Forum
doubted whether any company would self-report in circumstances
where it faced perpetual debarment in the event that the prosecutor
decided to pursue criminal proceedings:
[… the company] will have no incentive to
undertake internal audit and co-operate with the authorities.
On the contrary, it may be encouraged to conceal the offence […]
corruption will be driven underground, when preventing corruption
is best achieved by bringing it out into the open.[301]
191. The Secretary of State for Justice acknowledged
the problems posed by debarment and told us that he would look
into ways of addressing the issue. The UK Anti-Corruption Forum
stated that short-term options included finding ways of limiting
debarment to a short period of time. We note that clause 23(2)
of the Regulation can be used to side-step debarment where the
relevant public body considers there to be "overriding requirements",
although we question whether this can be used to adequate effect.
The Forum stated that, in the medium to long term "we
need a proper European debarment regime which works and which
takes account of the severity of the offence and mitigating circumstances,
and that could only be agreed at the European level".[302]
Other penalties
192. We support the penalties available under
the draft Bill, including the power to impose unlimited fines
on companies and a maximum ten year sentence of imprisonment for
individuals. The draft Bill must have teeth. However, the Government
must:
- Clarify the way in which
the unlimited fine will be assessed;
- Ensure that civil powers
of confiscation and recovery will operate in a way that is proportionate
and reasonable; and
- Take action at a European level to prevent
companies being automatically and perpetually debarred following
a conviction, while exploring shorter-term measures to prevent
disproportionate penalties being imposed in the meantime. The
Government must ensure that the UK reaches a position where debarment
is discretionary, if self-reporting is to work effectively in
practice.
292 BB10, para 2.4 Back
293
BB08, p3 Back
2 294 95
Draft Corruption Bill, HL 157, HC 705, July 2003, para 161
Back
295
BB10 Back
296
Q339 Back
297
BB10 Back
298
BB57, para 15 Back
299
BB14 Back
300
Further information is available at http://www.sfo.gov.uk/news/prout/pr_630.asp?id=630
Back
301
BB04; Q339 Back
302
Q240 Back
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