APPENDIX 2
SENIOR OFFICER: LIMITS TO THE ADEQUATE PROCEDURES
DEFENCE
The adequate procedures defence is set out in clause
5(4). Clause 5(5) limits the circumstances in which the defence
is available:
...the defence is not available if the negligence
referred to in subsection (1)(c) was wholly or partly that of
a senior officer of C or a person purporting to act in such a
capacity.
Although the Law Commission recommended that
the defence should not be available when the negligence was attributable
to a director of the company (or equivalent person), the Government's
draft Bill goes further than this. The defence is not available
where the negligence is wholly or partly that of a senior officer
or someone purporting to operate in such a capacity. This is far
wider than the Law Commission envisaged.
The fundamental question is whether the fault
of a senior officer should mean that an organisation cannot rely
on the adequate procedures defence. In our view it should not.
In deciding to recommend the creation of an
offence of corporate liability for bribery, the Law Commission
in its Report stated that "it would be right to recommend
that the criminal law be used to address the issue of culpable
organisational failure to prevent bribery offences" (paragraph
6.42). By making pivotal the fault of a senior officer, both the
Law Commission's proposal and the Government's draft Bill place
incidents of negligence, which may be a "one off" occurrence,
in an inappropriately paramount position, rather than effectively
target the systemic failure of an organisation.
Further, given that one of the purposes of criminalising
a failure to prevent bribery is to encourage the adoption of the
appropriate preventative measures, it is surprising that a commercial
organisation which takes its obligations seriously and appoints
a senior officer to carry out an anti-corruption function arguably
opens itself up to a greater risk of prosecution. On the face
of it, a commercial organisation would limit its risk of being
found criminally liable if it appointed someone below senior officer
level, as it would then at least have an opportunity to rely on
the adequate procedures defence.
However this would pose a significant difficulty
to multinational organisations which are subject to the jurisdiction
of the US Foreign Corrupt Practices Act. Under the US Federal
Sentencing Guidelines, which describe what an effective compliance
programme entails and upon which many corporate ethics and compliance
programmes are based, an organisation must give overall responsibility
for compliance to a member of high level personnel in order to
obtain sentencing credit. The problem is that whilst appointing
a senior officer with overall responsibility is clearly desirable
from the US perspective, as the draft Bill stands, it is equally
undesirable from the UK perspective.
In any event, and for the reasons we set out
more fully below, we are concerned that the exclusion means that
the prospect of a corporate defendant being able to employ the
defence are more illusory than real.
There are three distinct reasons for this: (a)
the definition of "senior officer", (b) the concept
of collective negligence and (c) the concept of purporting to
act.
Senior Officer
A senior officer is defined in clause 5(7) as:
(a) in relation to a body corporate, means a
director, manager, secretary or other similar officer of the body
corporate, and
(b) in relation to a partnership, means a partner
or any person who has control of management of the business of
the partnership.
This is a very wide definition, and one that
will lead to considerable uncertainty and inconsistency of application.
Different organisations will designate different levels of employee
as directors or managers, but by including managers at all in
the definition the exclusionary net is cast unnecessarily wide.
In order to avoid the potential problems caused
by the involvement of a senior officer of a company in an anti-corruption
capacity, there may be an understandable inclination to outsource
the anti-corruption function. The use of the phrase "any
person... connected with" a company to define a "responsible
person" (clause 5(3)) appears to cover the delegation of
the anti-corruption function to either a subsidiary or even a
wholly independent entity. If the delegation were to such a wholly
independent entity, such a person/body could not fall within the
definition of "senior officer" in which event the adequate
procedures defence would be available notwithstanding negligence
on the part of that wholly independent entity.
This might present as an attractive possibility
to the corporate: delegate the function out as such a course may
allow the adequate procedure defence to be claimed. However it
may be contended either that (i) a senior officer was responsible
for the delegated function and that therefore the negligence of
that person overseeing the wholly independent entity could be
a basis for liability, or (ii) such a delegation is not, by definition,
an adequate procedure. Clearly, the Bill as drafted leaves significant
issues for corporates to wrestle with, and given the consequences
of conviction should they get it wrong, such a state of affairs
is highly unsatisfactory.
Collective Negligence
Given that the offence in the draft Bill is
committed not only where the senior officer himself was negligent,
but where the appropriate standard was not reached by the senior
officer as one of a number of persons charged with preventing
bribery, the circumstances in which the exclusion will apply are
widened further.
Notwithstanding that a commercial organisation might
have procedures which go beyond mere (and sufficient) adequacy,
a single instance of negligent failure to prevent a bribe, which,
may be due partly to a one off lapse of attention by a senior
officer, which although not by itself negligent, when taken as
part of the conduct of a number of persons taken together, is
found to be negligent, the organisation cannot rely on what may,
in all other regards, be a model of best practice.
Purporting to Act
It is not clear what "purporting to act"
in the capacity of a senior officer means. The Oxford English
Dictionary defines "purport" as "appear to be or
do something; especially falsely".
It is unclear whether a person must have the knowledge
and intention to act "falsely" in order to come within
this test.
More fundamentally, given that the involvement
of a senior officer in the collective negligence of others prevents
reliance upon the adequate procedures defence the temptation for
a prosecutor will be to invoke this provision. It is possible
that prosecutors may argue that, given the importance to an organisation
of having an effective anti-corruption policy, any person, whatever
their level, whose function was to prevent the payment of bribes
was purporting to act in the capacity of a senior officer. The
phrase further unnecessarily limits the availability of the defence.
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