Additional Memorandum submitted by the
Director of Public Prosecutions (BB 48)
SUPPLEMENTARY QUESTIONS
TO THE
SERIOUS FRAUD
OFFICE AND
THE CROWN
PROSECUTION SERVICE
1. How many investigations and prosecutions,
if any, have been undermined by weaknesses associated with the
current law of bribery?
Over the years there have been cases which have
addressed the difficulties arising from attempts to define "corruptly".
These are referred to in the Law Commission's final report and
were addressed comprehensively by Mr Justice Silber in his further
memorandum in June 2003 on the previous draft bill. I can
add nothing to what is said there.
I have canvassed prosecutors for examples of
cases in which the existing legislation has created problems over
the years. The responses received do not indicate that there have
been significant issues for prosecutors. However, it is necessary
to bear in mind two things. First, that the number of cases of
corruption prosecuted annually by the CPS is small. Secondly,
prosecutors may make use of other offences, such as misconduct
in a public office or money laundering, where such offences are
seen as a more viable option.
Overall I find the new tests in the draft Bill
are likely to provide a practical and workable replacement. The
removal of the uncertainty in the law over the meaning of corruptly
will be effectively achieved by the proposals.
2. Should the test of "negligence"
at clause 5 be replaced with a test of "gross negligence"?
The current requirement in the draft Bill is
that a responsible person be negligent in failing to prevent the
bribe. This would involve "failing to exercise such care,
skill or foresight as a reasonable man in his situation would
exercise" (See Law Commission Working Paper No. 31). This
is an objective and not especially onerous test.
The concept of gross negligence is currently
restricted to manslaughter. In R v Bateman (1925) 19 Cr App
R 8, the court held that "the facts must be such that,
in the opinion of the jury, the negligence of the accused went
beyond a mere matter of compensation between subjects and showed
such disregard for the life and safety of others, as to amount
to a crime against the State and conduct deserving punishment".
This was quoted with approval by Lord Mackay of Clashfern in the
leading case of R v Adomako (1994) 3 All ER 79. Various words
have been used by the courts to describe "gross" conduct:
"culpable", "criminal", "wicked",
"clear", "reprehensible".
It is clear therefore that gross negligence
requires a very high degree of negligence. Inclusion of such a
test in Clause 5 would seriously stifle, perhaps terminally,
the policy intentions we understand to be behind the creation
of the corporate liability provisions. First, it would generally
be extremely difficult in a given case to establish that any negligence
was gross. Secondly, and as a consequence of the difficulty of
being able to prosecute the offence, such a test could substantially
reduce the incentive for companies to put in place stringent anti-bribery
procedures. Thirdly, it would be inappropriate for an adequate
procedures defence to be applicable if gross negligence were the
test, given the high level of culpability that gross negligence
implies.
3. You stated that it may be helpful for guidance
to be prepared in relation to the proposed offences. In brief:
Before dealing with the specific questions,
I would like to deal with the question of guidance generally.
First, the Government and Parliament need to decide what the purpose
of any guidance would be.
For my part I think that guidance may fall into
two types. The first is compliance guidance for businesses to
assist them in ensuring that they have robust anti-bribery procedures
in place. This may include policies on corporate hospitality,
gifts and so forth, but would also include training and clear
lines of reporting and responsibility. I would anticipate the
Serious Fraud Office may be in a position to provide concrete
detail on what guidance might look like, but I understand that
such guidance is already produced by the private sector in relation
to the current corruption laws. The second type is legal guidance.
I would envisage that legal guidance would be issued centrally,
possibly by the Attorney General, and would provide guidance to
prosecutors as to their approach to prosecution of offences created
under the Act. I would argue that guidance on compliance would
sit apart from legal guidance to prosecutors.
(a) Should guidance be given an official status
(akin to approved guidance under the Money Laundering Regulations)?
The Money Laundering Regulations (MLR) are themselves
detailed and complex regulations arising from the requirements
of a number of statutes such as the Proceeds of Crime Act 2002 and
the Financial Services and Markets Act 2000. They require specific
processes and procedures to be followed, including record keeping
plus a regime of supervision, registration and enforcement.
There are two points to note. The first is that
the money laundering legislation is something of a different beast
from the draft Bribery Bill, setting out clear positive obligations
and requirements which by definition require a regulatory regime
to be put in place. It does not therefore provide an obvious model
for guidance on the draft Bribery Bill to follow.
The second point is that, despite the existence
of the MLR, other authorities have issued their own guidance.
The Office of Fair Trading (OFT) and the Financial Services Authority
(FSA) have issued guidance as supervisory authorities. Her Majesty's
Revenue and Customs (HMRC) has issued guidance. Professional and
membership organisations have also provided their own guidance
for the protection of their members. There is therefore no one
set of guidance that can be used as a template for guidance for
individuals and businesses seeking to avoid falling foul of the
provisions of a future Bribery Act.
The Committee made mention of the formal system
of guidance in existence in the USA in relation to the application
of the Foreign and Corrupt Practices Act (FCPA). The Foreign Corrupt
Practices Act Opinion Procedure permits the obtaining of opinions
of the Attorney General on conformity with the Department of Justice's
enforcement policy. Such an opinion raises a rebuttable presumption
that specified conduct is in accordance with relevant enforcement
policy.
The apparent advantage of such a system, for
business at least, is that companies can, in advance, take advice
from the prosecution authorities as to whether the actions they
propose to take would fall foul of the American corruption legislation,
and act accordingly on the advice received.
Although we do not claim to have any detailed
knowledge of this system, it would seem that the provision of
advice is essential in ensuring a high degree of certainty for
businesses. The provision of generic guidance on the application
of any given law cannot possibly cover every situation—the
circumstances of every case differ—and therefore without
the formal opinions process, businesses concerned as to whether
their activities may amount to criminal conduct would have no
choice but to take their own legal advice and act accordingly.
I would make the following comments about the
US system as it appears to operate. First, it would be a radical
departure to provide such assurances in this jurisdiction, certainly
in respect of behaviour that would, were it to be criminal, amount
to a very serious offence. Secondly, the creation of such advisory
procedures would raise questions as to who would provide the advice
and how it would be resourced—opinions provided under the
FCPA (available on the Department of Justice website) can be of
considerable length.
Dealing with the question, I have no strong
views on whether guidance on compliance should be official, or
whether it should be left to the private sector to prepare, though
the latter places the responsibility to ensure compliance firmly
in the hands of business. I would suggest that the development
of legal guidance for prosecutors would be a matter for the Attorney
General working with those prosecuting authorities under her superintendence.
This leads me on to the second question posed.
(b) Who should prepare guidance (ie Government,
prosecutors, trade associations, the private sector, or a combination)?
The question of who should be involved in the
preparation of guidance depends to a large extent on what the
guidance is intended to cover. As I have indicated, guidance to
businesses on how to set up anti-bribery systems or codes of practice
is not something on which prosecutors would normally advise.
However, working on the assumption that the
Committee is predominantly concerned with the question on guidance
as to how the legislation will be enforced, then I am firmly of
the view that any guidance on the prosecution of offences should
be prepared by the prosecution authorities under the superintendence
of the Attorney General—for any other department to issue
such guidance would not only be unrealistic for obvious practical
reasons but would also be contrary to the independence of the
prosecutor.
(c) In broad terms, what issues should be
covered by the guidance and in what level of detail?
Broadly speaking, we would anticipate that any
prosecution guidance would cover the legal elements of the offences,
the application of the Code for Crown Prosecutors and any relevant
processes and procedures. The level of detail is something on
that would have to be determined having regard to the purpose
to which the guidance would be put.
However, it is essential to recognise that no
guidance can cover every situation that may confront prosecutors
and necessarily has to be broad in nature. Given this, I am firmly
of the view that it is neither desirable nor possible for guidance
to indicate in advance whether or not a particular activity would
amount to an offence. The opinion procedure under the FCPA may
amount to a recognition of this reality—every case must
be considered on its own facts.
(d) What status should the protocols be given
(ie purely informal, capable of being used as evidence at court,
or binding)? If you consider that guidance should either be capable
of being used as evidence or binding, would you welcome an additional
clause being added to the draft Bill to make this clear?
The answer to this question really depends on
the nature of the guidance provided. I understand that under the
US FCPA opinion procedure, the decisions may be cited in court,
which is perhaps a natural corollary of such a system.
Official non-binding guidance on compliance
would be a matter that either party might be able to introduce
in evidence either to show compliance or otherwise, though I doubt
that (unless the American FCPA opinions procedure were adopted)
guidance issued by the prosecution authorities would be relevant
to the determination of criminal proceedings. However, parties
to criminal proceedings may wish to introduce, for example, codes
of practice, in order to show compliance or otherwise with accepted
industry standards. This may help inform a jury's deliberations
as to what, for example, the expectations of a reasonable person
might be.
(e) Are separate guides needed for different
sectors of industry or for small domestic firms in contrast to
large exporters?
In terms of prosecution policy and practice,
the essential principles applied by prosecutors will be the same
whatever the industry or size of business so I would not anticipate
separate guidance being necessary or appropriate.
4. The Director of the Serious Fraud Office
expressed reservations about prosecutors being asked to advise
businesses in relation to prospective transactions, except for
in some limited circumstances:
(a) What are those limited circumstances?
(b) Would it be acceptable for an independent
body or commission to provide advice of this kind?
I believe the Director of the Serious Fraud
Office is probably better placed to provide an informed answer
to this question. However in general terms I would make the following
points. First, as I have indicated earlier, the US Department
of Justice operates such a system under the FCPA, so there is
a common law precedent. I have already made comments in relation
to the novelty and practicality of creating such a system in England
and Wales. It may well be the case that there are other objections
or issues of which I am not aware. In answer to the second limb
of the question, while it is of course open to any company to
take the advice of their lawyers as to the applicability of the
criminal law in any given situation, I think there would be real
issues in relation to prosecutorial independence if an independent
commission or body (as opposed to the prosecutor) were set up
to provide advice along the lines of the Department of Justice
opinion procedure.
5. Does the draft Bill clearly and adequately
address the circumstances in which a legal person can be liable
for the actions of its subsidiaries, joint venture vehicles, or
syndicates (including under clause 5(1) which adopts a test of
whether services are being performed "on behalf of"
the company and "in connection with [the company's] business")?
GENERAL OFFENCES
A foreign subsidiary of a UK company or part
of a joint corporate venture registered outside the UK ("foreign
body") cannot commit general offences of bribery outside
EWNI under the draft bill. It is not a person having a "close
connection" with the UK—as required by Clause 7(2)(c)
and as defined in Clause 7(4)(h)—even if acting for or on
behalf of a UK company.
FOREIGN PUBLIC
OFFICIAL
A foreign body cannot be guilty of bribing a
foreign public official (FPO) outside EWNI. It does not have a
close connection with the UK by virtue of Clause 7(4). It can,
however, be guilty of bribing an FPO within EWNI by virtue of
Clause 7(1).
CORPORATE LIABILITY
A foreign body can be guilty of a general offence
committed within EWNI but the identification doctrine makes a
conviction extremely unlikely. Clause 5 seeks to remedy this
difficulty.
A foreign body cannot, however, be guilty of
an offence under Clause 5 for an act of bribery occurring
either inside or outside EWNI, unless it carries on a business
or part of a business in EWNI as required by Clauses 5(1) and
5(7).
It is not clear on the face of the draft bill
what "carries on a business" means. We wonder whether
a foreign body without a place of business in EWNI would be a
"relevant commercial organisation".
Furthermore a UK registered body cannot be guilty
of an offence under Clause 5 for bribery by a foreign body
outside EWNI . The bribe would not be an offence under Clauses
1, 2 or 4 as required by Clause 5(2). The foreign body
therefore does not have a close connection with the UK as required
by Clause 7(2)(c). This includes companies incorporated in the
Crown Dependencies or Overseas Territories (CDOT).
COMMENT
The current draft leads to potential anomalies.
The definition of "relevant commercial organisation"
excludes bodies incorporated in the CDOT that do not carry on
a business in EWNI; the definition of "close connection"
excludes both these and joint venture partners and foreign subsidiaries
of UK companies. This provides loopholes that could be exploited
by the unscrupulous.
The test of services performed "for or
on behalf of" is one that I expect to work effectively as
it is clear and non-technical.
6. Should the jurisdictional reach of clauses
1 to 5 be extended to cover companies incorporated in
Overseas Territories, Crown Dependencies and (subject to your
views outlined above) subsidiaries of UK incorporated companies?
This is essentially a policy decision for the
Government and Parliament and I would not wish to comment, beyond
setting out some practical consequences of the propose legislation
as it is currently drafted.
Obviously a consequence of the jurisdictional
limitation is that we will be unable to prosecute some offences
of bribery that some might consider ought properly to be prosecuted,
or be capable of prosecution, in England and Wales. Clause 7 provides
for extra-territorial jurisdiction both in respect of individuals
and corporate bodies where the offence is committed abroad. However,
this is limited by the requirement that the person has a close
connection with England and Wales. This creates some odd situations.
For example, if the act or omission takes place in the Channel
Islands, the company may be prosecuted in England and Wales if
it is incorporated in the United Kingdom, but is beyond the reach
of the British authorities if it is not. Where the company is
a foreign incorporated subsidiary of a UK company this may, in
some cases, be something of an artificial distinction.
June 2009
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