Background
Bribery Act
Decision
Cooperation with authorities
Comment
In R v Skansen Interiors Limited – the first contested case of its kind since the Bribery Act 2010 came into force – Skansen was found guilty under Section 7 of the act for failing to prevent bribery after its defence of having adequate procedures in place to prevent bribery was unsuccessful.
Skansen, now a dormant company, was a refurbishment contractor with one open-plan office and 30 employees. In 2013 it won a contract worth around £6 million for two office refurbishments after it was invited to tender for the project by a contractor – DTZ Debenham Tie Leung.
In January 2004 Skansen's CEO, Mr Pigden-Bennett, discovered that the former CEO (Mr Banks) had bribed a project manager at DTZ (Mr Deakin) in return for information on the tender process for the £6 million contract. This came to light after Pigden-Bennett became suspicious of Banks's explanation for the payment of £10,000 to a company and the need to remit a further £29,000 to the same company. An internal investigation revealed that the payments were bribes made to a company, GDS, set up on Deakin's behalf. Mr Banks had taken steps to conceal the true nature of the payments by arranging for GDS to submit false invoices to Skansen for services that were never provided. These invoices were approved by senior management and, when the cost code was questioned, were allocated to an internal cost code.
In parallel with the internal investigation, Pigden-Bennett put in place an anti-bribery and corruption policy, which Banks signed. The proposed £29,000 payment to GDS was stopped and Banks and another commercial director, Mr Smith, were dismissed. Skansen cooperated with the authorities from the outset; the authorities had only learned of the bribes because Skansen had self-reported. After concluding the internal investigation, the company submitted a suspicious activity report to the National Crime Agency and reported the incident to Action Fraud. Skansen then voluntarily provided company documents – including privileged material – to the authorities during their investigation.
Skansen was formally charged under Section 7 of the Bribery Act in March 2017 and Banks and Deakin were charged under Sections 1 and 2 of the act, respectively.
Under Section 7 of the Bribery Act, a company commits a bribery offence if a person associated with the company bribes (under Sections 1, 2 or 6) another person with the intention of obtaining or retaining business, or a business advantage for the company. If found guilty, the company can be ordered to pay an unlimited fine (calculated with regard to harm and culpability factors).
It is no defence for a company to argue that it was unaware of the conduct. The only available defence is for the company to show, on the balance of probabilities, that it has in place adequate procedures to prevent bribery (the 'adequate procedures' defence). Ministry of Justice guidance suggests that the exact policies and procedures a company should have in place will vary depending on the company, and that a business should have in mind the following six principles when formulating anti-bribery policies and procedures:
- Proportionality (how big is the company and what type of business does it carry out?);
- Top-level commitment (is senior management committed to preventing bribery?);
- Risk assessment (what risks does the business face?);
- Due diligence (does the business know with whom it is dealing?); and
- Monitoring and review (are there periodic reviews of risks and policies to ensure that they are up to date?).(1)
The Crown Prosecution Service (CPS) argued that it was prosecuting Skansen – despite the company having by then become dormant and having no assets – as it was in the public interest and would send a message to others.
Skansen attempted to rely on the 'adequate procedures' defence. It argued that when the offences were committed, it had anti-bribery procedures in place which were appropriate for a business of its small size and which did not operate in multiple cities or jurisdictions. These included:
- clauses in the contracts with DTZ Debenham Tie Leung (the clauses prohibited bribery and provided that it was a termination event if bribery occurred);
- multiple approval levels for authorising payments; and
- policies requiring employees to deal with third parties in an ethical and honest manner (although none of these was bribery-specific).
However, the CPS argued that Skansen had failed to:
- implement any procedures in light of the Bribery Act's coming into force;
- record evidence of a compliance culture at the time when the offences took place (eg, training and implementing a system for reporting issues);
- appoint a compliance officer; and
- communicate policies to staff.
The jury returned a guilty verdict, finding that Skansen did not have adequate procedures in place. As Skansen lacked financial resources, the court gave an absolute discharge.
Companies are strongly encouraged to cooperate with authorities when they discover that bribery offences have been committed. For example, for the Serious Fraud Office (SFO) to invite a company to enter into deferred prosecution agreement negotiations (whereby the possibility of avoiding conviction by agreeing to make full reparations for criminal behaviour is discussed), the SFO has stated that there must be full cooperation with its investigations – a high threshold to meet. It has also emphasised the importance of involving the authorities at an early stage.
However, the Skansen judgment has resulted in greater uncertainty as to whether companies should cooperate with authorities, and what constitutes 'adequate procedures', particularly for smaller companies. This may cause companies to be wary of self-reporting in the future.
Companies must remember that cooperation is not a silver bullet; the authorities will ultimately consider whether it is in the public interest to prosecute an offence. A speech by the SFO's joint head of bribery and corruption, Camilla de Silva, at ABC Minds Financial Services conference on March 15 2018 illustrates just how high the bar is for those relying on the 'adequate procedures' defence:
"[s]ince the passing of [the Bribery Act 2010] the SFO have yet to encounter a corporate with sufficient confidence in its compliance programme to persuade us of its adequacy or run a section 7 defence argument in court."(2)
For further guidance on 'adequate procedures', the SFO has suggested that companies consider:
- comments in previous deferred prosecution agreements (eg, SFO v ICBC SB PLC and SFO v Rolls Royce PLC);
- the Organisation for Economic Cooperation and Development's case studies; and
- guidance by the secretary of state in relation to Section 9 of the Bribery Act.(3)
It may also be helpful for companies to consider the CPS's arguments against the adequacy of Skansen's procedures, which provide an indication of what could be regarded as inadequate.
Companies face the challenge of weighing up the costs of implementing a range of anti-bribery and corruption policies and procedures versus the cost of facing a fine under Section 7 of the Bribery Act if an offence is committed. Given that there is no one-size-fits-all rule for what constitutes adequate procedures, it will be difficult for a company to assess whether it falls on the right side of the line. However, all companies to whom the Bribery Act applies – no matter their size – should have some policies and procedures in place to prevent bribery. It will not be sufficient to rely simply on employees conducting themselves ethically and honestly, or on non-specific policies. In light of the Skansen decision, it would be prudent for companies to revisit their compliance policies.
For further information on this topic please contact Geraldine Elliott or Laura Evans at RPC by telephone (+44 20 3060 6000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.
Endnotes
(1) See www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf.
(2) See www.sfo.gov.uk/2018/03/16/camilla-de-silva-at-abc-minds-financial-services/.
(3) See www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf and www.oecd.org/corruption/anti-bribery/The-Detection-of-Foreign-Bribery.pdf.
