8 May 2018
Since the Bribery Act 2010 brought into force the corporate offence of failing to prevent bribery in 2012 (the 'Offence'), the courts have seen a number of companies convicted of, or entering into deferred prosecution agreements ('DPAs') in relation to, the Offence. However, late last year saw the first ever contested trial, in which Skansen Interiors Limited (the 'Company') pleaded not guilty to the Offence, and ran the much debated (but previously untested) defence of "adequate procedures". The defence hinges on the company demonstrating that, at the time that the bribery took place, it had in place adequate procedures to prevent bribery being committed on its behalf. The jury found against the Company, and convicted it of the Offence. For various reasons, the company was not fined, and the conviction is already spent, but the case should concern corporates for a number of reasons.
Leaving aside the debate sparked by the question "if a bribery offence has been committed, can the procedures have ever been adequate in the first place?", the case raises serious questions about the efficacy of the "adequate procedures" model as a defence.
In this case, the procedures in place at the time of the Offence were limited, but the Company itself was relatively small (comprising roughly 30 employees), and in fact managed to prevent the payment by the perpetrators (who included the Company's managing director and commercial director) of the final tranche of the agreed bribe. In circumstances where the Company's procedures actually prevented payment of part of the bribe, a finding by the jury that those procedures were not adequate might be surprising to some. Granted, the Company did not have an explicit anti-bribery policy in place, and there was no individual appointed responsible for dealing with concerns around bribery, but government guidance acknowledges that a company's procedures should be proportionate to the company's size, complexity and overall risk. The issue is that the question of whether or not a company's procedures are adequate is a question of fact for the jury, which will often comprise individuals with no real knowledge or understanding of corporate governance and who may have unrealistic expectations of what constitutes a reasonable and proportionate anti-bribery regime.
On balance, in this case it could be argued that the procedures brought into place were triggered partly in response to the bribes paid, which could have undermined the force of the argument that the defence applied. However, the case underlines the uncertainty a company faces in running the adequate procedures defence, and it reinforces the concern of many corporates and defence lawyers that the "adequate procedures" defence pays lip service to a defence which, in reality, will rarely if ever be successfully run. It also underlines the point missed by many corporates in our experience, which is that, just because you have a policy in place, that is not going to help you if you are not implementing, updating and properly enforcing your procedures in accordance with your specific level of risk.
The case raises a further question as to what it will take for prosecutors to consider entering into a DPA with a corporate, where the costs of prosecuting are less prohibitive than in large-scale complex investigations such as those conducted by the Serious Fraud Office. In this case, the Company reported itself to the police, voluntarily provided copies of company documents, and even provided copies of confidential legal reports and legal advice. Notwithstanding this, the Crown Prosecution Service decided that a DPA was not appropriate because the Company was dormant, in spite of the Company's full cooperation with the investigation, and the fact that it had self-reported. The Serious Fraud Office and the Crown Prosecution Service have together issued a Code Of Practice for DPAs, which clearly states that cooperation with the investigation by the company should be a factor in favour of agreeing a DPA.
The question of whether or not the Company's procedures in this case were adequate is now a moot point – the jury in the case convicted. However, corporates – especially smaller companies who think that they do not need to do much to meet the Bribery Act requirements – should treat this case as a warning that the mere fact of having a compliance procedure in place is not necessarily going to avail an organisation of the adequate procedures defence. This will be concerning, not only to companies at risk under the Bribery Act , but also to corporates facing exposure as a result of the coming into force in September last year of the new corporate offences of failure to prevent the facilitation of tax evasion. Although the consequences of the conviction for the Company in this case were small, that will not necessarily be the case for active, profitable partnerships and companies which are prosecuted for "failure to prevent" offences. This case should serve as a stark warning: if you have not got your anti-bribery and anti-tax evasion procedures in place, or if you do but you are not properly enforcing them, you could be in serious trouble.