The Organisation for Economic Co-operation & Development (OECD) last week published a report which assessed the effectiveness of UK and Scottish law enforcement agencies in detecting and prosecuting bribery and corruption of foreign public officials.
Of note was a recommendation that Scotland introduce US-style deferred prosecution agreements (DPAs) to deal with corporate offending.
It seems likely that DPAs in some form will be introduced into Scotland
The OECD concluded that the UK was a major enforcer of overseas public sector bribery but that the total number of enforcement cases relative to the UK economy remains low.
Its report highlighted Scotland’s oil and gas sector, which operates in parts of the world where there is a high risk of bribes being paid to public officials, and therefore identified the need for effective bribery enforcement in Scotland. The report recommended that Scotland should introduce US-style corporate DPAs, which have recently been introduced into England and Wales.
Scotland’s Crown Office & Procurator Fiscal Service (COPFS) currently has a civil settlement regime which is designed to encourage companies to self-police and self-report failures to prevent bribery for which companies are criminally liable under the Bribery Act 2010. Under that regime enforcement action has been taken against companies which have self-reported failings to prevent potential bribery and those cases have resulted in the recovery of significant sums of money.
Under Scotland’s civil settlement regime, a company that self-reports to COPFS may enter into an agreement to pay over any profit earned from a bribe and to remediate, in return for COPFS not prosecuting the company for any bribery offences. DPAs in England are similar but a DPA includes a penalty which may be up to four times the profit earned from a contract that is tainted by bribery, the entering into of the agreement is overseen by a judge and the case details are published.
The OECD considers that foreign bribery should attract significant penalties and that Scotland’s regime is potentially too lenient. It also prefers the more transparent nature of DPAs and the fact that there is judicial oversight.
The Scottish Government and COPFS will need to report back to the OECD in two years’ time on the steps taken to implement its recommendation. It therefore seems likely that DPAs in some form will be introduced into Scotland.
The English or US model is unlikely to be right for Scotland because we have a far clearer separation between the role of the prosecutor in exercising prosecutorial discretion and judicial responsibility for sentencing. Scottish judges may not welcome DPAs as it conflates the role of prosecutor and sentencer. Care is also needed not to undermine the substantial success that COPFS has achieved in encouraging self-reports in Scotland.
At the heart of the OECD’s recommendation there is an inconsistency – it supports a regime to encourage companies to self-report but it also wishes to make the penalties in Scotland for resolving cases more severe. As the OECD also point sout, the real mischief is the UK-wide failure to detect most cases of overseas bribery. Over half of the cases brought are a result of corporate self-reports. That is disproportionately high and it leads to more ethical companies being subject to enforcement action.
While a kilted form of DPA may now be inevitable, if the scourge of international bribery is to be tackled, increasing the risk of detection should be the real priority. That can only be achieved through funding specialist investigators and prosecutors, and by greater inter-agency co-operation within the UK and internationally.
While DPAs are under consideration for Scotland, the civil settlement regime remains open. Perhaps more companies will take the opportunity to clean out any skeletons before the enforcement regime hardens?
• Tom Stocker is a partner and specialist in corporate crime and investigations at Pinsent Masons