The OECD recently released its ”Phase 3 Report on Implementing the OECD Anti-Bribery Convention in the United Kingdom” (see here for the report). As stated by the OECD (here) “the purpose of Phase 3 is to maintain an up-to-date assessment of the structures put in place by Parties to the OECD Anti-Bribery Convention to enforce the laws and rules implementing the Convention and the 2009 Recommendations.”
This post provides a brief overview of certain issues in the report.
In the report, the U.K. was generally commended for the increase in enforcement of its foreign bribery laws in recent years. In addition, the report notes that, as of January 31, 2012, the SFO indicated “it had 11 active bribery / corruption cases and a further 18 cases under consideration.”
The U.K. received high marks “for publishing guidance to commercial organizations which led to the entry into force of the Bribery Act”(see here for the guidance). With the U.S. eagerly anticipating DOJ guidance as to the FCPA and with some viewing the upcoming guidance as a panacea for many of the issues in this new era of FCPA enforcement, it is noteworthy to observe that the U.K. report states that guidance does not have the force of law, is not binding on prosecutors or courts, and that judges consulted during the OECD visit stated that the guidance was not issued by Parliament and is thus of comparable authority to an academic text.
In the report, the U.K. also received high marks for its ”recent significant increase in foreign bribery enforcement actions” and was urged to “sustain these efforts.” However, the report notes that the lead examiners were “concerned over certain aspects of the U.K.’s foreign bribery enforcement framework.”
For instance, the report is critical as to the transparency of enforcement. The report states “in some cases it is unclear how the amount of the penalties agreed between the SFO and the defendant was arrived at” both in terms of criminal actions and civil recovery orders under the Proceeds of Crime Act 2002.
As to the latter, the report states as follows. ”Unlike a criminal plea agreement, there is no court hearing. A judge does not assess the factual basis of the order, or determine the amount that the defendant should pay.” The report further states that “the disadvantage of reduced judicial scrutiny is that there is even less transparency with consent civil recovery orders than cases resolved through criminal plea agreements.” The report notes that in response, the SFO said that “it is unable to disclose more information in some cases because the settlement agreement includes confidentiality clauses.” According to the report, “the SFO further argued that civil settlements ‘are by their very nature private disputes between the parties and the information disclosed by one side to the other is confidential.’” As to this argument, the report notes as follows. “However this overlooks the fact that the conduct underlying these consent civil recovery orders is foreign bribery and related misconduct. These are therefore not private disputes but criminal matters about which the public has an interest and a right to be fully informed.” In short, the report states as follows. “The lead examiners are extremely concerned that many key details about the SFO’s civil settlements of foreign bribery cases remain private. [...] The settlement process is opaque, lacks accountability, and thus fails to instill public and judicial confidence.”
Another notable aspect of the OECD Phase 3 report is in reference to the SFO’s recent demonstrated committment, particularly leading up to the Bribery Act going live in July 2011, of active engagement with the business community on risk management and prevention. The report references prior SFO statements that its ”emphasis is on helping corporations to develop [a modern corporate] culture and to use enforcement actions only where this is necessary and proportionate.” The report further noted that in the U.K.’s questionnaire responses that the priority for small and medium sized enterprises is not enforcement, but raising awareness of what is needed to build an anti-corruption corporate culture.” As to this approach, the report states that ”the SFO’s policy on giving advice to rather than prosecuting companies is consistent with prioritizing corruption prevention over enforcement.” The report further states as follows. “The lead examiners consider that preventing corruption and promoting an anti-corruption corporate culture are equally important as criminal investigations and prosecutions.”
The U.K. Phase 3 report has much in common with the October 2010 U.S. Phase 3 report (see here for the prior post). In both reports, the countries are loudly praised for the high level of enforcement (as in the case of the U.S.) or the increase in enforcement (as in the case of the U.K.). Yet both reports also quietly criticize and question many of the policies which yield the high level or increased level of enforcement and a common thread in both reports is the general lack of transparency, judicial scrutiny, and accountability in many enforcement approaches.