Global focus on bribery remains on the individual

The government has announced it will
not proceed with the proposed extension of the corporate criminal offence
of failure to prevent bribery under section 7 of the Bribery Act 2010 (the section 7 offence) to encompass a wider range of economic crime.
It has also shelved its review
of whether rules on corporate criminal liability should be widened to make it easier
to convict companies who commit wrongdoing.

The section 7 offence is a strict liability offence which was introduced to counter criticism from the Organisation for Economic Co-operation and Development about the identification principle (the need to attribute guilty knowledge to the directing mind of a company) in English law. Companies will not be prosecuted if they can demonstrate they had adequate procedures in place to prevent bribery. Although there have been no prosecutions under section 7 as yet, the Crown Office in Scotland has very recently resolved its first section 7 case through a civil recovery order.

The government's move, announced by Andrew Selous MP in a written response to a parliamentary question, will
be a blow to David Green.
The director of the Serious Fraud Office (SFO), who has frequently cited the inadequacy of the law on corporate criminal liability and believes the identification principle is too high a bar for prosecutors to successfully attribute criminal culpability to a company.

Wider criminal range

It was Green's suggestion in 2012 that the section 7 offence should be extended to encompass a wider range of criminality.
This proposal appeared to have gained support and, in December 2014, the government published its first anti-corruption plan in which it acknowledged there were likely to be other forms of economic crime beyond bribery for which it is appropriate to ensure that senior corporate executives were sufficiently accountable. The Ministry of Justice was tasked with examining both the case for a new offence of a corporate failure to prevent economic crime
and the rules on establishing corporate criminal liability more widely. The introduction of this new offence was included in the Conservative party manifesto. Businesses in the UK were therefore bracing themselves
for stricter rules on corporate criminal liability and so the change of heart came as a surprise to many.

According to Selous, the rationale behind the reversal
is twofold. First, the UK already has corporate criminal liability and commercial organisations can be and are prosecuted for wrongdoing; and second, there have been no prosecutions under the section 7 offence
with little evidence of corporate economic wrongdoing going unpunished.

Yet the government's
change of tack is perhaps not
as unexpected as it first appears. Since the introduction of the section 7 offence, there have been frequent complaints about its damaging effect on the UK economy because it deters overseas businesses from locating here. George Osborne has also made it clear that the age of banker bashing must come to an end, realigning himself with the financial services industry and asking them to become part of the solution rather than the problem. This was reinforced by his removal of Martin Wheatley
as chief executive of the Financial Conduct Authority (FCA).
This reversal by the government appears to be another aspect of their new approach to businesses.

Low prosecution chances

The news will be welcomed by companies but not prosecutors. Corporate convictions will remain a rarity and companies will also be less likely to enter into deferred prosecution agreements (DPAs) if they consider that the chances of a successful prosecution are low. DPAs were introduced in February 2014 but none have been agreed as yet.

However, company executives should not draw much comfort from this. Individuals are firmly in the spotlight, both in the UK and globally. The SFO and FCA will continue to use the current model of corporate criminal liability to try to pursue companies, which means
that senior executives will
be targeted to identify the directing mind of a company.

Under the DPA regime, companies are expected to incriminate individuals to deter prosecutors from taking action against the companies themselves and, if a company does agree a DPA, the SFO has made it plain that it will still prosecute culpable individuals. The FCA and Prudential Regulation Authority have introduced the Senior Managers Regime, due to come into force from March next year and under which senior individuals will be accountable for any wrongdoing that falls within their areas of responsibility. The publication of the Yates memo in the US earlier this month is another reminder that the global focus is firmly on the individual rather than the corporate. While it remains difficult to prosecute companies, it will become easier to hold individuals to account. SJ