The first negotiated settlement of a corporate bribery investigation under the UK Bribery Act involved a deferred prosecution agreement between the Serious Fraud Office and ICBC Standard Bank. That case is a turning point in the enforcement history of the UK Bribery Act and, at a global level, it fuels the debate about the use of settlements to resolve foreign bribery charges.
The United States has been using negotiated settlements for years — involving DPAs and non prosecution agreements. Other OECD countries have been reluctant to take the plunge. Yet negotiated corporate settlements are the most efficient way to resolve foreign bribery offenses, which typically require years and colossal resources to prosecute through the courts. Proponents of negotiated settlements also argue that they increase enforcement and therefore boost compliance efforts in the business community.
So why aren’t negotiated settlements of overseas bribery cases more common and universal?
In some civil law countries like France, the use of settlements to resolve criminal charges is inconsistent with the foundations of the penal system. In other countries, American-style pre-trial agreements are criticized for lacking transparency as to how financial penalties are determined, and for the weak judicial review the settlements receive.
A recent OECD report advocates that “settlement procedures should respect the principles of due process, transparency and consistency. For this reason, the outcome of the settlement should be made public, …. especially the reasons why the settlement was appropriate, the basic facts of the case, the legal or natural persons sanctioned, the sanctions agreed, and the terms of the agreement.”
In the UK, the Standard Bank settlement provides guidance on what will be the main features of DPAs in the UK, and how they will differ from US settlements.
A comparison of the two systems shows that settlements in the UK are subject to stricter, more formal rules, and the review power of the court is greater. For a DPA to be approved in the UK, the court must find that it is fair, reasonable and proportionate. And contrary to the U.S., prosecutors in the UK have to follow strict guidelines to determine the amount of any fine imposed under the DPA. Finally, any amendment of the agreement will require court approval, and only the court (not the prosecution) can decide if a DPA has been breached.
The UK’s use of DPAs to resolve corporate bribery investigations appears to meet the features advocated by the OECD. It could therefore be a better model for countries that are considering using settlements. In addition to being an inspiration for other countries, the use of DPAs in the UK could bring some balance to the United States’ predominance when it comes to enforcement of foreign bribery laws.
While the jurisdiction of the UK Serious Fraud Office is more limited than the SEC’s, the use of DPAs in the UK could represent a big change in the enforcement landscape and bring about more cooperation among prosecutors in various jurisdictions.
ICBC Standard Bank’s settlement with the SFO was also the first enforcement action with allegations under Section 7 of the UK Bribery Act, which makes a commercial organization liable if a person associated with it pays a bribe to retain business or an advantage in the conduct of business for that organization. The settlement also provides important guidance on the key features of this offense and the associated defense of showing that the organization had adequate procedures in place to prevent the person from bribing.
Elisabeth Danon is a legal analyst at the World Bank, where she specializes in public procurement. She previously worked at the Anti-corruption Division of the OECD. She can be contacted here.