The UK’s Serious Fraud Office is gradually lengthening the role of prosecutions for overseas corruption with an important new prosecution, and clear indications that more are in the pipeline.
The new case involves Smith & Ouzman, a printing company, and four individuals connected with it. The company and some of its officers are accused of complicity in bribery of foreign officials to the tune of more than £400,000 (about US$640,000). At around the same time as the case came to court, the Director of the SFO gave a clear warning to businesses about the future enforcement of anti-corruption law. The speech can be seen here. In essence, the Director re-iterates the more robust stance of the agency, anticipates the use of deferred prosecution agreements, and argues for a more expansive theory of corporate criminal liability. He also makes clear that several more big cases are in prospect.
The SFO is still working through a caseload of corruption cases it began developing four to five years ago, many of which the Bribery Act came too late for. So the Smith & Ouzman charges are under the UK’s Prevention of Corruption Act 1906.
More interesting again is the fact that the company is a defendant alongside individuals. Under current English law, a company can only commit a crime requiring mens rea (i.e., a mental state such as intent) if an individual with the required mental state, such as a director or senior employee, can be identified as the controlling mind of the company at the relevant time. This is known as the identification principle and it has been controversial for many years. Critics say that the principle is at least partly responsible for the rarity with which UK companies have been prosecuted for corruption or other serious crimes.
Section 7 of the Bribery Act was created specifically to avoid the identification principle. It created a strict liability offence for corporates, the offence of failure to prevent bribery. Where an employee has paid a bribe in order to win business, the only defence a corporate will have is that it had adequate anti-bribery procedures in place.
There is no doubt that section 7 will make corporate liability for bribery more likely, mostly through early guilty pleas and/or deferred prosecution agreements. But it is interesting that, with a little more external pressure and a little more self-confidence, the SFO has felt able to bring corporate prosecutions unassisted by section 7. Indeed, this is not the first such case: Mabey & Johnson Ltd was convicted of overseas bribery contrary to the 1906 legislation back in 2009, as were certain of its directors.
These cases reinforce a personal view of the author: that the previous UK corruption laws were not as hopeless as some critics had argued, and that the causes of under-enforcement were to be found in a lack of political or institutional will, rather than in inherent deficiencies in the legislation. This is not to say that the Bribery Act was unimportant. The Act can be seen as a catalyst of much more robust enforcement efforts. The Director of the SFO himself seems to want to extend the principle behind section 7 to all corporate crime, thus relegating the identification principle to history.
It is ironic that one of the apparent effects of the Bribery Act seems to have emboldened prosecutors to be more aggressive in enforcing those laws that it replaced. Given the greater potency of the Act, it is safe to predict that future cases will be larger and more far-reaching than those we have seen up to now. A lot more is to come.