Mat Tromme, Project Lead & Senior Research Fellow at the Bingham Centre for the Rule of Law, contribute today's guest post, which is based on discussions at a recent Bingham Center-Duke Law School FCPA Roundtable:
In the latest sign that the UK’s Serious Fraud Office (SFO) it is flexing its prosecutorial muscle, the SFO recently opened a case against British American Tobacco, and in June convicted four senior executives from Barclays Bank for conspiracy to commit fraud. This adds to the SFO’s growing list of "successes," such as cases against the ICBC Standard Bank, Tesco, and Rolls Royce. It also raises some important questions (which aren't new), on the one hand about the means used to prosecute bribery, and on the other about the extent to which ongoing economic considerations such as Brexit might put an end to what appears to be good momentum.
Despite the SFO's "wins," some critics are disappointed with the Rolls Royce deferred prosecution agreement (DPA) and questioned whether the SFO is sufficiently aggressive in prosecuting corruption. This view follows concerns that the Rolls Royce case failed to meet the interests of justice and illustrates how big companies are let off the hook where the prosecution of bribery is concerned. Such concerns echo criticisms that DPAs in the United States, which pioneered their use, undermine the rule of law by letting individuals avoid prosecution, and by allowing this area of law to develop outside of the public eye and with very little judicial oversight. This leaves the lasting impression of a two-tiered criminal system by promoting a “too big to jail” culture. DPAs, it is also been argued, undermine both the deterrent effect of the law and incentives to self-report.
On its face, the UK DPA model is more attuned to these risks than the US approach. The UK provides more guidance on the use of DPAs through a published “Code of Practice” (which, among other things, instructs prosecutors to apply an evidentiary and public interest test when deciding whether a DPA is appropriate). Although the U.S. has also published and FCPA Resource Guide, and all DPAs and other settlements are published, US prosecutors can secure DPAs with little or no judicial involvement. In contrast, UK law requires meaningful judicial review of DPAs. First, after negotiations with the defendant have commenced – but before any DPA has been finalized –the prosecutor must seek a declaration from the Crown Court, after an in camera hearing, approving the DPA process in principle. Second, after a defendant has accepted the terms of a draft DPA, the prosecutor must again apply to the Crown Court for final approval, following another hearing. While that hearing may be private, if the court decides to approve the DPA, that decision and reasons for it must be handed down in open court. At both of these stages the court must assess whether a DPA is in the “interests of justice, and if the terms are fair, reasonable and proportionate.” If the DPA is approved, then the prosecutor is obliged to publish the DPA, the initial judicial declaration, the court’s reasons for granting it and the court’s final decision to approve it.
Recent developments – particularly the DPA in the Rolls Royce case – suggests that in practice, these requirements may not always be strictly followed. With respect to the Rolls Royce case, critics contend that the court, instead of fulfilling its statutory obligation to conduct meaningful review, merely rubber-stamped the deal. According to those critics, this deal was not “just or fair” since it failed to focus on the victims and since no prosecution was brought forward for such an egregious case of corruption (here and here). The main concern, with respect to both the SFO and the judiciary, is that they may prove too willing to place economic considerations above the interests of justice (which raises questions about how well both the SFO and the judiciary are agents of the statutes). To wit: In his final judgment approving the Rolls Royce DPA, Judge Leveson argued that although “national economic interest is irrelevant” (as it must be, pursuant to Article 5 of the OECD Convention), prosecuting Rolls Royce would unfavorably affect the financial well-being of the company, its employees, and more generally Britain’s defence industry. In his view, it was not in the public interest to prosecute, and settlement as part of a DPA was the better option.
Although it is too early to tell whether the Rolls Royce case is a harbinger of things to come, it is legitimate to wonder, in light of Judge Levenson's troubling reasoning, how ”just and fair” the prosecution of corruption in the UK will be in the future. After all, this is not the first time that economic considerations seem to have – arguably improperly – influenced corporate corruption prosecutions. The SFO, for example, was accused of failing to act independently when it dropped charges in the politically sensitive BAE case—although in the SFO’s defense, the House of Lords upheld as lawful the decision to discontinue the criminal investigation. More generally, there have been concerns in the past that the SFO is subject to too much political influence. And more to the point, the economic considerations that seem to have influenced Judge Leveson’s judgment in the Rolls Royce case are likely to take on greater salience in light of Brexit, as the UK feels greater pressure to secure new trade deals. Indeed, concerns about “stifling” UK businesses at a critical time are likely to be more acute.
It is not impossible that the SFO will be adept at fending off political pressures. But if investigators, judges, and prosecutors give in to the pressure to take economic and financial considerations into account when prosecuting corruption, this would undermine the rule of law, of which an independent prosecutorial process is a central tenet.