The problems of the EU Courts
Quis custodiet ipsos custodes? = ‘Who guards the guardians?’…. Do we tell a ‘noble lie’ – as Plato argued – and trust those in power, to guard themselves against themselves?
the OECD has undertaken a peer review of DG-Competition, and found that its multiple roles raise ‘serious doubts’ about the absence of checks and balances….why?: the DG acts as prosecutor, judge, jury and executioner.
Is this procedure compliant with the right to a fair hearing ?.
CFI Judge revealed, ‘cases are decided on: 20 percent fact, 20 percent law and 60 percent policy
The CFI (GC) reviews EC decisions against a ‘manifest error of assessment’ standard…. This very limited standard of review is a deferential bow to the EC…
The UK Bribery Act
The UK is generally deemed to have an advanced legal framework for whistleblower protection (European Parliament 2017). Protection of whistleblowers is enshrined in the Public Interest Disclosure Act (PIDA) of 1998. The act protects employees from detrimental treatment for disclosing violations. PIDA contains important elements to protect whistleblowers such as:
- covering most UK workers except armed forces and national security
- defining wrongdoing broadly
- protecting concerns raised internally and externally
- compensating for dismissal and detrimentshort of dismissalAmendments to the law were made in 2013 to replace a “good faith test” with a “public interest test”, which removes scrutiny from the whistleblower.
The OECD raised the concern that expatriate employees of UK companies were often not covered, and civil society has suggested that more should be done to require companies to set up internal reporting mechanisms.
According to the SFO, the number of bona fide reports made by whistleblowers has increased in recent years, which is attributed to the launch of a new website and reporting mechanism, Make a Report, in 2016, which streamlined reports and allows for anonymous reporting (OECD 2017a).
The OECD Working Group has commended the SFO for efforts to promote and raise awareness to the importance of whistleblowers as a source of information, for example, through the publication of an Annual Report on Whistleblowing Disclosures …. However, while awareness of legal protection for whistleblowers has improved, it remains low
The Bribery Act covers four core offences: active bribery, passive bribery, bribing a foreign public official and failure of commercial organisations to prevent bribery
The law applies if any part of the relevant act or omission pertaining to the offence took place in the UK or if the person guilty of the offence has a close connection to the UK (Article 12). Under the UK Bribery Act, the general offence of bribery, given or received, makes no distinction between public or private sector representatives . Legal entities can be found guilty of an offence under the Bribery Act if a person associated with the company commits bribery to the benefit of the company, or if a company failed to prevent bribery (Article 7).
The Bribery Act provides for a legal defence if the company can prove that it had adequate procedures in place (see below). According to Transparency International, the Bribery Act “continues to provide a sound legal basis for strengthened the status for whistleblowers by introducing penalties for obstructing a whistleblowing alert and additional protections for whistleblowers, such as measures to protect their identity… Finally, trading in influence in connection with foreign public officials was criminalised and the law mandated the creation of a register for lobbyists
Sanctions and enforcement
Sentencing guidelines were published in 2014 regarding the fines applicable to legal persons. A fine is calculated by reference to multipliers of between 20 and 400 of a figure representing the financial “harm” caused by the offence. Higher levels of “culpability”, for example, through systematic or sustained wrongdoing, lead to the application of higher “multiplier” figures (Baker McKenzie 2017b). Additional sanctions for legal persons may include confiscation, debarment and appointment of an external monitor
The UK was commended for its increased enforcement and improved detection capabilities by the OECD Working Group in its latest full report. However, the follow-up to the report from 2019 notes that the number of enforcements in relation to the size of the UK economy is still relatively low (OECD 2019a).
Reforms and newer measures
Deferred prosecution agreements (DPAs) were introduced in 2014 (see below), which have supported and increased enforcement efforts.
The UK also improved its whistleblowing channels and was commended for the exemplary disclosure by the Serious Fraud Office (SFO) of concluded foreign bribery cases. The SFO further publicises statistics on opened investigations, cases commenced and cases concluded through its annual report
firms/pbs, have a duty to incorporate and implement:
i) corporate (criminal) liability;
ii) non-trial resolutions;
iii) regulations regarding compliance programmes;
iv) regulations regarding self-reporting and cooperation;
v) whistleblower protection;
vi) external reporting.
Corporate liability
if the bribed/briber (individual)’s goal is to benefit their employer, or at the (indirect) encouragement of their employer, firms/pbs should be accountable for misconduct.
companies can be held :
a. criminal liability [in 66 per cent of OECD countries] eg. uk, france, netherlands.
b.administrative and civil liability
both types of liability are admitted by oecd, as long as it is in line with the principle of ‘functional equivalence’”
Corporate criminal liability
Under English criminal law:
a company has a legal personality and can be prosecuted using the IP “identification principle” :
the intention and will is allocated to those “with directing mind” to the company
The identification principle is necessary for a corporation to be held criminally liable under sections 1,2, and 7 of the Bribery Act. section 7 creates the new offence of a corporate failure to prevent bribery. This creates a separate strict liability for corporations, if a violation of bribery laws occurs at the company, and the company failed to put adequate measures in place to prevent such misconduct
<>COCOO WILL SEEK recent, individuals’ convictions for corporate crimes, and use the IP, to enforce the STRICT LIAB OF their FIRMS/PBS, in the WPI….eg also by breach of cl, al, el,
Corp. Admin and Civil Liability
In the other two jurisdictions (Germany and Italy), companies cannot be held criminally liable. However, both jurisdictions allow for a liability of legal entities based on administrative/civil law.
A legal defence is provided for companies that have put adequate preventive measures in place
Non-trial resolutions = ‘settlements’
agreement with an individual/company, and a prosecuting or another authority
is the primary enforcement vehicle of anti-corruption laws in all 44 countries that have adopted the OECD Anti- Bribery Convention
usual requirements (for the prosecutor/cocoo, to agree settlement) are:
self-reporting, admission of facts, cooperation with authorities, information about third parties or assistance in investigations against other entities, implementation of compliance measures (before or after the offence), remedial actions, internal investigation (if a legal person) and agreement to a monetary penalty
Governments generally opt for settlement, out of WPI and efficiency grounds…
egs:
- settlements give both parties more certainty about the penalty
- allow for a fair distribution of the sanction among affected jurisdictions
-
an understanding of what behaviour would be rewarded and how
clear guidelines, as well as transparency about the outcomes of settlements, are paramount to ensure accountability and trust in the system
<> cocoo will claim that a country failed to settle [in my case, or someone elses], thus harming wpi and economic efficiency (ew)
The DPAs in the UK, for example, come with guidelines as to when they should be entered into and how. The factors to consider when deciding whether to enter into a DPA include:
wpi, a history of similar conduct and past business practices, existence of compliance programmes, timely disclosure, level of harm caused and cooperation shown
settlement Sanctions
max financial penalty: fine + confiscation + restitution + compensation
Increasing compensation to victims is a demand often made by CSOS
<> COCOO WILL CLAIM INCREASED FINANCIAL PENALTIES
In the UK, a company can be required by the SFO to appoint a monitor (to monitor settlement compliance) as part of a DPA
settlement Criticism
Through a non-trial resolution, companies can sometimes avoid harsher penalties. For example, in non-trial resolutions that do not amount to a conviction, companies can often avoid a debarment. Through a settlement, the offender can also hope to avoid [reputational harm is the worst] the publicity, length and possible spectacle of a (public) trial and might reduce the final sanction
To increase transparency and to ensure accountability of the process, non-trial agreements should be publicised…. But while the majority of OECD countries do publicise some information, the degree varies. This sometimes gives rise to the criticism that companies’ misconduct escapes public scrutiny and it becomes hard to assess whether sanctions were proportionate and dissuasive
-the risk that DPAs in the UK become the “new normal” , as opposed to a measure only entered into in instances of a strong wpi….eg: Rolls Royce was able to enter a DPA without having self-disclosed
settlement types
“structured settlement” = nontrialresolution = reached between an alleged offender and the authorities, outside the courts,as an alternative to a trial. The alleged offender is required to cooperate and show good behaviour and in return can hope for a lower sanction and/or faster and more predictable process.
settlement types:
A/ deferred prosecution agreements
B/non-prosecution agreements
c/ plea deals
DPAs and similar agreements
DPAs do not require an admission of guilt, although they may require an admission of facts….they are not considered a final conviction, but the suspension of a prosecution…thus there is no debarment.
If the conditions set out in the agreement are not fulfilled, the suspension can be revoked and, unlike with NPAs, initial charges are usually filed .
in the UK and France DPAs apply only to legal persons
In the UK, DPAs, which are enshrined in the Crime and Courts Act 2013, need to be approved by the courts to which the SFO makes an application after negotiations with the offending entity. A judge must determine that entering into a DPA is in the interest of justice and that the conditions negotiated are fair, reasonable and proportionate. The DPA also needs to be filed with the courts
DPAs in the UK require a “statement of facts” and may include financial penalties, compensation to victims, disgorgement of profits, charitable donations and implementing or improving a compliance programme. Guidelines are provided for prosecutors through the Deferred Prosecution Agreements Code of Practice
Information about a DPA will be published, except for such details that would negatively affect an on-going prosecution. If a company does not comply with the conditions laid out in the DPA, the prosecution may make an application to the crown court to rectify the failure, or cancel the DPA.
Non-prosecution agreements:
Non-prosecution agreements differ from DPAs in that the case is dropped fully instead of deferred and no charges are filed. NPAs do not require an admission of guilt and usually need to be approved by a court. Such non-trial resolutions are “generally designed for offenders who self-report and/or fully cooperate with the prosecution, including, when relevant, providing information on third parties”
non-trial resolutions (other than settlement)
–forfeiture orders, may resolve a case without a trial, under the condition that the proceeds of the crime are recovered/forfeited…. very used in germany
-Negotiated sentencing agreements (germany) : a de facto non-trial solution and can be applied to natural and legal persons. Some form of confession is usually required as part of negotiated sentencing agreements, but they do not constitute a guilty verdict.
Regulations on compliance programmes
As discussed above, deciding whether or not to prosecute a company and to what extent, usually depends on two questions:
- Did the company (or its management) benefit from the misconduct?
- Did the company (or its management) attempt to prevent the misconduct?
If the answer to either of these is yes, a prosecution becomes possible/likely. If the answer is no, prosecutors might refrain from bringing charges or reduce possible sanctions.
Some jurisdictions have official legal defences
Legal requirements for compliance programmes
Often, a well-implemented compliance programme, mitigates a sanction. But only in France is it a legal requirement….Failure to comply with the requirement can result in a fine of up to €200,000 for individuals and €1 million for legal persons ….Sapin II makes the existence of a compliance programme mandatory for certain companies. A compliance programme is thus not just a mitigating factor, but is a requirement, as its absence can constitute an offence… To be considered adequate under Sapin II, a compliance programme must include the following elements:
- a code of conduct defining and illustrating the different types of prohibited behaviours
- an internal reporting system enabling employees to report misconduct
- a documented risk assessment
- a process for due diligence on third parties internal financial controls
- training for managers and employees
- a sanction regime for employees that violate the code of conduct
- evaluation procedures to assess the efficiency of the programme.
Legal defence for compliance programmes
In the UK, adequate internal measures may be used as a misconduting corp. legal defence
Guidance is provided by the UK Ministry of Justice, lays out principles to follow:
- proportionate procedures
- top-level commitment
- risk assessment
- due diligence
- communication (including training)
- monitoring and review
Self-reporting refers to the voluntary disclosure by a company of misconduct that the authorities up until that point were unaware of.
Self-reporting to settle, or to mitigate sanctions
UK have used self-reporting, to settle…..the SFO explicitly encourages self-reporting when considering DPAs
However, the absence of self-reporting does not always take a DPA off the table, as was seen in the Rolls Royce case. Prosecutors argued that the cooperation shown by the company was so substantial that it warranted entering into a DPA and reducing the fine even in the absence of self-reporting.
Whistleblowing
Whistleblowers are a potentially crucial source in bribery cases as they often have first-hand knowledge of misconduct. However, few come forward. According to the OECD “only 2% (5 cases) of foreign bribery schemes resulting in sanctions was detected by whistleblowers”
France
In France, Sapin II created a comprehensive framework for the protection of whistleblowers (European Parliament 2017). It provides a definition of whistleblowers that extends beyond employees, includes rules on how to raise an alert, and bans any discrimination against whistleblowers. The law also provides for sanctions of up to a year imprisonment and €15,000 in fines for persons preventing a report being made or retaliating against a whistleblower
Sapin II also guarantees the protection of whistleblowers’ identity by requiring that internal procedures to receive reports guarantee strict confidentiality of the identity of the reporting individual. “Elements that could identify the whistleblower may not be disclosed except to law enforcement authorities and only with the consent of the whistleblower and once the report has been substantiated” . Disclosure of confidential information is punishable with up to two years imprisonment and €30,000 fines
Under Sapin II a requirement is put on companies to establish internal reporting channels open to employees or external individuals working with the company (Journal officiel de la République française 2016). A further decree (No. 2017-564) mandates that companies with over 50 employees (who are not necessarily covered under Sapin II), implement internal whistleblowing procedures as well.
Reporting requirements
EU Directive 2014/95/EU
Under EU Directive 2014/95/EU9 certain companies are required to report on their environmental and social impacts, including anti- corruption and bribery.
The directive applies to companies that are: publicly listed have over 500 employees
In 2017, the EU published non-binding guidelines on corp reporting requirements: the areas to be covered are:
- environmental matters
- social and employee matters
- respect for human rights
- anti-corruption and bribery matters
- where relevant: supply chain and conflict minerals
- board diversity
Sanctions for non-compliance
In the UK, Italy and Germany fines may be imposed. In France, no immediate penalties are applicable, but if an interested party asks for the report and it is unavailable, a judge may impose a fine.