Clarity on plea bargaining is needed

WHATEVER the final shape of the Bribery Act, which was once again delayed last week, one area that needs to be clarified is the question of plea bargaining. A number of cases have sown confusion in the minds of British businesses. Clarity on plea bargaining is now sorely needed.

The confusion dates to July 2009 when, following the earlier successful negotiation of a multi-million pound settlement by Balfour Beatty, the SFO formally announced that it wanted companies to self report misconduct. As a “carrot”, the SFO proffered the possibility of civil rather than criminal sanctions.

The benefits of such co-operation are clear. It provides corporates embroiled in wrongdoing greater control over the investigation and the ultimate sanctions imposed; it speeds up the process of investigation; and, importantly, opens up the possibility of global settlements with domestic and international regulators. The ability to negotiate a civil sanction is especially important for those operating in the public sector, given the consequence of debarment from public contracts for those convicted of criminal offences.

Despite the SFO’s best efforts to encourage co-operation, however, the ability to negotiate a plea is riddled with uncertainty given the UK judiciary’s reluctance to accept the SFO’s power to enter into such agreements.

In March 2010, the British chemical firm Innospec pleaded guilty to conspiracy to corrupt in relation to the introduction of lead-free fuel in Indonesia and Iraq in exchange for a total penalty of $40.2m. But Lord Justice Thomas criticised the global settlement that had been agreed by Innospec with the SFO and the US authorities. He expressed that it will “rarely be appropriate for criminal conduct by a company to be dealt with by means of a civil recovery order” and suggested that it was constitutionally unsound of the SFO to have agreed a division of the penalty (the SFO accepted $12.7m of the total penalty) with the US authorities.

This was soon followed by the case of Robert Dougall, a former executive of DePuy International Limited who was involved in unauthorised payments to Greek healthcare officials. At first instance, Mr Justice Bean refused to pay heed to the agreement reached between the whistleblower and the SFO and imposed a custodial sentence. While that decision was overturned by the UK Court of Appeal, it too also cast doubt on the use of plea agreements. The Lord Chief Justice, Lord Judge, said that an agreement on sentencing was not envisaged in the Attorney General’s guidelines on plea negotiations: “Responsibility for the sentencing decision in cases of fraud or corruption is vested exclusively in the sentencing court.”

In October 2010, the case of Julian Messant, a former insurance broker for PWS International Limited, appeared to reflect a change of heart, with the UK court accepting the terms of an agreement with the SFO and sentencing Messant to 21 months imprisonment for his role in a series of corrupt payments to Costa Rican officials. But things swung back the other way once again with the controversial BAE Systems case, which concluded just before Christmas, which once again saw the judiciary criticising what was described as a “loosely and perhaps hastily drafted” deal with the SFO which saw BAE pleading guilty to accounting errors in exchange for a £500,000 fine and £29.28m compensation to Tanzania.

While the UK courts in all of these cases eventually upheld the agreements entered into with the SFO, the criticisms and comments create doubt as to whether agreements entered into with the SFO (and international regulators) will always be accepted by the judiciary. Unless and until the SFO clarifies its guidelines in light of these decisions, corporates caught within the scope of the UK anti-bribery regime are left in limbo as to whether self-reporting is the best strategy. This state of uncertainty will only increase when the Bribery Act 2010 finally comes into force, given that the scope of the Act is extremely broad and key areas of it will be left to prosecutorial discretion.

Richard Alderman, Director of the SFO, recently commented that he would like to see judges either taking part in the plea negotiations or supervising the process. Whether the UK judiciary would accept such input remains to be seen and based on present judicial comment appears unlikely, however it certainly appears to be a sensible and pragmatic way to lend some clarity to the perplexing world of plea bargaining with the UK authorities.

Alistair Graham and Sona Ganatra work for City law firm White & Case