General context and principles
1 Identify the highest-profile corporate investigation under way in your country, describing and commenting on its most noteworthy aspects as it relates to your country.
A number of high-profile investigations are under way. Good examples include the SFO investigations of Barclays, Unaoil, GSK and other well-known names, including the engineering firm Rolls-Royce. In 2012, a former employee of Rolls-Royce Holdings plc made internal whistleblowing allegations in regard to the use of bribery by intermediaries to win multimillion-pound contracts in various jurisdictions including Indonesia and China over more than 20 years, including the gifts of a luxury car and US$20 million to the son of the former President of Indonesia.
Following an internal investigation conducted by external lawyers, Rolls-Royce made a self report to the Serious Fraud Office (SFO), which led to the instigation of a criminal investigation in December 2013.
In February 2014 the SFO assisted by the City of London Police and the National Crime Agency conducted dawn raids and arrested two alleged agents of Rolls-Royce.
The SFO does not comment on ongoing investigations except to confirm that raids or arrests have taken place, and as a result, little is known about the current investigation, however, media reports have stated that the investigation has been extended to include dealings in Brazil and Nigeria.
The investigation began in late 2013 and is ongoing, which is unsurprising as SFO investigations often take a number of years to conclude.
2 Outline the legal framework for corporate liability in your country.
A corporation is a legal entity and can be held criminally liable for the actions of its employees under two principles:
- Vicarious liability – depending on the wording of the legislation, a corporation can be held vicariously liable for strict liability offences committed by its employees. This most commonly occurs under regulatory legislation, for example, sale of food that is unfit for human consumption and other minor offences such as road traffic offences, for example, falsifying tachograph records. The principle of vicarious liability in the UK is not directly comparable with the respondeat superior doctrine that exists in the United States.
- Identification principle – a corporation can be held criminally liable for the actions of its employees who are determined to be a directing mind and will of the company, and therefore the embodiment of the corporation when acting in its business.
Additionally, some specific pieces of legislation create particular corporate criminal offences, such as the Corporate Manslaughter and Corporate Homicide Act 2007 and the Bribery Act 2010, which created the offence of corporate failure to prevent bribery by an associated person (i.e., a third party who performs services on behalf of the corporation; for example, a marketing consultant).
A corporation cannot be held criminally liable for any offence not punishable by a fine, for example, murder, or any offence that cannot be committed by an official of a corporation in the scope of their employment, for example, rape.
3 In your country, what law enforcement authorities regulate corporations? How is jurisdiction between the authorities allocated? Do the authorities have policies relating to the prosecution of corporations?
In England and Wales, corporations are treated identically to individuals in regard to criminal law enforcement, and are subject to investigation or prosecution by all law enforcement authorities, including (non-exhaustively):
- The SFO – this is the lead authority for the investigation and prosecution of large and complex corporate financial crime or corruption.
- The National Crime Agency (NCA) and local police forces – these investigate smaller scale or less complex corporate crime, which is then prosecuted by the Crown Prosecution Service (CPS).
- Her Majesty’s Revenue and Customs (HMRC) – HMRC investigates tax related offending which is then prosecuted by the CPS.
- The Financial Conduct Authority (FCA) – this is the regulator of the financial services industry. As a regulator, the FCA can impose civil sanctions for misconduct, but also may prosecute regulated firms or individuals for specific market-related offences such as insider trading and market manipulation. Frequently, cases involving financial services companies fall within the scope of both the FCA and the SFO’s investigation powers. In those cases the SFO will usually take precedence in relation to the criminal proceedings as it may prosecute a wider range of offences.
- The Competition and Markets Authority (CMA) – the CMA investigates anticompetitive behaviour; it may impose civil sanctions but can also prosecute cartel offences.
- The Department of Business Innovation and Skills (BIS) – this government department investigates and prosecutes activities concerning the affairs of companies, including fraudulent trading, and breaches of bankruptcy or disqualification orders.
- The Information Commissioner’s Office (ICO) – the ICO investigates and prosecutes or imposes civil sanctions for data protection offences.
- Health and Safety Executive (HSE) – the HSE investigates and prosecutes or imposes civil sanctions for health and safety offences.
In late 2009, the SFO and CPS published a joint guidance note for corporate prosecutions setting out general principles, and evidential and public interest factors that could be taken into account when making a prosecutorial decision in regard to a corporate.
4 What grounds must the authorities in your country have to initiate an investigation? Is a certain threshold of suspicion necessary to trigger an investigation?
Law enforcement authorities must have reasonable grounds to suspect that a criminal offence has been committed to exercise their investigative powers. The threshold for suspicion is low.
The SFO may investigate any suspected offence that appears to the Director of the SFO on reasonable grounds to involve serious or complex fraud. The SFO’s compulsory powers under Section 2 can be exercised in any case in which it appears to the Director that there is good reason to do so for the purpose of investigating the affairs, or any aspect of the affairs, of any person.
Additionally, and only in relation to bribery and corruption, under Section 2A of the Criminal Justice Act 1987 the SFO may apply the even lower test of the ‘appearance’ that bribery and corruption may have taken place to initiate a ‘pre-investigation’ (and use its powers under Section 2 to determine whether a formal investigation should be undertaken).
5 Does double jeopardy, or a similar concept, apply to prevent a corporation from facing criminal exposure in your country after it resolves charges on the same core set of facts in another country?
The principle of double jeopardy exists in the UK in that a corporation cannot be prosecuted again for the same or similar offences on the same facts following a legitimate acquittal or conviction, or other appropriate disposal such as a deferred prosecution agreement, by a court in the UK or by a court of competent authority in a foreign jurisdiction.
However, even if the predicate offending has been disposed of in one jurisdiction, double jeopardy will not preclude UK authorities from prosecuting ancillary or incidental offences, such as books and records offences that occurred in the UK. Nevertheless, there is scope to engage with international regulators to ensure that in practice one agency takes primary responsibility for the investigation and enforcement.
6 Describe the principal challenges in your country that arise in cross-border investigations, and explain whether and how such challenges are dependent on other countries involved.
The challenges of dealing with cross-border investigations arise from the inconsistencies in the approaches of the various law enforcement agencies and the local laws and customs. The topmost issues are:
- the differences in the scope and application of legal professional privilege between the jurisdictions, and ensuring that privilege is adequately protected when dealing with document or information requests from the various authorities or when conducting the internal investigation;
- the differences in data protection laws in each jurisdiction, and ensuring that breaches do not occur in the gathering and transferring of data between jurisdictions for the purposes of the internal investigation or responding to requests from a law enforcement authority;
- whether any of the jurisdictions have a positive statutory obligation to make a formal report once the corporation becomes aware or begins to suspect that a crime has been committed;
- identifying which authorities may claim that the offending conduct occurred in their jurisdiction as a result of the fact that with cloud-based communications (email, WhatsApp, i-Message, etc.), offending behaviour can occur in more than one location, for example, a fraud as a result of email that contains a fraudulent misstatement can occur in the locations of both the email sender and the recipient when the message was sent and received;
- whether evidence-sharing or mutual assistance treaties exist between the relevant jurisdictions; and
- whether there are sensitivities between the authorities in the various jurisdictions, for example, whether one authority is taking precedence, and if so whether the other authorities accepted that position.
7 What bearing do the decisions of foreign authorities have on an investigation of the same matter in your country?
Law enforcement authorities in the UK generally try to co-operate with counterparts in foreign jurisdictions. Usually at the outset of an investigation, the authorities will agree whether one jurisdiction should take precedence in the investigation and prosecution of the matter (e.g., if the majority of the misconduct took place in that jurisdiction or in the jurisdiction of incorporation).
Even if it is agreed that the predicate offending in a matter should be prosecuted in one particular country, incidental offences such as books and records offences can still be prosecuted in the other jurisdictions.
Ultimately, UK authorities are responsible for the conduct of their own investigations and prosecutions. The extent to which a decision of a foreign authority would influence a UK investigation will depend on the particular facts of the matter, the relationship between the UK and foreign authorities, and the relationship between the UK and the other country on a state level.
8 Do your country’s law enforcement authorities have regard to corporate culture in assessing a company’s liability for misconduct?
In the UK prosecutors must consider the ‘Full Code Test’ set out in the Code for Crown Prosecutors before bringing charges against an individual or corporation. This test has two limbs: the evidential and public interest tests. Depending on the seriousness of the offending, evidence of a very ethical corporate culture could be considered to be a public interest factor against prosecution or taken into consideration by a sentencing judge as a persuasive mitigating factor.
Evidence of an ethical corporate culture is particularly important when a corporation is under investigation for failing to prevent bribery by an associated person, as it can assist in proving the statutory defence that the corporation had adequate procedures to prevent bribery in place at the time of the offence.
Similarly, a company’s compliance with health and safety legislation, and specifically how senior management organise and manage the company’s activities, will have a bearing on any decision to prosecute a company for corporate manslaughter or other associated health and safety offences.
9 What are the top priorities for your country’s law enforcement authorities?
International corruption has been a top priority for the UK government and its law enforcement authorities for the last number of years. In December 2014, the UK government published their Anti-Corruption Plan, which outlined anti-corruption initiatives, including the introduction of the International Corruption Unit within the National Crime Agency in May 2015.
In May 2016, the UK hosted the international Anti-Corruption Summit at which David Cameron, the prime minister at the time, pledged that the UK would be part of a ‘more coordinated, ambitious global effort to defeat corruption’.
Recently tax evasion has also become a key priority, leading to the planned introduction between late 2016 and early 2017 of a corporate criminal offence of failing to prevent the facilitation of tax evasion and a proposed consultation for an even wider offence of corporate failure to prevent economic crime.
A further focus is increased transparency of the beneficial ownership of foreign companies investing in UK property or bidding for UK government contracts. This has prompted the imminent introduction of a register of beneficial ownership of foreign investors, which is intended as a measure to reduce both tax evasion and the likelihood of UK properties being used to launder foreign criminal funds.
10 How are internal investigations viewed by local enforcement bodies in your country?
UK authorities have publicly stated that they are not opposed to internal investigations that are carried out in a manner that would not impede a criminal prosecution.
UK authorities expect data gathering exercises to be carried out promptly, covertly and coordinated across multiple sites simultaneously. Digital material should be forensically imaged and preserved by IT specialists. All procedures taken to gather and image data should be recorded and then fully disclosed to the law enforcement authority.
Additionally, UK authorities expect that full and accurate accounts be taken during witness interviews and that the accounts are then disclosed, and are likely to strongly rebut any claims of privilege over those accounts.
If a matter becomes known to an authority before the internal investigation has begun or been concluded, it is highly advisable to enter into a dialogue with the authority to agree the steps of the internal investigation, preventing any accusation from the authority that the internal investigation obstructed or impeded its criminal investigation, and ensuring credit for co-operation.
Before an internal investigation
11 How do allegations of misconduct most often come to light in companies in your country?
In addition to the normal means for identifying misconduct, such as audits, screening procedures and whistleblowing, UK companies can become aware of allegations of misconduct through cybercrime or data breaches (e.g., the Unaoil and Panama Papers cases) and due diligence carried out in relation to commercial transactions, including mergers and acquisitions.
If a media outlet informs a company of an allegation they intend to publish, the company will need to carefully consider whether it should make an immediate self-report to law enforcement authorities before the matter is made public. The SFO have made it clear that once an allegation enters the public domain, the option of and credit for a ‘self-report’ will not be available.
Similarly, as employment tribunals and litigation proceedings in civil courts are generally held in public, if allegations are raised during such proceedings the company should consider carefully whether it should make a self-report before the matter proceeds to a public trial or tribunal, as well as the increased risk of a report being made to the relevant authority by the disgruntled opponent.
12 Are search warrants or dawn raids on companies a feature of law enforcement in your country? Describe any legal limitations on authorities executing search warrants or dawn raids, and what redress the company has if those limits are exceeded.
Authorities that investigate corporate crime in the UK, such as the SFO, often conduct dawn raids of business or residential premises under the authority of a search warrant issued by a court.
When a raid is carried out under a warrant, the authority may use reasonable force to gain entry to the premises. The authority may only search the premises specified in the warrant and seize items within the scope of the warrant.
Certain categories of material, such as confidential journalistic material or personal records created in the course of a business, for example, patient records in a raid of a medical practice, cannot be seized during a raid. Legally privileged material cannot be seized unless it was created with the intention of the furtherance of a crime (crime-fraud exception), or unless it is inextricably linked to other, seizable material, in which case it can be seized but must be examined by an independent lawyer for privilege before it is examined by the investigating team. The use of this power is subject to the Criminal Justice and Police Act 2001, which entitles the corporate’s legal representative to be present at a review of the material and apply to a judge for the material to be returned.
The CMA may conduct a dawn raid of business premises without a warrant.
Some authorities have additional powers that can be exercised during a dawn raid, for example, the SFO and CMA may compel a person to answer questions relevant to the search, such as regarding the location of certain documents.
If there are significant errors in either the process of obtaining the warrant or authorising the raid, or in the execution of the raid, the raid can be challenged by judicial review and rendered unlawful and deemed to be a civil or criminal trespass, or both, and the material seized during the raid could be rendered inadmissible.
13 How can privileged material be lawfully protected from seizure during a dawn raid or in response to a search warrant in your country?
As a general rule, legally privileged material cannot be seized during a dawn raid unless the crime-fraud exception applies or where it is inextricably linked to seizable material as described above.
However, in relation to competition investigations, the European Commission does not regard advice from in-house lawyers as legally privileged, so it may seize such material during raids or inspections.
The authorities who investigate corporate crime are generally accompanied during raids by an independent lawyer specifically tasked with reviewing onsite any material that the company asserts as privileged. It is, therefore, important to be aware of where privileged material is likely to exist so that assertions can be made before items are seized.
Where there is a dispute as to privilege, the authority will seize the material by sealing it in an opaque bag for review by an independent lawyer at a later date. The company may have its legal representative present during that review.
Digital devices containing both privileged and non-privileged items that cannot be separated may be seized or imaged during a raid. In practice, the privileged material will then be quarantined by digital forensic experts within the authority by applying search criteria provided by the company.
14 Are there any privileges in your country that would prevent an individual or company from providing testimony? Under what circumstances may an individual’s testimony be compelled in your country? What consequences flow in your country from such compelled testimony?
There is a qualified right to claim privilege against self-incrimination when being interviewed as suspect or a voluntary witness. The privilege is qualified as adverse inferences can in certain circumstances be drawn at trial by the interviewee’s refusal to answer questions.
This privilege does not apply where an authority such as the SFO, FCA and CMA exercises specific statutory powers by issuing a notice compelling a witness to answer questions or produce documents. Failure to comply with such a notice without reasonable excuse can result in a criminal offence. However, the contents of a compulsory interview cannot be used against the individual except in a prosecution specifically for making a false or misleading statement in that interview.
15 What legal protections are in place for whistleblowers in your country?
The Public Interest Disclosure Act 1998, as amended, offers statutory protections to whistleblowers.
The dismissal of an employee or employee shareholder will be automatically unfair if the principle reason for their dismissal is that they have made a qualifying ‘protected disclosure’. Workers, employees and employee shareholders are also protected from detrimental treatment (e.g., harassment or reduction in pay) on the ground that they have made a qualifying protected disclosure.
There is no requirement for a minimum period of service or any financial cap on the amount of compensation that can be awarded.
Useful guidance is available to employers, including guidance by the Whistleblowing Commission (Whistleblowing Code of Practice) and the Department for Business, Innovation and Skills (BIS) (Whistleblowing: Guidance for Employers and Code of Conduct).
16 What rights do employees possess under local employment law that determine how they are treated within a company if their conduct is within the scope of an investigation? What employment rights would attach if they are deemed to have engaged in misconduct? Does it differ for officers and directors of the company?
Suspension pending investigation
Employment legislation does not specifically deal with suspension but case law and guidance issued by ACAS (a public body in the UK) in the form of the ACAS Code of Practice on Disciplinary and Grievance Procedures (the ACAS Code) requires that employees only be suspended where this is necessary and that the period of suspension be as short as possible. It is also important that employees be informed of the nature of the allegations made against them (whether in relation to an internal or external investigation) and, in most cases, suspension should be on full pay and with no loss of benefits. Any failure to follow these principles can result a breach of the ACAS guidance and a repudiatory breach of contract.
Right to a fair hearing
The disciplinary process should be carried out in accordance with the ACAS Code. As a minimum, the disciplinary process should include a disciplinary investigation to establish the facts of the case. If the investigation finds that there is a case to answer, there will be a disciplinary hearing. The employee must be informed of the right to be accompanied by a colleague or a trade union representative at any disciplinary hearing or appeal, to be informed of the issue and to be given a full opportunity to put his or her case in response before any decision is made by the employer.
Employers should carry out their own disciplinary investigation and disciplinary hearing rather than relying on the police’s or an external organisation’s investigation. If an employee has been convicted, or charged with wrongdoing by the police or another external organisation, this does not mean that the employer can move straight to dismissal. The applicable employment law should be complied with, and the ACAS Code should be followed as far as possible.
The right not to be unfairly dismissed
All employees with over two years’ continuous service with an employer have the right not to be unfairly dismissed. In the case of a successful claim, an employment tribunal can award compensation. In most cases compensation is capped at £93,332, although in certain situations employees can argue that this compensation cap should be disapplied.
Company director considerations
Directors may also be employees (in which case the above will apply in tandem with any specific issues of directors’ duties). Directors are subject to general duties, which are set out in the Companies Act 2006 and contained within the company’s articles. It may be that the director has acted in breach of one or more of their duties as directors. If this is the case, both the Companies Act and the company’s articles include provisions regarding the removal of a director. Additional regulations should be considered for directors of public companies.
17 Are there disciplinary or other steps that a company must take in your country when an employee is implicated or suspected of misconduct, such as suspension or in relation to compensation? Can an employee be dismissed for refusing to participate in an internal investigation?
Generally there is no strict legal requirement from an employment law perspective to suspend or discipline those suspected of misconduct. Some heavily regulated employers, for example, within the financial services sector, may be required by their regulatory body to suspend and take disciplinary action against employees who carry out regulated activities. Employees may also be regulated themselves and will have specific obligations towards the regulator.
Failure to take disciplinary action could be regarded by an authority as evidence of poor corporate culture. Furthermore, failure to suspend or dismiss an employee who is capable of impeding a criminal investigation by destroying documents or alerting or interfering with witnesses, could be regarded as obstruction of the criminal investigation.
If an employee refuses to participate in an internal investigation, the employer may carry out the disciplinary process without the employee’s engagement, having first warned the employee in writing. Generally speaking, a request to participate in an investigation will be a reasonable management instruction and any unreasonable refusal to engage in this process may constitute misconduct in itself. However, it is important that the employer does not interrogate or pressurise the employee into making admissions of guilt.
Commencing an internal investigation
18 Is it common practice in your country to prepare a document setting out terms of reference or investigatory scope before commencing an internal investigation? What issues would it cover?
It is good practice to prepare an investigation plan before commencing an internal investigation, setting out the purpose of the investigation, the issues to be investigated, the investigation team and reporting lines, how legal privilege will be established and maintained (e.g., the investigation team is instructed by and reports to a lawyer), how digital and hard copy material will be collected and preserved, how staff interviews will be conducted, and any other necessary immediate controls or steps, for example, ceasing all future payments to suspect third parties.
19 If an issue comes to light prior to the authorities in your country becoming aware or engaged, what internal steps should a company take? Are there internal steps that a company is legally or ethically required to take?
A company should always investigate an issue as soon as it comes to light to enable the company to take the following steps.
Stop the offending behaviour
If it was later established by an authority that the conduct had continued after the company had become aware, the company could become exposed to further criminal liability.
Additionally, if the conduct had ceased and the company was aware or suspected that it possessed funds obtained from the conduct, but it failed to take any action in regard to those funds, for example, making a suspicious activity report to the National Crime Agency, the company could commit a money laundering offence.
Preserve all documents and material relevant to the issue
In the event that a law enforcement authority becomes aware of the matter, it would expect the company to have taken all necessary steps to protect and preserve all material that would be relevant to its criminal investigation (including by taking forensic images of digital material) so that the material could be eventually provided to them. Failure to protect and preserve relevant material could impede a criminal investigation and would be viewed as a lack of co-operation by an authority.
Furthermore, it is a criminal offence to destroy, falsify, conceal or dispose of relevant documents when a person knows or suspects an investigation of serious or complex fraud is already being, or is likely to be, undertaken by the police or SFO.
Take remedial or preventative action
Preventative measures should be implemented to ensure that the offending behaviour cannot occur in the company again.
If a company failed to take any steps to address an allegation of bribery, it is unlikely that they would be able to rely upon the ‘adequate procedures’ defence in the event of a prosecution of corporate failure to prevent bribery under the Bribery Act 2010.
20 At what point must a company in your country publicly disclose the existence of an internal investigation or contact from law enforcement?
Privately owned companies are not required to publicly disclose the existence of internal investigations or contact from law enforcement.
Under the UK Listing Rules, publicly listed companies must, without delay, issue a market announcement of any major new development that may affect their business, if the development may lead to a substantial share price movement. A notice compelling the provision of documents would be unlikely to require an announcement, but confirmation from the authority that the company was a suspect in a criminal investigation would be likely to require an announcement.
21 When would management typically brief the board of a company in your country about an internal investigation or contact from law enforcement officials?
If the allegations are serious and could expose the company or directors to criminal liability or reputational damage, the board of the company is typically briefed at the outset and kept abreast of progress.
However, to the extent that members of the board are implicated in the issues under investigation, it may not be appropriate to brief the whole board. In addition, for legal privilege reasons, it may also be beneficial for the company to convene a subcommittee of the board to whom briefings are given.
22 What internal steps should a company in your country take if it receives a notice or subpoena from a law enforcement authority seeking the production or preservation of documents or data?
Upon receipt, the notice or court order should be sent immediately to the appropriate person within the business (usually the legal department). The exact scope of the request should be determined and clarifications sought if the scope is unclear. The deadline for responding should also be diarised. It is advisable to seek external legal advice if the legal department is inexperienced in dealing with such matters.
To the extent the company has an internal policy setting out the steps to be taken upon receipt of a notice or court order, this should be followed. The company should consider circulating document retention notices to ensure all relevant data is preserved, taking forensic images of all potentially relevant data sources (e.g., laptops, PCs, tablets, phones), and compiling a database that can be interrogated for documents falling within the request.
Once reviewed for relevance, the results should be double-checked for privilege and copies retained of anything provided to the authorities.
23 How can the lawfulness or scope of a notice or subpoena from a law enforcement authority be challenged in your country?
Depending on the authority and type of notice, it may be possible to informally agree a narrower scope of information to be produced without having to formally challenge the lawfulness or scope. Otherwise the company may challenge the lawfulness or scope of the notice or production order by way of application to the court for a judicial review.
24 May attorney-client privilege be claimed over any aspects of internal investigations in your country? What steps should a company take in your country to protect the privilege or confidentiality of an internal investigation?
Legal professional privilege can be claimed over various aspects of internal investigations. There are several standard ways of preserving privilege, such as:
- involving lawyers (whether external or internal) as soon possible;
- marking all communications pertaining to legal advice as ‘privileged and confidential’;
- segregating privileged and non-privileged documents;
- refraining from forwarding or creating new documents that summarise legal advice received;
- encouraging employees not to amend or quote extracts from legal advice; and
- only circulating legal advice and privileged material on a strictly need-to-know basis.
25 Set out the key principles or elements of the attorney–client privilege in your country as it relates to corporations. Who is the holder of the privilege? Are there any differences when the client is an individual?
There are two forms of legal professional privilege in the UK: advice privilege, which can be claimed over any communication between a client and lawyer where the client seeks or is given legal advice; and litigation privilege, which can be claimed over any communication between a client, lawyer and third party where the dominant purpose of the communication is use in actual, pending or contemplated litigation.
The holder of the privilege is the client. In the case of corporate investigations, the client is the group of individual employees or directors charged with seeking and receiving legal advice on behalf of the company rather than the entire corporate entity. This group of individuals generally includes the in-house legal team and the board of directors.
It is important at the outset of an investigation to identify the group of individuals that will be the client.
26 Does the attorney–client privilege apply equally to inside and outside counsel in your country?
Generally, legal professional privilege applies equally to internal and external counsel, except in the case of competition investigations by the European Commission in which internal advice is not considered privileged.
27 To what extent is waiver of the attorney–client privilege regarded as a co-operative step in your country? Are there any contexts where privilege waiver is mandatory or required?
UK authorities have frequently stated that they have no interest in communications between a client and its lawyers as to questions of liability or rights, but they do not approve of assertions of legal professional privilege over factual aspects of internal investigations, such as accounts given by third parties in internal investigations, and would expect the waiver of claimed legal professional privilege in those circumstances. This can be contentious.
The authorities have stated that a refusal to waive a well made-out claim of legal professional privilege will not be held against a company, but a waiver of such a claim would be good evidence of co-operation. False or exaggerated claims of legal professional privilege will be considered strong evidence of non-co-operation and will be challenged.
28 Does the concept of limited waiver of privilege exist as a concept in your jurisdiction? What is its scope?
There is a concept of limited waiver of legal professional privilege, and it is for the individual or entity waiving the privilege to determine the extent of the waiver.
It is important to be very clear as to the scope of the waiver with regard to the purpose for which the privileged information can be used and with whom it can be shared, to avoid the information being shared with other domestic or foreign enforcement authorities or parties in any related civil proceedings.
29 If privilege has been waived on a limited basis in another country, can privilege be maintained in your own country?
This will depend on a number of factors including the terms of the waiver, the circumstances in which the material was received by the UK authority, and whether the UK authority disputes the claim of privilege, for example, where the UK authority asserts that the material falls within the crime-fraud exception.
30 Do common interest privileges exist as concepts in your country? What are the requirements and scope?
Common interest privilege exists in the UK and can be used to preserve privilege in documents disclosed to third parties who have a common interest in the subject matter of the privileged document or the litigation for which the document was created.
It is advisable when disclosing information under the common interest privilege to ensure that the recipient understands that the document has been disclosed on this basis and to obtain undertakings from the recipient that the privilege will not be waived.
31 Can privilege be claimed over the assistance given by third parties to lawyers?
Privilege can be claimed over communications with third parties where the dominant purpose of the communication has been use in actual, pending or contemplated litigation.
32 Does your country permit the interviewing of witnesses as part of an internal investigation?
Yes. An internal investigation is a fact-finding exercise and interviews will often be central to any internal investigation. However, it is advisable to always be sensitive to the expectations of investigating authorities, to avoid any criticism that such interviews could have prejudiced the law enforcement investigation.
33 Can the attorney–client privilege be claimed over internal witness interviews or attorney reports in your country?
While privilege is often claimed over internal witness interviews, UK authorities such as the SFO have stated that they do not accept that the factual accounts of a witness interview are privileged and disapprove of such claims.
Privilege can and should be claimed over reports that include issues of liability or rights, but generally the authorities expect to receive a report of factual findings from which the discussion of liability or rights has been redacted.
34 When conducting a witness interview of an employee in your country, what legal or ethical requirements or guidance must be adhered to? Are there different requirements when interviewing third parties?
Whether the interviewee is an employee or third party, they should be informed:
- that the interview is part of a fact-finding exercise;
- if they are implicated in any wrongdoing;
- that the lawyer conducting the interview represents the company and not the interviewee;
- that the interview notes belong to the company and therefore any privilege rests with the company and the company may choose to provide the notes to an authority; and
- that the interview is confidential and the contents of the interview should not be discussed with other employees or witnesses to avoid contaminating their recollection.
35 How is an internal interview typically conducted in your country? Are documents put to the witness? May or must employees in your country have their own legal representation at the interview?
Generally interviewees are not legally represented in fact-finding interviews; however, companies should not refuse a request from an individual to be legally represented at his or her own expense.
Documents can be put to the interviewee. A copy of each of the documents referred to or an interview pack should be retained as part of the record of the interview.
Reporting to the authorities
36 Are there circumstances under which reporting misconduct to law enforcement authorities is mandatory in your country?
The Proceeds of Crime Act (POCA) places a specific duty on employees of regulated businesses (i.e., financial services firms and professional services such as lawyers and accountants) to make a report to the NCA where they have reasonable grounds to know or suspect that another person is engaged in money laundering and that knowledge came to them within the course of their regulated business. Failure to make a report in those circumstances carries a risk of imprisonment for up to five years or a fine, or both.
All companies (regulated and non-regulated) should make a report to the NCA where the company knows or suspects that it possesses funds obtained as a result of suspected criminal conduct by the company or employees, as this is a money laundering offence under POCA. A report provides a statutory defence to money laundering if made as soon as practicable.
A money laundering report to the NCA is not a ‘self-report’ for the purposes of a DPA (see question 37) or mitigation of sentence. A ‘self-report’ must be made directly to the relevant authority, such as the SFO.
37 In what circumstances might you advise a company to self-report to law enforcement even if it has no legal obligation to do so? In what circumstances would that advice to self-report extend to countries beyond your country?
It would be advisable to self-report where the company wishes the matter to be settled by way of a deferred prosecution agreement (DPA), which is an agreement reached between a prosecutor and company under investigation, and approved by a court. The agreement allows a prosecution to be suspended for a defined period provided the organisation meets certain specified conditions. If the conditions are met, the prosecution is formally discontinued. For further information about the DPA process in the UK, see question 50.
The SFO has articulated that DPAs will only be available where there has been a genuinely proactive approach by the company, including a full self-report (i.e., complete disclosure of the facts); an acceptance of wrongdoing by the company; reparation (e.g., compensation to the victim); implementation of effective anti-bribery systems to prevent further offending; access to material and information in the company’s possession, including that gathered during the internal investigation (in particular the accounts of witness interviews); and full co-operation with the ongoing investigations and prosecution, for example, of individual employees and directors.
It is, therefore, particularly important that before making a self-report the company satisfies itself that it can, and is willing to, meet the other conditions required for a DPA offer.
DPAs are only available to corporate defendants and not to the individual employees or directors involved in the criminal conduct.
38 What are the practical steps you need to take to self-report to law enforcement in your country?
Before making a self-report a company should undertake the appropriate level of investigation to ascertain the extent and nature of the offending, ensuring that the company will not be taken by surprise by further issues that could arise in the course of a criminal investigation.
UK authorities have advised that for a company to be afforded full credit for making a self-report, it must be made within the context of a genuinely proactive and co-operative approach by the company. The following steps are indications of such an approach:
- gathering and preserving hard copy and digital material the authority is likely to request;
- providing a report of the factual findings of the internal investigation along with key supporting documents;
- ensuring that employees are made available for interview;
- taking appropriate disciplinary measures against offending employees; and
- compensating victims, providing this is feasible.
Responding to the authorities
39 In practice, how does a company in your country respond to a notice or subpoena from a law enforcement authority? Is it possible to enter into dialogue with the authorities to address their concerns before or even after charges are brought? How?
It is both possible and desirable to enter into a dialogue with the authority immediately upon receipt of a notice to discuss concerns the company has, for example, that the deadline for compliance with the notice is unreasonable, or the description of the information and documents requested is unclear.
The authorities will generally be happy to discuss such concerns and work with the company to find a reasonable and practical solution, so long as the result is that the relevant information and documents are ultimately received in a timely fashion.
40 Are ongoing authority investigations subject to challenge before the courts?
The exercise of powers by any public authority, such as in undertaking an investigation, can be challenged by application to the court for a judicial review if considered to be unlawful.
If found to be unlawful, the court can order various remedies such as stopping the exercise of that power, rendering it ineffective, or awarding damages.
41 In the event that authorities in your country and one or more other countries issue separate notices or subpoenas regarding the same facts or allegations, how should the company approach this?
While attempting to deal with notices or court orders issued by various jurisdictions as one consistent disclosure package would reduce effort and costs, it is generally advisable to deal with them separately. Court orders and notices issued under compulsory powers usually negate data protection laws and any obligations of confidentiality to third parties, consequently civil proceedings cannot be brought by third parties against a company for its actions in providing material in response to a lawful court order or compulsory notice as long as the material provided was within the scope of the notice or order. However, if the company provides material beyond the scope of the notice or order, and in doing so breaches a confidentiality obligation or data protection law, it could expose itself to claims.
To avoid creating risks of civil and criminal liability, notices and orders should be responded to separately unless the company is able to satisfy itself that the scope of the orders or notices from each of the jurisdictions are in all important respects identical.
42 If a notice or subpoena from the authorities in your country seeks production of material relating to a particular matter that crosses borders, must the company search for and produce material in other countries to satisfy the request? What are the difficulties in that regard?
Generally, if information is in the control of a company (e.g., a parent company with a right to take possession, inspect or take copies of a subsidiary’s documents), the company will be expected, but not necessarily required, to search for and produce all requested material, even when it is located in another country. In practice, if the company wishes to seek credit for co-operation, it should comply with any reasonable requests, whether or not it is required to.
The exception is when the data protection legislation in the other country does not permit the removal or transfer of the data from that jurisdiction. In those cases, the requesting authority will generally need to use mutual legal assistance to obtain the material through foreign counterparts.
43 Does law enforcement in your country routinely share information or investigative materials with law enforcement in other countries? What framework is in place in your country for co-operation with foreign authorities?
The UK authorities can and do share information and investigative materials (for intelligence purposes and the detection and prevention of crime) with authorities in various other countries whether or not there is a mutual legal assistance agreement with that country and regardless of whether the country is providing information or materials in return, although reciprocity is generally expected.
Where material is required for a prosecution a mutual legal assistance request must be made. UK law authorities will only provide assistance that conforms with the UK’s laws and international obligations.
A list of the international mutual legal assistance and extradition agreements to which the UK is a party can be found on the UK government website at www.gov.uk/government/publications/international-mutual-legal-assistance-agreements.
The UK authorities can provide further assistance by conducting dawn raids in the UK on the foreign authority’s behalf, interviewing witnesses or suspects, freezing assets, or arresting and extraditing suspects.
44 How would you advise a company that has received a request from a law enforcement authority in your country seeking documents from another country, where production would violate the laws of that other country?
In these circumstances the company should not provide the documents, but should inform the requesting authority of the reason that these documents cannot be provided (i.e., that the data protection laws in the other country constitute reasonable excuse for lack of compliance).
45 Does your country have data protection statutes or blocking statutes? What related issues are implicated by complying with a notice or subpoena?
The collection and use of personal data in the UK is governed by the Data Protection Act 1998 including restrictions on the disclosure of personal data. Personal data is defined as data that relate to a living individual who can be identified from those data. However, broadly speaking, the non-disclosure provisions in the Data Protection Act do not apply where the material is requested by a notice or court order issued on the grounds that the material is necessary for the prevention or detection of crime, apprehension or prosecution of offenders, or assessment or collection of any tax or duty or of any imposition of a similar nature.
46 What are the risks in voluntary production versus compelled production of material to authorities in your country? Is this material discoverable by third parties? Is there any confidentiality attached to productions to law enforcement in your country?
When material is provided voluntarily and without restrictions, the authority is free to share it with third parties or other authorities, and to use it for any purpose.
Generally it is advisable only to provide material voluntarily having obtained contractual undertakings that agree the restricted basis on which the material has been provided (e.g., only for use by that authority in the course of an investigation and not to be shared with other parties).
While contractual undertakings restrict the authority’s ability to voluntarily provide the material to other parties, they do not prevent third parties from obtaining court orders against the authority requiring production of the material. However, production orders should only be granted where it is in the interests of justice, and the fact that the material came into the possession of the authority under the restrictions imposed by the undertakings may lead a court to determine that it is not appropriate to grant a production order against the authority in that context, particularly as the third party could attempt to obtain the documents from an unfettered source, such as the company.
Generally authorities are restricted as to how they can share material they obtain as a result of exercise of their compulsory powers or court orders, and customarily such material should only be shared where it is necessary for an investigation and the disclosure is proportionate.
47 Prior to any settlement with a law enforcement authority in your country, what considerations should companies be aware of?
Before entering into a settlement with a law enforcement authority a company should assess the merits and strength of the prosecution and defence cases; the likelihood of conviction; the expected time, cost, reputational damage and other adverse effects of a lengthy investigation and trial; and the likely penalties in the event of a conviction, including possible debarment from public procurement tenders.
The company should then carefully assess the terms of the proposed settlement, including: the impact that ongoing co-operation could have on the business (legal costs, staff resources, etc.); whether the settlement will resolve the matter in all relevant jurisdictions and, if not, the impact the settlement could have in regard to ongoing investigations in other jurisdictions (e.g., whether the authority that has settled will disclose information and assist foreign authorities); and any other adverse impact that the settlement could have on the future of the business.
Ultimately the company should balance the seriousness of the charge and the effect of a conviction (i.e., whether the conviction results in debarment) against the terms of the settlement, as in some circumstances the terms of a settlement including, for example, the costs of regular review and monitoring by an independent monitor (typically a large accountancy or law firm) could be more disadvantageous to a company than a conviction.
48 What types of penalties may companies or their directors, officers or employees face for misconduct in your country?
Penalties on conviction include imprisonment for individuals, fines, compensation and confiscation orders. Individuals can also be disqualified from being a director of a company for up to 15 years. Where DPAs are agreed, monitors may be imposed.
Companies convicted of certain offences, including active bribery and money laundering must also be debarred from public tendering for up to five years.
Regulatory authorities can impose additional penalties. For example, the Financial Conduct Authority can withdraw a firm’s authorisation and prohibit it from undertaking specific regulated activities for up to 12 months, prohibit individuals from carrying out regulated activities, or impose fines on firms or individuals. The Prudential Regulation Authority (the authority responsible for the prudential regulation and supervision of around 1,700 banks and other firms) can restrict a firm’s permission to conduct regulated activities or impose a fine.
49 What do the authorities in your country take into account when fixing penalties?
When fixing penalties following conviction, courts must have regard to the sentencing guidelines published by the UK and Scottish Sentencing Councils.
Specific sentencing guidelines were published in 2014 in respect of corporate fraud, bribery and money laundering offences providing that, when sentencing a company, the court must first determine whether compensation or confiscation orders should be made. Thereafter the court should consider, inter alia, the following issues:
- the level of culpability and financial harm;
- the aggravating or mitigating factors, for example, whether the criminal activity was endemic or whether the corporate offer full co-operation with law enforcement authority during the investigation;
- the financial circumstances of the company; and
- the stage at which a guilty plea was entered (if the matter was not contested).
50 Are non-prosecution agreements or deferred prosecution agreements available in your jurisdiction for corporations?
DPAs have been available in the UK (as a result of the Crime and Courts Act 2013) since 2014 as an alternative disposal for corporate offending. DPAs are not currently available in Scotland. Non-prosecution agreements do not exist in the UK.
The SFO and CPS have published a Code of Practice explaining the DPA process.
A prosecutor may at their discretion invite a corporate suspect into DPA negotiations where it determines that having identified the full extent of the offending, the evidential test has been satisfied and the public interest would benefit from a DPA. Generally a corporate will only be invited to negotiations where a self-report has been made and the corporate has fully co-operated with the authority.
If it is possible to agree the terms of a DPA and a statement of facts, the corporate will be formally charged with the criminal offence or offences and the matter will be brought before a judge for approval. The judge will only approve the DPA if satisfied that it is in the interests of justice and the terms are fair, reasonable and proportionate. The judge can adjourn the matter to obtain further information or clarification as to the facts or terms.
If judicial approval is given, the criminal proceedings will be suspended for a set period as defined by the terms of the DPA. The terms and facts of the DPA will then be published on the authority’s website.
If the corporate complies with the terms of the DPA, at the conclusion of the set period the criminal proceedings will be formally discontinued. If the corporate breaches the terms and the breach cannot be remedied, the criminal proceedings will resume.
DPAs carry the advantage of avoiding a conviction, and affording the opportunity of speedier resolution (relatively speaking) and to continue trading under agreed parameters. They also enable the corporate to avoid the time and costs of an open-ended, lengthy and uncertain criminal investigation and trial that can adversely impact share price and access to finance, and cause difficulties in tendering.
The obvious disadvantage of entering into a DPA is accepting guilt and penalties based on an untested prosecution case that could result in an acquittal if contested. A further disadvantage to be carefully considered is that the terms of a DPA are likely to include regular monitoring and audit by an independent monitor (typically a large accountancy or law firm) for which the company will bear the costs.
Only two DPAs have been agreed in the UK. In November 2015, a DPA was agreed in relation to a charge of corporate failure to prevent bribery against Standard Bank PLC in payments made by employees of a former sister company in Tanzania. The key terms of the three-year agreement are: financial orders of US$25.2 million; US$7 million in compensation to the Government of Tanzania; £330,000 in prosecution costs; a requirement to undertake a review of the existing compliance programme by an independent monitor and implementation their recommendations; and full continual co-operation with the SFO and any other domestic or foreign authority as directed by the SFO.
The second DPA against XYZ Ltd, anonymised because criminal proceedings are ongoing against individuals, was agreed in July 2016 and involved the payment of bribes to agents across Asia for over eight years. Misconduct was identified at senior levels and so offences of conspiracy to corrupt were accepted by the company as well as a failure to prevent bribery. Its terms included disgorgement of gross profits of £6,201,085; a financial penalty of £352,000; co-operation with the SFO; and a review and maintenance of the organisation’s existing compliance programme.
51 Is there a regime for suspension and debarment from government contracts in your country? Where there is a risk of suspension or debarment or other restrictions on continuing business in your country, what are the options available to a corporate wanting to settle in another country?
The 2014 EU Public Sector Procurement Directive was transposed into UK law by the Public Contracts Regulations 2015. Under these Regulations, companies must be excluded from public procurement where they have been convicted in the last five years of a list of offences, which includes among other offences, conspiracy, corruption, bribery, money laundering and fraud offences. The corporate offence of failure to prevent bribery (Section 7 of the Bribery Act 2010) is not included in this list of offences and does not require mandatory debarment.
The regulations also provide a list of offences that carry discretionary debarment for up to three years, including professional misconduct, non-payment of tax and distortion of competition.
However, the Regulations allow companies to recover eligibility to bid for public contracts following a debarment by demonstrating evidence of self-cleaning, such as the payment of compensation to the victim of the offending, clarification of the facts and circumstances of the offence in a comprehensive manner, co-operation with the investigating authority, and the implementation of appropriate measures to prevent further criminal offences or misconduct.
52 Are ‘global’ settlements common in your country? What are the practical considerations?
Global settlements have been known, for example the DPA agreed between the SFO and Standard Bank plc in November 2015 was coordinated with the settlement between Standard Bank and the US Securities and Exchange Commission.
A coordinated approach between the US and UK was also achieved in relation to Innospec Inc and BAE Systems in 2010, although in both cases the court was critical of the coordination.
53 Are parallel private actions allowed? May private plaintiffs gain access to the authorities’ files?
Parallel private civil actions are allowed. Generally, but not always, the criminal proceedings will take precedence, and civil proceedings can be stayed for the duration of the criminal investigation so as not to prejudice any criminal proceedings.
Private plaintiffs will only gain access to specified information in the authority’s files if they obtain a court order. Before making any such order, the court would carefully consider the reason why the private plaintiff requires the information; whether the plaintiff would be able to obtain the information from any other source; the method by which the authority obtained the relevant information, for example, if it was obtained under compulsory powers; and whether the information is likely to contain any confidential, privileged or personal information of third parties.
Publicity and reputational issues
54 Outline the law in your country surrounding publicity of criminal cases at the investigatory stage and once a case is before a court.
It is a contempt of court to publish a report that creates a substantial risk that the course of justice in active criminal proceedings will be seriously impeded or prejudiced. Proceedings are active for this purpose after arrest or charge and until the proceedings have been concluded, for example, by acquittal or conviction or discontinuance by the authority. As a result there is generally very little media reporting of criminal investigations in the UK until the end of the trial other than to state the facts of arrests and report court hearings.
55 What steps do you take to manage corporate communications in your country? Is it common for companies to use a public relations firm to manage a corporate crisis in your country?
It is common practice for companies to hire a PR firm to manage a large-scale corporate crisis to mitigate potential reputational damage. It is important to ensure a consistent approach by opening good lines of communication between the company’s internal marketing and the external PR firm, and to ensure that the PR firm is aware of any legal or corporate issues (including any agreements reached with the investigating authority with regards to press releases, etc.).
It is also vitally important that public statements do not have the potential effect of prejudicing ongoing criminal proceedings, for example, trial of the company or individual employees, or contradict any defence which the company may later seek to reply on. For those reasons statements issued by a company under investigation should be brief and factual, and should always be approved by the company’s criminal law advisers.
56 How is publicity managed when there are ongoing, related proceedings?
As stated above, it is vitally important that that public statements issued by the company do not have the potential effect of prejudicing ongoing criminal proceedings, such as related prosecution of employees or third parties. Statements issued by a company in those circumstances should always be brief and factual, and approved by the company’s criminal law advisers until the conclusion of all related proceedings.
Duty to the market
57 Is disclosure to the market in circumstances where a settlement has been agreed but not yet made public mandatory?
Under the UK Listing Rules, publicly listed companies must issue a market announcement without delay of any major new development that may affect their business, if the development may lead to a substantial share price movement. A settlement of criminal proceedings would generally require such an announcement.
If the matter is settled by way of a DPA, the matter is not settled until it has actually been approved by a judge at a court hearing. In practice, prior to the final hearing (at which the parties will generally expect approval to be given as the terms, etc., will have been examined and challenged at preliminary hearings) the company and the authority will have agreed press statements to be released to the market and wider public as soon as approval is given.