Will the SFO up its game on overseas corruption?

After criticism of the Serious Fraud Office’s (SFO) failure to bring any cases of overseas corruption, the past couple of months have seen its successful prosecution of bridge-builder Mabey & Johnson for corruption in Jamaica and Ghana, and its stated intention to seek the Attorney-General’s consent to prosecute British Aerospace.

This seems to signal a new determination at the SFO to prosecute these offences, but no doubt these cases will also be used by the SFO to demonstrate the full consequences of criminal investigation and prosecution, in contrast to the civil outcome it states that it wishes to reach in cases where companies bring overseas corruption problems voluntarily to its attention.

In July the SFO issued a guide, Approach to Dealing with Overseas Corruption, which seeks to encourage companies with an overseas corruption problem to self-report. It states that “we want to settle self-referral cases… civilly wherever possible”. The possibility of a company apparently being able to avoid criminal proceedings by reaching a civil settlement with the SFO is controversial, but is this, in fact, what the SFO is offering?

Where a firm has corruptly obtained a contract, it is liable to civil proceedings under the Proceeds of Crime Act 2002 to recover the proceeds. The SFO has to date only dealt with one case of any type on this basis (Balfour Beatty, which related to payment irregularities in an overseas subsidiary), but the guide is clear evidence of the intention of the SFO to deal with more cases in this way.

There are doubtless advantages to a firm if it can deal with a corruption issue on a civil, as opposed to a criminal, basis. The guide identifies such benefits as avoiding the full rigours of a criminal investigation, prosecution, conviction and confiscation, and avoiding the mandatory debarment provisions under the EU Public Procurement Directive that would follow conviction. However, whether the civil process is in fact an alternative to the criminal process will depend on whether the company ever ran the risk of prosecution in the first place.

It is well-established that a firm will only bear criminal liability if one or more of its “guiding minds” (normally a director) has personal criminal liability. Thus a company can only be convicted of corruption if the prosecutor is able to establish the guilt of somebody sufficiently senior within the organisation to be regarded as a guiding mind.

Is the SFO offering the prospect of a civil outcome in these circumstances? It would appear not. The SFO identifies the situation where “board members of the corporate had engaged personally in the corrupt activities, particularly if they had derived personal benefit” as one of the exceptions to its desire to settle self-referral cases civilly.

Even if a firm self-reports and is dealt with on a civil basis, it does not follow that individuals will escape prosecution. The SFO states that there are no guarantees, but there is no inconsistency in this. Individuals involved in corruption will always be vulnerable to prosecution, whereas the vulnerability of a company will depend on the seniority of the individual concerned, although in deciding to self-report, a firm may seem to be hanging individuals out to dry.

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It is clear from the outcome of the Mabey & Johnson case that in future the SFO will act as both prosecutor and regulator to help produce a new corporate culture and bring about behavioural change.