SFO unveils plans for US-style negotiations

The Serious Fraud Office (SFO) has for the first time formalised its approach towards businesses that come forward with bribery and corruption issues in return for leniency.
 
In an operational note released today, the SFO confirmed that it plans to move towards a US-style system where businesses can self-report corruption issues and then negotiate a settlement.
 
As part of the incentive for self-reporting, the SFO says it will use civil penalties such as fines "wherever possible" instead of criminal sanctions.
 
Paul Lomas, a litigation partner at Freshfields Bruckhaus Deringer, said the new regime signals a step change in the SFO's approach to corporate corruption by encouraging businesses to talk by a "carrot and stick" approach.
 
"Essentially, the new system offers cooperating companies agreed, and presumably lower, civil remedies in preference to criminal sanctions," Mr Lomas said.
 
The only precedent for a negotiated approach is in the case of Balfour Beatty, the UK construction group that recently negotiated to pay a fine to settle a bribery investigation relating to an Egyptian building project.
 
Tom Stocker, a director at law firm McGrigors, said: "This is a significant development for the SFO. A move towards negotiated - and mostly civil - settlements has been on the cards for a while but this is the first time the SFO has actually confirmed its commitment on paper and detailed how it is going to work."
 
Mr Stocker said the move was a welcome one and would lead to greater self-reporting from UK businesses. It will also please SFO critics who argue the agency spends too much time and money pursuing criminal prosecutions.
 
However, although the emphasis for self-reported issues will be on civil settlements, Rod Fletcher, a partner at RJW, said companies must still take "a leap of faith" because the SFO could subsequently decide to launch a criminal prosecution.
 
This is because although the guidelines say the regulator will pursue civil remedies "wherever possible" it reserves the right to change its position.
 
Mr Fletcher said: "It's a step in the right direction but we need more guidance about how things will work in practice.
 
Mr Stocker said: "You could get to a situation where a company self-reports and the SFO decides a criminal prosecution is warranted and uses the information it has just been given to help build its case."
 
Mr Lomas agreed the procedures were "rather general" but he said companies "can be pretty confident that the SFO are going apply it in a reasonable manner."
 
"They will want the process to be credible to companies and their advisers and for it to become trusted. No doubt they will clarify, and possibly harden, the approach in the light of experience but that is likely to be progressive and publicised in due course."
 
The SFO also announced a new procedure for businesses that discover corruption issues during due diligence before a takeover.
 
If the acquirer can demonstrate its own good record and a commitment to eradicating the problem at the target, it can approach the SFO and negotiate an amnesty period to make changes free of prosecution.