UK: Global Settlements

Last Updated: 4 March 2010

Article by Monty Raphael, Special Counsel, Peters & Peters Solicitors


1. Overall global settlements are clearly desirable to save time and money. Delinquent businesses want to draw a line under their wrongdoing and move on. That is one approach, another is the view that global settlements are imposed by governments seeking to impose extra-territorial jurisdiction and "universal" standards. Certainly there are no universal standards, there is no global harmony in crime control, and no homogeneity of practices, concepts of criminality, jurisprudence or punishment.

2. Companies that trade globally, may bribe globally, pollute globally, price-fix globally. They can only hope that when the day of reckoning comes they will be able to negotiate with the strongest of the leading state powers in whose crosshair sights their conduct has appeared.

3. Until the day when grand corruption ranks alongside war crimes, genocide and torture and merits an international tribunal, we must make do with adapting the matrix of bilateral and multilateral treaties to this purpose. It must be borne in mind that state parties can always contract one another on a case by case basis. Again the phrase "global settlements" pre-supposes a willingness on the part of the corporate parties and, where appropriate, individuals to co-operate in this process.

4. No settlement is possible without consensuality. This requirement itself raises numerous difficulties as the state, corporation and individuals may all have different and often conflicting aspirations as to outcomes. A further complication is that state parties may wish to compete for jurisdictions, corporations will wish to maintain a competitive position to avoid debarment and, of course, individuals to avoid the most severe of sanctions, loss of liberty.

5. In the case of corruption the developed world is by no means constrained in the pursuit of punishing the supply side of corruption. However, priorities, political will, technical capacity, resources and necessary procedures all vary from country to country, even in the OECD. Add to this mix the communal views of the EU, Council of Europe and some supra-national agencies like the UN or the World Bank and you have numerous norms all vying for credibility, if not supremacy. Pragmatism and per case scenarios are all that is possible at the present time. And yet, in advising any of the parties, we as lawyers are asked to devise strategies that involve predicting likely outcomes.

Key considerations in global settlements:

1. Corporate liability

6. Where criminal convictions carry collateral consequences in addition to fines, such as debarment, the question of corporate criminal liability becomes important. However, in some jurisdictions corporate criminal liability is not available at all. Such jurisdictions adhere to the principle societas delinquere non potest, "a legal entity cannot be blameworthy", whereby corporate delinquency is addressed by means of administrative sanctions with criminal liability limited to the responsible individuals.

7. In contrast, the USA follows the doctrine of respondeat superior whereby a corporation may be convicted of a crime when one of its agents has committed a criminal act (i) within the scope of his employment, and (2) for the benefit of corporation.

8. In the UK the picture is more complex. For some offences, a company can be held criminally liable on the basis of strict liability.  For some offences which involve a fault element, a company can be held criminally liable on the basis of the doctrines of vicarious liability and delegation. For serious offences which involve a fault element, a company can only be held criminally liable if a high-ranking officer or employee of the company satisfies the fault element of the offence – the "identification" theory. 

9. Austria, Netherlands, Denmark, Finland, Switzerland, France have recently introduced some form of corporate criminal liability.

2. Sanctions

10. In different jurisdictions different offences attract different sanctions. Debarment is one of the more severe sanctions posing high risk of loss of business. Needless to say the possibility of debarment will feature prominently in considerations on how to structure a settlement in multi-jurisdictional investigations.

11. Of particular concern is Public Procurement Directive (2004/18/EC) (the "Directive"). Article 45 of the Directive provides:

12. "Any candidate or tenderer who has been the subject of a conviction by final judgment of which the contracting authority is aware for one or more of the reasons listed below shall be excluded from participation in a public contract".

13. The following offences are on the list:

(a) participation in a criminal organisation, as defined in Article 2(1) of Council Joint Action 98/733/JHA;

(b) corruption, as defined in Article 3 of the Council Act of 26 May 1997 and Article 3(1) of Council Joint Action 98/742/JHA respectively;

(c) fraud within the meaning of Article 1 of the Convention relating to the protection of the financial interests of the European Communities;

(d) money laundering, as defined in Article 1 of Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering.

14. Unlike previous EU public procurement directives, where debarment was optional, Article 45 mandates the exclusion of suppliers convicted of these offenses.

15. Regulation 23 of the Public Contracts Regulations 2006 implements Article 45 in England. Paragraph 2 of the Regulation accords very limited discretion to contracting authorities to disregard the prohibition only in cases where there are "overriding requirements in the general interest which justify doing so".1

16. In the USA, on the other hand, debarment is clearly discretionary. This is expressly specified in section 9.402 of the Federal Acquisition Regulation 2005:

"(a) Agencies shall solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only. Debarment and suspension are discretionary actions that, taken in accordance with this subpart, are appropriate means to effectuate this policy.

(b) The serious nature of debarment and suspension requires that these sanctions be imposed only in the public interest for the Government's protection and not for purposes of punishment."

17. Section 9.406-1 further provides that "the existence of a cause for debarment, however, does not necessarily require that the contractor be debarred; the seriousness of the contractor's acts or omissions and any remedial measures or mitigating factors should be considered in making any debarment decision". The section goes on to list mitigating factors for consideration of the debarring official prior to arriving at the debarring decision.

18. The list includes, whether the contractor had effective standards of conduct and internal control systems at the time of the improper activity; whether the contractor brought the improper activity to the attention of the appropriate Government agency in a timely manner; whether the contractor cooperated fully with Government agencies during the investigation; whether the contractor has paid all criminal, civil, and administrative liability for the improper activity; whether the contractor has taken appropriate disciplinary action against the individuals responsible for the improper activity; whether the contractor has implemented or agreed to implement remedial measures; whether the contractor has instituted or agreed to institute new or revised review and control procedures and ethics training programs; whether the contractor's management recognizes and understands the seriousness of the misconduct giving rise to the cause for debarment and has implemented programs to prevent recurrence.

19. The mandatory nature of the EU debarment rules makes these considerations largely irrelevant. This militates against settlements that have a bearing on the EU Procurement Directive. Unsurprisingly in such circumstances corporates would be minded to resist the charges brought against them.

20. Largely for this reason the Siemens settlement with US and German authorities, which appears to have avoided the EU debarment rules, has attracted practitioners' attention on both sides of the Atlantic. The parent company (Siemens AG) admitted to violating the books and records provisions and avoided a conviction for bribery. Presumably Siemens believed that its plea would not constitute a corruption conviction under article 45 of the Directive. Significantly no Siemens European subsidiaries pleaded guilty to any charges (only non-European subsidiaries did – Siemens Argentina; Siemens Bangladesh; Siemens Venezuela).

21. Fortunately the obstacles posed by the Directive have also caught the attention of the UK government. In his June 2009 speech at the 5th European Forum on Anti-Corruption Secretary of State for Justice, Jack Straw, expressed his concern that the EU procurement rules can act as "a disincentive for businesses to come clean and change their behaviour, and that they are not necessarily applied consistently across the EU". The Secretary of State commented: "I have asked my officials to look into this further – in terms of the practice of other European countries and the implications of new [UK] plea negotiation guidelines issued earlier this year – and we will raise this with our European counterparts".

3. Self-reporting, immunity and penalty discounts

22. The problem with mitigating factors and debarment in Europe is broader. Perhaps with the exception of leniency programmes in cartel investigations, the link between self-investigation, self-reporting, cooperation and sentence/penalty mitigation is not universally established in jurisdictions outside USA.

23. It is only in 2009 that the UK saw two significant developments – the publication of Attorney General's Guidelines on Plea Discussions in Cases of Serious or Complex Fraud and Self-Reporting Guidelines by the Serious Fraud Office, Approach of the Serious Fraud Office to Dealing with Overseas Corruption.

24. The SFO Guidelines offer the prospect of civil settlement an opportunity to manage publicity as enticements for firms to self-report. As the Guidelines acknowledge, civil settlement, rather than criminal prosecution, would also avoid the mandatory debarment provisions under Article 45 of the EU Public Sector Procurement Directive.

25. The aim of the new anti-corruption strategy is to bring about behavioural change within businesses. This is reflected in the terms of the settlement with the SFO which may include restitution; an independent monitor; a programme for culture change and training; possible discussion about individuals; and a public statement agreed by the corporate and the SFO.

26. The Guidelines acknowledge that "[a] very important issue for the corporate will be whether the SFO would be looking for a criminal or a civil outcome". However they go on to state "[w]ithout knowing the facts, no prosecutor can ever give an unconditional guarantee that there will not be a prosecution of the corporate. Nevertheless, we want to settle self referral cases ... civilly wherever possible." Richard Alderman, director of the SFO, offered a list of factors that will be considered in deciding whether a prosecution is appropriate [Talking Corruption with the SFO, ICID Lecture, 20 10 2009]. These were:

the seriousness of wrongdoing;
whether the incident is isolated;
whether wrongdoing is systemic;
whether continuing Board members derived personal profit from wrongdoing;
whether the group had earlier warning regarding inadequacy of its processes;
whether the group failed to report within a reasonable time;
whether the report was full and accurate.

27. However no guarantees are given and, predictably, there has not been a rush of companies to self-report corruption in the UK to date.

28. The SFO's reluctance to guarantee civil outcomes is understandable. Invariably there will be cases where only criminal prosecution would be in the public interest. The problem is in part due to the mismatch of instruments at the disposal of prosecuting authorities. Unlike the United States, the UK does not have deferred prosecution agreements despite the canvassing by the SFO for the introduction of a similar system in the UK (see speech by Vivian Robinson QC, General Counsel at the SFO, International Co-operation in the Investigation of Serious Fraud and Corruption, 13 August 2009).

29. The Guidelines offer the SFO's assistance in achieving a global settlement. Following a self-report, the SFO would want to establish whether the corporate will "want us, where possible, to work with regulators and criminal enforcement authorities, both in the UK and abroad, in order to reach a global settlement?" However it is also made clear that the SFO will not play second fiddle to the US Department of Justice: "If the case is also within our jurisdiction we would expect to be notified at the same time as the DoJ".

30. In his December 2009 speech, tellingly titled The SFO and DOJ 'Special Relationship': The future of UK/US Co-operation against Overseas Corruption and Other Crimes, Richard Alderman observed:

"We have a number of cases where we are looking at global settlements with the US. I hope that we will be able to make some announcements soon. This will show that our commitment to global resolutions is very real and that we are delivering on this."

31. The Guidelines are a welcome step towards aligning the approach of the SFO with the DoJ. However important differences, notably the deferred prosecution agreements, remain. Where authorities cannot guarantee the same outcome of investigations, multinationals will rightly stay cautious in deciding which authority to approach.

4. Prosecutorial discretion

32. An issue related to diverging regulatory "toolkits" is the divergence in prosecutorial discretion across jurisdictions. Inevitably there will be differences in prosecutorial discretion in deciding:

- whether to charge or not;
- which charges to bring;
- whether to indict or not;
- to negotiate guilty pleas.

33. The right of victims to compel prosecution if the charges are dropped will also be relevant.

34. These differences are likely to be most pronounced between the adversarial criminal systems of the common law world and the inquisitorial systems in continental, primarily civil law, Europe. In the latter systems the prosecutorial powers are often diffused among several officials, examining magistrates and the judges. Victims of crime can often file criminal charges directly with courts. This provides an incentive for the prosecutors to file charges.

35. If the judges are reluctant to shed powers to prosecutors in their own jurisdictions, the problem is only likely to be more acute where the judiciary is asked to approve a settlement reached outside jurisdiction.

36. The UK Court of Appeal decision in R. v Whittle and others [2008] EWCA Crim 2560 offers a good illustration. The facts arose from the Marine Hose cartel. The appellants were the three UK executives that were arrested in Texas in May 2007 for violation of section 1 Sherman Act. Each applicant entered into a formal plea agreement with the US authorities, which included their agreement to plead guilty in the US and to a cartel offence in the UK.

37. Each plea agreement provided that the term of imprisonment would be reduced "by one day for each day of the total term of the sentence of imprisonment imposed upon [him] following his conviction for the UK cartel offence". Part of the agreement was that each applicant would plead guilty to such an offence and further that he would not "seek from the UK court a sentence of imprisonment less than that" provided for in the agreement. The sentences provided for in the respective agreements were 2½ years for Whittle, 2 years for Allison and 20 months for Brammar. However, upon return to the UK the three were sentenced as follows: Allison/Whittle each sentenced to 36 imprisonment; Brammar sentenced to 30 months imprisonment.

38. The Court of Appeal reduced the sentences to those specified in the plea agreements, however, not without disapproval:

"Whilst each applicant through Counsel has invited us to reduce the terms imposed by the judge, none has invited us to reduce the terms below the period specified in the agreement into which he entered. It follows that this court has not had the benefit of the kind of argument from counsel to which it is accustomed; we emphasise this is through no fault of theirs. They were acting upon their instructions and their instructions were imposed upon them by the terms of the plea agreements. We have our doubts as to the propriety of a US prosecutor seeking to inhibit the way in which counsel represent their clients in a UK court, but having heard no argument on the subject we shall express no concluded view."

5. Instruments on concurrent jurisdiction

39. Finally, legal instruments may limit the ability of the defence to negotiate a settlement with one or another authority.

40. In the EU the key instrument is the Council Framework Decision 2009/948/JHA on Prevention and Settlement of Conflicts of Exercise of Jurisdiction in Criminal Proceedings, adopted on 30 November 2009.2

41. Article 10(1) of the Decision provides that "when it is established that parallel [criminal] proceedings exist, the competent authorities of the Member States concerned shall enter into direct consultations in order to reach consensus on any effective solution aimed at avoiding the adverse consequences arising from such parallel proceedings, which may, where appropriate, lead to the concentration of the criminal proceedings in one Member State".

42. Effectively the prosecuting authorities of two Member States can agree where to conduct criminal proceedings. No mention is made of the accused's right to make representations or even right to be informed. The matter is left to national law, as confirmed by Recital 17 which states that the framework decision "does not affect any right of individuals to argue that they should be prosecuted in their own or in another jurisdiction, if such right exists under national law".

43. In fact little is provided by way of objective criteria on which the authorities should reach their decision. Article 11 simply states that in order to reach the decision the authorities shall consider "the facts and merits of the case and all the factors which they consider to be relevant". In contrast, the original, January 2009, proposal contained article 15 which provided for criteria to determine the best placed jurisdiction. This included a general presumption in favour of jurisdiction where most of the criminality had occurred. The adopted Framework Decision contains analogous criteria. However the criteria is only in a Recital (Recital 9). Competent authorities should take it into account but are not obliged to do so.

44. Similarly the 2007 Attorney General Guidance for Handling Criminal Cases with Concurrent Jurisdiction between the United Kingdom and the United States provides neither an obligation to consult or reveal information to the defence, nor any rules or principles for allocation of jurisdiction.

45. The instruments offer no guide to businesses to ascertain what types of cases will be investigated or where.

The author acknowledges the assistance of Vlad Meerovich in the preparation of this paper.


1. The Public Contracts Regulations 2006 are available at

2. The Framework Decision is available at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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