25 February 2014
4 min read
Let’s make this clear, we are not in the predictions business. Far from it. In fact, as a firm that has a varied and large workload of cases, it is our job to make sure each case is handled in the strongest, most pro-active way – which often leaves us little time to start making any important-sounding noises about the future.
But people have asked us how we think the legal landscape may change in 2014 and it’s fair to say that we do have a few opinions. We’ve listed them here for your consideration, more as a few points for the reader to chew over rather than to be treated as a checklist to be marked at the end of the year. So while we’re not sticking our necks out, we do feel a few things may become evident between now and 2015.
Firstly, it is likely that compliance will be seen increasingly this year as an essential tactic for a company’s wellbeing - rather than an issue designed to stop them functioning efficiently for profit. The legislation and the agencies that enforce it have made it almost impossible for companies to operate by turning a blind eye or being completely ignorant of their legal obligations. It has taken some time but senior business figures are now starting to recognise that compliance has to be considered a component in the running of a company, just as manpower, raw materials and capital are.
Those who prefer not be aware of this fact are playing an increasingly dangerous game. And there are becoming less and less of them. Directors and CEO’s are now at the forefront of companies’ attempts to make sure they are legally compliant. Due diligence and monitoring of third parties is now working its way higher and higher up the agenda of many CEO’s. This may be for no other reason than that they can be held personally liable but nevertheless it is them who are initiating the focus on compliance. In our experience, many more companies are now making the effort to be legally compliant as early as possible. And even those who do not do this are coming to realise the need to obtain expert legal help the moment a problem arises. This latter approach may not be ideal but it is still more enlightened than the “hear no evil, see no evil, speak no evil’’ culture that pervaded many companies of all sizes a decade or so ago. 2014 will only consolidate the move towards greater compliance.
In the past few years, government agencies have been restructured or reinvented, given greater legislative powers and more technological resources. Their ability to root out companies that are behaving illegally has increased hugely. And it seems as if many more companies are now coming to realise this. Perhaps in response to this, there now appears to be a glut of compliance software on the market.
Whether this is a trend that will continue in 2014 is hard to say. Much will depend on users’ opinions of its effectiveness. In a world where, for example, the UK’s Bribery Act makes any company with a connection to this country responsible for the behavior of its staff, agents, third parties or partners anywhere in the world, it would be impressive if any piece of computer kit could factor out any risk element. Arguably, informed legal advice and the laying down of considered company procedures would be of greater value. But the rise of compliance software does – if nothing else – show that, as an issue, compliance is one that will keep rising this year.
As this year unfolds, it may well be accompanied by the sound of whistle blowing. This is not a new concept. It has probably been with us as long as business – and certainly as long as business crime has been around. But just as the penny seems to have dropped in the corridors of power regarding compliance, it does appear that senior business figures are realising the importance of whistle blowers. This coming year looks like being the one in which whistle blowers are not seen simply as a threat to a company’s wellbeing – they are set to be regarded as a useful tool.
We have written at length previously about how whistle blowing procedures can be introduced, monitored and revised to become a company’s prime source of intelligence about any illegality being committed in its name. As companies are increasingly subject to scrutiny at home and abroad – and as whistle blowers are being given increasing legal protection – directors are coming to appreciate the benefits of a properly-run whistle blowing policy. As the UK authorities adopt US techniques to encourage firms to self-report wrongdoing in order to minimise the penalties, the whistle blower is now more likely to be viewed as someone who can help a company avoid catastrophe rather than the one who can only bring trouble to the table.
Looking abroad, we may well see business figures facing a tougher time of it in foreign lands than they may previously have expected. GlaxoSmithKline’s problems in China, Rolls Royce’s own on-going investigation of corruption allegations against it in China and Indonesia and the prosecution of Siemens executives in Brazil all show that bribery and other forms of business crime are now coming home to roost. No matter how far away the alleged crimes were committed they can no longer be ignored or dismissed by companies. The legislation and the climate of compliance may well see many more foreign nationals being prosecuted abroad in 2014 for corporate misbehavior.
Many a wise man has said that in order to predict the future you have to look to the past. So with that in mind, we have to say that the fall-out from the investigations into the charging practices of A4e, Serco and G4S may have serious implications for the way the UK government puts work out to tender – and then monitors it.
Talking of the government, 2014 will be the year when we are able to judge whether the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) really are an improvement on their derided predecessor, the Financial Services Authority (FSA). This will also be the first full year in operation for the National Crime Agency (NCA); an organisation that will have to prove it can build on its high-profile start. As mentioned elsewhere in this newsletter, the SFO has recently suffered embarrassment: this year it will have to back up its tough talk with some successes.
The SFO’s success rate may or may not depend on deferred prosecution agreements (DPA’s), which are set to come into effect in the UK this year. Under a DPA, a company can admit wrongdoing but escape prosecution if it puts right a number of issues and meets a number of conditions laid down by the authorities in a certain timescale.
What will their effect be? It is hard to say. As we said earlier, we don’t really do predictions.