Michael O'Kane discusses which immunity model the Office of Fair Trading should adopt in dealing with illegal cartel activity

The Enterprise Act 2002 is the first statute to codify the granting of immunity to defendants who have committed serious criminal offences.

Following on from the successful 1993 US Department of Justice model, the Office of Fair Trading (OFT) will offer immunity to defendants who come forward and confess their full role in illegal cartel activity.

This unusual technique for the obtaining of evidence is indicative of the difficulty that prosecuting agencies have had in many jurisdictions, detecting and successfully convicting those companies or individuals involved in cartel activity.

For example, in the US the predominant legislative measure governing this area was the Sherman Antitrust Act of 1890.

Throughout the course of the 20th century, this Act was invoked infrequently, largely because of the great difficulty the Department of Justice had in discovering the furtive cartel activities of senior company members.

In August 1993, the Department of Justice's antitrust division tried a new tactic and instigated a corporate and individual leniency programme.

Under this programme, if a corporation and/or an individual came forward and admitted involvement in cartel activity, they could obtain complete immunity from prosecution, provided they complied with certain conditions.

Largely as a result of this measure, since 1993 the number of investigations and successful prosecutions in the US in relation to illegal cartel activity has blossomed.

Since 1997, the division has imposed fines of more than $2 billion.

And since 1999, more than 75 years' imprisonment has been imposed on individuals, and the average jail sentence now exceeds 18 months.

Of course, offering deals in this way in a criminal environment is nothing new to the US justice system where there is a well-developed plea bargain culture.

In the UK, where the culture is different, how will it be done?

The UK procedure will be handled by the OFT.

Guidelines have been published on its Web site.

These guidelines set out the procedure to be followed should an individual wish to become a 'whistleblower'.

In essence, the current procedure is as follows:

- The individual must contact the director of cartel investigations at the OFT;

- The director must then give an indication as to whether immunity may be granted;

- The individual is then interviewed, and;

- After interview the individual is then told whether the OFT is willing to offer immunity.

Immunity will only be offered if the individual satisfies the following:

- Admits participation in the cartel offence;

- Provides the OFT with all information available on the offence;

- Maintains continuous and complete co-operation throughout the investigation;

- Has not coerced another individual to take part in the illegal activity, and;

- Refrains from any further participation, except as directed by the OFT.

The system appears deceptively simple but the practicalities are such that it will quickly be seen to be unworkable in its current form.

For example, there is an absence of any suitable safeguards for the individual from the procedure.

It is difficult to understand why someone coming forward and disclosing to the OFT details of criminal activity in which they have been involved is not afforded the protections of code C of the Police and Criminal Evidence Act (PACE).

Code C requires the investigator who suspects an individual of crime to caution him, inform him of his rights and tape-record any interview.

This is not just a point of principle.

The OFT reserves the right in the guidelines to use the interview against the individual where the immunity offer is withdrawn.

It is difficult to envisage a criminal court allowing the contents of such an interview to be admitted in circumstances where the individual has not been afforded the right to legal advice, cautioned, or the interview tape-recorded.

The OFT would do well to learn a lesson from the recent decision of R v Gill and Gill [2003] EWCA Crim 2256 CA and the effect of that decision on a similar immunity procedure used by the Inland Revenue.

For nearly a century, the Revenue, when investigating individuals for alleged deliberate underpayment of taxes due, could invoke the 'Hansard procedure'.

This allows for an individual to be interviewed by the Revenue, confess all, pay any monies due as agreed in settlement with the authorities, and thereby escape criminal prosecution.

Although not codified by statute, the procedure has evolved over the years into a relatively successful system.

On 12 March 2002, the Gill brothers were convicted at Snaresbrook Crown Court in London of cheating the Revenue.

During the course of the investigation, they were interviewed under the Hansard procedure and made certain admissions.

The Gills argued that they ought to have been afforded the protection of code C of PACE because they must have been suspected of having carried out criminal offences.

However, the trial judge allowed these admissions to be used in evidence as in his view the Hansard procedure was essentially a civil and not a criminal process.

In the Court of Appeal, the decision was overturned as the court formed the view that tax fraud involved the commission of a criminal offence, so that Revenue investigators were 'charged with the duty of investigating offences' within the meaning of section 67(9) of PACE.

Accordingly, they held that code C applied to the Hansard interview.

As a result of Gill, the Revenue special compliance office now offers all individuals subject to the Hansard interview the protections of code C, which are set out in their new standard letter.

The Hansard procedure before Gill was similar to the current procedure for granting immunity under the Enterprise Act 2002.

To instil confidence in the immunity regime of this Act, the OFT would be wise to absorb the lessons from Gill.

It should either offer whistleblowers the same protections now being offered by the Revenue or abandon the desire to be able to use the contents of this interview as evidence against the whistleblower in any subsequent prosecution.

Michael O'Kane is a member of the Enterprise Act Team at London-based law firm Peters & Peters