Many firms are looking for ways to ensure individuals are treated fairly in an internal investigation. Could the much-maligned practice of “Maxwellisation”, borrowed from public inquiries, offer a solution?

Internal investigations can lead to significant consequences for individuals. Depending on the investigation’s findings, an individual may find themselves subject to enhanced supervision, a change to their role or responsibilities, disciplinary action adjustment to remuneration or other adverse consequences.

Often, by the time an individual has an opportunity to make their own representations in a disciplinary process, the narrative has been set, the authorities or regulator informed and decisions made. Given the severity of the potential consequences for individuals, firms are increasingly looking for ways to ensure that individuals are treated fairly in the prior internal investigation. Often, this means enabling the individual to comment on an investigation’s findings before they are settled.

This may not always be appropriate, such as where a criminal investigation is afoot. However, where it is appropriate, one approach is to adopt the “Maxwellisation” process often used by public inquiries.

What is “Maxwellisation”?

“Maxwellisation” is the process of sending proposed criticisms of an individual to them for their comment. Oddly, despite being a feature of many public inquiries over the past 30 years, the process is not required by English law. The case of Maxwell v Department of Trade and Industry [1974] provides that an individual must be afforded the opportunity to respond to any criticisms an inquiry may make of him or her. But this can take place during the evidence-gathering phase, for instance through questions put to a witness.

Furthermore, the process itself has acquired a bad name in recent years. In the UK, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) were heavily criticised by Parliament and the press for allowing senior managers to submit over 1,600 representations on their report into the failure of HBOS; a process that caused significant delay to the report’s publication. Similarly, there was a chorus of complaints after the Chilcot report on the Iraq war was delayed by repeated rounds of comments from individuals criticised in the report. In consequence, in 2016, the UK Treasury Committee commissioned Andrew Green QC at Blackstone Chambers in London to work out how the process could be avoided or accelerated.

What does the process offer?

Yet, in our experience, done right, a Maxwellisation process for an internal investigation can be valuable. There are three main reasons for this.

• The process affords an additional element of procedural fairness for the individual, enabling them to understand the “charges” and the evidence against them in a way which may not have been clear in the original fact-finding stage. They can then rebut those findings that they perceive to be unfair and provide any additional context or information that they may not have recalled or disclosed at their earlier interview.
• Global regulators and authorities are increasingly focused on individual accountability. From the Yates Memo and the DOJ’s cooperation policy in the US to the Senior Managers and Certification Regime in the UK, regulators and authorities are prioritising holding individuals to account, raising the stakes and ramifications for individuals. For instance, in considering whether to grant individuals “Senior Manager” status, the UK regulators may consider any intelligence gathered through enforcement work, even if the individual was never personally investigated. Perhaps most importantly, the process can make the investigation’s findings more robust and credible for both internal stakeholders and regulators. Any misapprehensions or mistakes can be corrected and context considered. Ultimately, all those involved can be satisfied the investigation team’s findings have been properly tested.

How do you do it?

Essentially the process involves asking the individual to comment on the findings that are adverse to them. A firm will need to decide in advance what amounts to an “adverse” finding, how they should be communicated to the individual and what supporting documents made available.

The process needs to be carefully and robustly managed to ensure it does not fall foul of the same pitfalls that afflicted the HBOS and Chilcot inquiries. The guidance in Andrew Green QC’s report advocates setting short but fair time limits for representations to be submitted, usually allowing only one round of controlled representations and avoiding an ongoing dialogue about the investigation’s conclusions.

Provided those challenges are faced head on, in our experience, the process can be valuable. Done correctly, it need not add a significant amount of time to an investigation and the benefits it confers, both for the firm and the individual, can be material.