Deferred Prosecution Agreements – Following the US?

Posted on Tuesday April 2, 2013

Deferred Prosecution Agreements (DPAs) are a much-used tool in the United States when it comes to the governance of corporates and alleged wrong doing.

According to some reports these agreements allowed the US Department of Justice to bring in $2.3bn in 2010. From 2014 a similar system, subject to Parliamentary approval, will be in operation in the UK.

In The UK this adds to the recent armoury of legislation that targets corporates such as the Bribery Act and Corporate Manslaughter Act. However being a potentially self-regulated issue, will there be enough certainty and clarity for a company to make a disclosure of wrong-doing to the prosecuting agency?

It may be useful for international corporates to have this tool available to their UK companies and subsidiaries as it may create a more realistic prospect of reaching a global settlement in cross-border criminal investigations. It may also be of interest to companies involved in public procurement where a conviction for corruption can result in mandatory debarment in certain jurisdictions.

DPAs act as a form of “plea bargain” and are designed to ensure that unacceptable corporate behaviour is tackled in a way which will allow a company to avoid immediate prosecution if there is an acceptance of wrongdoing. The company will have to pay financial penalties, undertake internal reforms and may have to agree to external monitoring, disgorge profits or make donations to third parties.

Essentially the idea flows from the introduction of the Bribery Act and is designed to encourage the self-reporting of white-collar crime, and to ensure fines are paid in the UK rather than overseas.

The UK government has used the system which is in place in the US as a role model for good reason as it has proved that there is scope for corporate self disclosure, self investigation, the imposition of serious fines and a monitoring process to avoid repeat offending.

The system which is likely to be adopted in the UK will however differ from that in the US as there will greater judicial involvement in the process which will be scrutinised by an independent judge upon hearing evidence. Essentially a court will decide the following:

  • Whether it is in the interests of justice to sanction a DPA;
  • Whether the proposed DPA is ‘fair, reasonable and proportionate’;
  • Whether a DPA should and could properly be varied;
  • Whether there has been a breach of a DPA; or
  • Whether a DPA should be terminated.

Therefore it may well be out of the hands of the UK prosecutor as to the final outcome for the company and there may be a degree of uncertainty of whether or not there will be a prosecution. This may deter a company from providing the initial disclosure to the prosecutor.

Additionally, to enter into a DPA the company will have to accept the allegation of the criminal charges set out by the UK prosecutor. Accepting criminal liability may give rise to the risk of prosecution from another jurisdiction. In recent years the US Department of Justice has pursued UK companies for bribery and corruption relating to international matters. This again may deter the company from publically admitting the wrongdoing.

It may be that when finally introduced in the UK next year the possibility of “double jeopardy” will have been addressed.

The introduction of the DPA into the UK judicial system is therefore not going to allow for any easy decisions to be made by the corporate.

However they will be an additional tool to fight against corporate crime and the DPA will have the advantages of penalising companies, enabling swifter restitution and rehabilitation, and reducing the risks to innocent directors, employees, and stakeholders.

Mackrell Turner Garrett