Back in May, we reported that the new Director of the SFO had offered support to the US-style deferred prosecution agreements (“DPAs”). DPAs aim to make out-of-court settlements easier by allowing defendant companies to avoid criminal prosecution instead agreeing a series of conditions. These conditions usually including paying a civil penalty, handing back the profits earned from the alleged wrongdoing, compensating victims and implementing measures to prevent future offending (such as improving governance structures, appointing monitors or reporting requirements.
In the UK, the Ministry of Justice are currently considering whether DPAs should be introduced for use in relation to various economic crimes, including bribery and corruption. On 17 May 2012, a consultation paper was published entitled “Consultation on a new enforcement tool to deal with economic crime committed by commercial organisations: Deferred prosecution agreements”. The Ministry of Justice say that “[its] ambition is to ensure that a higher proportion of economic crime is identified, investigated and dealt with. DPAs are a tool that seeks to achieve these goals whilst being transparent, clear and consistent”.
When considering whether to offer a DPA, it is proposed that the Serious Fraud Office (SFO) should be subject to specific guidance and it is likely that they will be required to consider: the nature and seriousness of the offence; the level of premeditation and whether any attempt was made to hide the wrongdoing; how widespread within the commercial organisation the wrongdoing was and the seniority and number of the perpetrators; any losses to innocent third parties; the likely impact on the commercial organisation of prosecution and its financial health; any action being taken in relation to the wrongdoing in other jurisdictions; what action has been taken by the commercial organisation and the level of commitment to resolving the issues, recovery and restitution of benefits and improving compliance; and previous convictions and previous DPAs.
Those in favour say that DPAs will encourage companies to self-report. This means that more offending will come to the SFO’s attention and it will save the SFO the time and expense of securing convictions. However, companies may still be reluctant to self-report as it is unlikely that the offer of an DPA will be a right upon self-reporting (the SFO will only be offer a DPA where it is in the public interest to do so) and the SFO can still choose to prosecute following a company self-reporting. Some commentators believe that DPAs allow companies to get off lightly and avoid many of the penalties that could follow a conviction (such as debarment from public procurement). Reputational damage should still follow, but may be less than the damage following a prosecution.
The consultation provides some sample clauses for DPAs, many of which are strict and may put companies off self-reporting. These sample clauses include requirements for companies to pull out from the market in which the offence was committed or appoint an independent monitor to work within their organisation, both of which would clearly be costly. Because bribery often occurs internationally, it will be important for companies to ensure that the DPAs bind regulators in other jurisdictions, so that separate enforcement action is not taken against the company overseas.
It is intended that each DPA will be approved by the Court (and thus have more judicial involvement that those in the US) and made public. The Court will therefore play a role in determining whether the proposed terms appear “fair, reasonable and proportionate” and are “in the interests of justice”. It may be that Judges take a different view than the SFO in relation to a specific DPA and they may force already negotiated DPAs to be amended.
It is proposed that breach of a DPA will not be a criminal offence but would lead to a financial penalty; additional or varied conditions; extension of the period of the DPA; and/or termination of the DPA (in which case prosecution for the original wrongdoing could follow with companies being bound by the facts agreed in the DPA).
Agreed DPAs will of course have to document what a company has done wrong. DPAs may therefore be used against companies in civil proceedings by third parties affected by the company’s conduct, as evidence of its wrongdoing. This could end up costing companies more than prosecutions, which if pursued may have been successfully defended or the alleged wrongdoing reduced. DPAs could also be used against any individual personally implicated in the wrongdoing.
The consultation seeks amongst other things, suggestions on how DPAs can be used to encourage companies to self-report. The consultation is open until 9 August 2012 and responses can be submitted at https://consult.justice.gov.uk/digital-communications/deferred-prosecution-agreements. The intention is that legislation will be made in 2013/14 to introduce DPAs to England and Wales in 2014/15.