A DPA is an agreement between the prosecutor and a company (they do not extend to individuals) that a criminal prosecution for an economic offence (for example bribery, corruption, fraud, or money laundering) will be deferred or postponed if certain conditions are met (for example payment of substantial penalties, making reparation to victims, undertaking reform to prevent such conduct occurring again, and submitting to regular reviews and monitoring). The Government intends to make the legislation retrospective, so DPAs should be available for prior conduct so long as no proceedings have yet commenced.  DPAs are an enforcement tool which have already been adopted and utilised in the US, raising $2.5 billion a year in penalties.

The Government will require the Director of Public Prosecutions (DPP) and the Director of the SFO to produce a Code of Practice for Prosecutors on DPAs. Clearly, this will need to address the circumstances in which a DPA (rather than a full criminal prosecution) will be the preferred enforcement route.  In addition, the Sentencing Council will be asked to produce sentencing guidelines for offences committed by an organisation that are likely to be encompassed by DPAs. 

The DPP or the Director of the SFO must personally exercise the power to enter into a DPA and will be required to hold a preliminary hearing in private before a judge to determine if it would be in the “interests of justice” to agree the DPA and whether the proposed draft conditions of the DPA are “fair, reasonable and proportionate”. If a judge determines that a DPA is appropriate, the terms of the DPA must subsequently be confirmed in open court and must be published, in order to ensure full public transparency of the wrongdoing and agreed sanctions and to meet criticisms – often based on U.S. DPAs – that DPAs allow prosecutors to circumvent the judicial process by reaching an agreement with a defendant out of court and out of the public eye.

Upon the expiry date of a DPA, the prosecutor will publish details of how the DPA has been complied with. If there is a breach of the DPA, this will be publicised and can be contested.  Significant breaches of a DPA will need to be dealt with by a judge.  The options available to a judge on a finding of a breach will be provided for in the legislation. Judicial approval will be required for any proposed variation or termination of a DPA. There will be no right to appeal any judicial ruling in this process.

The implementation of DPAs in the UK is particularly timely, given the relatively recent updates to the SFO’s policy on self-reporting, which set out that self-reporting is no guarantee that a prosecution will not follow.  The Government hope that DPAs will ultimately enable prosecutors to secure tough penalties for wrongdoing and ensure reparation for victims, without the uncertainty, expense, complexity or length of a full criminal trial. Organisations will be encouraged to self-report wrongdoing and be held accountable for their actions but without employees, customers, pensioners, suppliers and investors being unfairly affected and penalised by the impact of a lengthy trial and conviction.  DPAs should also ensure more offenders are held to account as the number of cases that can be prosecuted and pursued to full trial is limited.

An important benefit of a DPA is that, as it is not a criminal offence, it will not trigger mandatory debarment under the EU Public Procurement Regime. The Government has warned, however, that a DPA may still be a “potential factor” in deciding whether to exclude a company from public procurement tenders on a discretionary and case by case basis.

There are however concerns over DPAs, including that there is no certainty that a negotiated DPA will be approved by a judge; the fact that any admissions made during the DPA negotiations could possibly be used against the company in any subsequent criminal proceedings; DPAs will be made public and so reputational damage is likely to be significant; and DPAs can be used against a company or individual in civil proceedings.

Evidently, the Government will have to ensure that the DPA process is sufficiently clear and consistent to encourage companies to self-report, and that the operation of justice is transparent and open to public scrutiny. 

Companies can derive some comfort from the fact that the Government does not intend to require waiver of legal professional privilege as a condition to the DPA nor require an admission of guilt, which are other differences between the UK and US models (in the US commercial entities often find themselves waiving legal privilege in order to demonstrate cooperation with an investigation). However, a UK prosecutor might still invite voluntary disclosure of privileged materials, and admissions can nonetheless be made. Particular care must be therefore taken, and questions of whether to self-report, privilege and confidentiality will need to be closely considered on the facts of each case.

OUP’s international division includes Kenyan-based Oxford University Press East Africa (“OUPEA”) and Oxford University Press Tanzania (“OUPT”), both of which were wholly owned subsidiaries of OPL. In 2011, OUP became aware that OUPEA and OUPT had used illegal methods to win public tender contracts to sell educational publications between 2007 and 2010. OUP launched an investigation immediately, instructing independent lawyers and forensic accountants to undertake a detailed investigation.

Following the investigation, OUP voluntarily reported concerns to the SFO in November 2011. The SFO then required OUP to follow a procedure based on its published guidance “The Serious Fraud Office’s Approach to Dealing with Overseas Corruption”. This process involved numerous interviews and an extensive review of documentation and electronic data relating to public tender contracts, all of which had to be completed to the satisfaction of the SFO and paid for by OUP. In addition, because two of the tenders over which OUP had concerns were funded by the World Bank, OUP voluntarily reported a potential breach of the World Bank’s Procurement Guidelines, with the World Bank also requiring OUP to carry out an investigation.

When OUP presented the findings of their investigations to the SFO and the World Bank, both the SFO and the World Bank decided that payments had been offered and made by OUPEA and OUPT, directly and through agents, with the intention of inducing recipients to award them competitive tenders and publishing contracts for schoolbooks.

OUPEA and OUPT, as wholly owned subsidiaries, paid dividends and fees to OPL. Consequently, under the UK money laundering regime, OPL had received and would continue to receive, criminal property (arising from the acts of bribery and corruption). Accounting examinations allowed the SFO to determine what benefit OPL had received and the amount that should therefore be recovered. A civil recovery order was made by the High Court for £1,895,435, along with the SFO’s costs of £12,500 for pursuing the order.

The SFO listed a number of reasons why civil recovery, rather than a criminal prosecution, was imposed on OPL. Some of the most notable included:

• Credit was given to the fact that OUP had conducted itself in a manner which adhered to the SFO’s published guidance on self reporting matters of overseas corruption.
• There was no evidence of board level knowledge or connivance within OUP of the corrupt practices.
• The products supplied were of a good standard and provided at “open market” value. This meant that the goods had not been sold at over-inflated prices or were goods which were unsuitable or not required.
• The test under the Code for Crown Prosecutors in relation to the case meeting the criteria to prosecute had not been met, and was unlikely to be met, in the future.

The SFO also bore in mind OUPEA’s and OUPT’s debarment from participating in future World Bank funded tenders for three years, which formed part of a Negotiated Resolution Agreement between OUP and the World Bank.  OUP also introduced enhanced compliance procedures, which will be subject to review by a monitor. This independent monitor will report to David Green QC within 12 months, along with a separate report to the World Bank. OUP also made a £2 million contribution to not-for-profit organisations for teacher training and educational purposes in sub-Saharan Africa.

It is worth noting the SFO’s approach to this case. The SFO’s published guidance on self reporting overseas corruption states that the SFO will seek to settle self-referral cases civilly wherever possible, if the organisation in question adopts the appropriate approach to the investigation of the suspected corruption.  OUP strictly adhered to this guidance, with the SFO listing this adherence as one of the reasons for pursuing a civil recovery order. In addition, the case shows that the SFO were keenly aware of the resource implications of pursuing the case against OUP further. The SFO highlighted the extensive resources needed to facilitate further investigation into the matter, particularly given the cross-jurisdictional nature of the corrupt practices. The use of civil recovery was seen as a “better strategic deployment of resources to other investigations which have a higher probability of…criminal prosecution”. The details of the Order made by the High Court, along with the claim setting out the basis of proceedings have been made public, following criticism of a lack of transparency when civil recovery has been used previously.

The OUP were not the first publisher to be fined for corrupt practices in the sale of educational materials in South Sudan. In 2011, Macmillan Publishing came to a similar settlement with both the SFO and the World Bank, following a voluntary report to the SFO. The Macmillan case also involved the use of bribes to unlawfully influence the award of tender contracts. Macmillan closely followed the SFO’s published guidance whilst investigating the extent of the corruption and the eventual settlement included the appointment of an independent monitor and debarment from World Bank funded tenders. It is likely that OUP sought to follow the same approach on the discovery of the corrupt practices of its East African subsidiaries. However, Macmillan’s fine of £11.26 million was much larger, despite Macmillan self-reporting the corporate case to the SFO.

The level of fines imposed, the cost of the SFO and World Bank investigations and the continuing costs of the independent monitors, along with the attendant negative publicity, means that OUP and Macmillan paid a heavy price for self-reporting to the SFO. These costs stand at odds with the absence of a legal obligation to self-report. The SFO’s guidance, and continued stance, is to encourage commercial organisations to self-report instances of corruption and bribery. Some of the stated benefits include the ability to control any adverse publicity arising from the corruption and the use of civil rather than criminal proceedings. It is noteworthy that both OUP and Macmillan received credit in the SFO’s press releases for their co-operation. However, the mainstream media still widely reported the corrupt practices of the subsidiaries in both cases. Until the SFO brings a criminal prosecution against a corporate who has failed to self-report, there are no cases to serve as a yardstick against which the benefits of self-reporting can be quantified and judged.