Although familiar in the US, Deferred Prosecution Agreements (DPAs) have only been a feature in English law for just over two years and only one DPA has been approved to date. We explore below the key characteristics of UK DPAs and highlight some differences from the US system.
Corporate Prosecutions in the UK
Part of the background to DPAs is the difficulty in the UK in securing corporate convictions. A company will only be found criminally liable for an act or omission if it can be shown that the company's "directing mind and will" had knowledge of and was complicit in the misconduct1. This hurdle is higher than in the US, and is difficult for the prosecution to prove, especially where there is no evidence of participation by senior management.
What is a DPA?
A DPA is an agreement between a prosecutor and a company charged with a criminal offence. Provided the DPA is approved by a judge, the proceedings are automatically suspended. In order to avoid prosecution, the company which has been granted a DPA must comply with the terms of the DPA for a defined period. Full compliance will mean that the proceedings are discontinued.
When were DPAs introduced?
Unlike in the US, DPAs in the UK have a recent full statutory footing, having been introduced in February 2014 by the Crime and Courts Act 2013. At the same time, a Code of Practice for Prosecutors was published, which sets out criteria for negotiating DPAs; applying to court for approval of DPAs; and overseeing compliance with DPAs. Previously, the Serious Fraud Office (SFO) had agreed civil recovery orders for some corporate prosecutions, e.g. Innospec (2010) and Mabey & Johnson (2012), so this represented a significant new development.
In what circumstances is a DPA granted?
A court must be satisfied that it is in the "interests of justice" for the prosecution to be deferred; and the DPA's terms are "fair, reasonable and proportionate", otherwise it can reject the agreement. This role is seen as more crucial to the process than the perceived "rubber stamping" by US Courts.
DPAs will involve the company avoiding prosecution for offences including bribery, fraud or other economic crime, if it complies with approved conditions. Such conditions could involve co-operation with any criminal investigation, payment of financial penalties and/or compensation, and/or the imposition of monitors, and/or the introduction (or improvement) of a compliance regime.
In November 2015, the Crown Court approved the first DPA in the UK, which was entered into by the SFO and ICBC Standard Bank (ICBC). This has been promoted by the SFO as a textbook example of how a cooperative approach satisfies the criteria for the grant of a DPA.
How can you show that a DPA is in the "interests of justice"?
ICBC became aware of several suspect transactions in Tanzania and self-reported to the SFO within one month of making this discovery. At the same time, ICBC also conducted an internal investigation and shared its findings with the SFO. The judge and the SFO believed that the most important factors in assessing whether it was in the "interests of justice" to approve the DPA were the prompt self-report, the fully-disclosed internal investigation and the extent of ICBC's co-operation with the SFO.
It appears to be critical that a company's management acts decisively and ethically when confronted with possible criminal conduct in the organisation and ensures that an internal investigation is launched immediately.
Co-operation is a key factor that a prosecutor will take into account when deciding whether to invite a company to enter into a DPA and the SFO is sending the message that only full co-operation by an implicated company will suffice.
How can you show that the terms of a DPA are "fair, reasonable and proportionate"?
The terms of the DPA must be "fair, reasonable and proportionate" and such terms will normally include compensation for victims (if possible) and a financial penalty.
In deciding the financial penalties to be imposed on ICBC, the judge took into account the serious nature of ICBC's conduct, but noted that ICBC had fully co-operated with the SFO and had made subsequent admissions of guilt. This led to the reduction of the financial penalty by one third. The judge also said that he considered this to be "fair, reasonable and proportionate" because the US Department of Justice had confirmed that the penalty was comparable with what would have been imposed in the US.
What is the approval process?
The Court must approve the terms of a DPA. Any court hearings in relation to a DPA are, however, usually held in private in order to preserve the possibility of prosecution, but if a DPA is eventually approved, the court must give its judgment in public.
Are global settlements a possibility?
Given the global nature of corruption, it is only a matter of time before the first global DPA is agreed, although the DOJ (and/or other non UK regulator) and SFO would need to navigate the extra burden of judicial scrutiny imposed by UK legislation.
In circumstances where a UK prosecution is a distinct possibility, the ability to use the DPA regime is very attractive. Not least in a climate where Governments are looking to ban companies convicted of corruption from tendering for public contracts.
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1. One exception to this principle, however, is the corporate offence of failing to prevent bribery under section 7 of the Bribery Act 2010. The Government is now consulting on a further offence of failing to prevent economic crime.