On Tuesday, the government released its report on the introduction of Deferred Prosecution Agreements (DPAs), confirming the introduction of DPAs as a new enforcement tool to deal with economic crimes committed by companies.
The government proposed to allow the use of DPAs as an additional tool for prosecutors to combat economic crimes committed by companies (but not for individuals nor other crimes). Draft legislation contemplates that the decision whether to enter into a DPA will rest with the Director of the Serious Fraud Office and the Director of Public Prosecutions. After negotiations have commenced but before a DPA is agreed, a judge will, at a preliminary hearing held in private, undertake an initial review of whether it is in the “interests of justice” to agree the DPA and whether the proposed draft conditions of the DPA are “fair, reasonable and proportionate”. This early judicial involvement is a key difference between the UK and US models.
Final approval of the terms of the DPA negotiated between the prosecutor and the company also will rest with a judge and the same test will be applied (likewise any subsequent variation to the SPA). The conditions might include payment of a penalty, restitution for victims, donation of monies to charity, disgorgement of profits from the offence, introducing or changing training/compliance programs, co-operation in investigations, and paying the costs of the prosecutor in relation to the offence or DPA. An agreed statement of facts also will be included. An admission of guilt is not required but may be included in the statement of facts (although the statement of facts itself will be treated as an admission in any criminal proceedings against the company for the offence). The final hearing handing down the judge’s approval of a DPA will be public, and both the reasons why the DPA was approved and the terms of the DPA itself will be published. Under the DPA, the prosecutor will lay, but immediately stay, criminal charges. If the party complies with the terms of the DPA, upon its expiry, the stayed prosecution and charges will cease. But if the party does not comply with the DPA, the prosecutor can, at its discretion, apply to the court for a determination that there has been a breach (on the balance of probabilities), and seek variation of the DPA or other proposals to remedy the breach, or to terminate the DPA and prosecute the stayed charges. The DPA itself can provide penalties the prosecutor can impose in cases of minor breach. The prosecutor will also publish details of how the company has complied with the DPA, as well as any breach or variation and how that is dealt with by the prosecutor and court (giving reasons).
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.
The government’s decision to introduce DPAs followed a public consultation process that generated a significant proportion of positive responses (86% of respondents agreed that DPAs have the potential to improve the way that economic crime committed by companies is dealt with), and the government’s own positive impact assessment of DPAs. The government should see very significant monetary recoveries under the DPA regime, and it also should relieve pressure on investigatory agencies suffering from budgetary constraints. The introduction of DPAs will be done by way of amendment to the new Crime and Courts Bill (found at this link: Crime and Courts Bill Amendment), which is currently working its way through Parliament. Royal Assent of that Bill is expected in April 2013, with implementation in early 2014. However, the government intends to make the legislation retrospective, so DPAs should be available for prior conduct so long as no proceedings have yet commenced.
The proposals also contemplate that the Director of Public Prosecutions and the Director of the Serious Fraud Office will jointly issue a Code of Practice for Prosecutors on DPAs. The Sentencing Council will produce sentencing guidelines for offences likely to be encompassed by DPAs when committed by a company, and the amount of any financial penalty agreed under the DPA must be broadly comparable to the fine that a court would have imposed on conviction following a guilty plea.
Companies always should seek legal advice both prior to and during the course of negotiating a DPA. Important strategic decisions will have to be made as material disclosed or admissions made in the course of negotiations could be used in subsequent proceedings against the company (criminal or civil, including resultant third party actions), and also may be shared with other regulators or prosecutors in and across other jurisdictions. It is advisable that companies proceed on the basis that disclosures or admissions made in the DPA process will be used and shared. 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. 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 privilege and confidentiality will need to be closely considered on the facts of each case.
The government's full response along with the impact assessment and equality impact assessment can be found at the following links: Government Consultation Report; Impact Assessment; Equality Impact Assessment. See also our Client Alert dated 18 May 2012.