In our July Newsletter, we discussed the Ministry of Justice (MOJ) consultation paper on Deferred Prosecution Agreements ("DPAs").  In its response to the consultation paper, published on 23 October 2012, the MOJ confirmed that DPAs will be brought into effect, and has outlined the legislative proposals that will be introduced as amendments to the Crime and Courts Bill currently before Parliament.

How DPAs will operate

A DPA will act as a plea bargain, and will allow a company publicly to admit past wrong doing whilst paying penalties, undertaking internal reforms, or agreeing to external monitoring, in exchange for immunity from prosecution.  The agreements will be overseen by an independent Judge, agreed in open court, and the outcome published to ensure transparency. Various admissions would be made by the company party to the DPA, but provided the company complies with the terms of the agreement, the prosecution would be dropped after a pre-determined period. The prosecutor could, however, revive criminal proceedings and rely on admissions made in the DPA if the agreement was subsequently breached.  Further key aspects of the proposed DPA system are:

  • The decision to enter into DPA negotiations is to be governed by a DPA Code of Practice for Prosecutors.
  • The decision to offer a DPA will require the personal approval of the Director of Public Prosecutions or the Director of the Serious Fraud Office (SFO).
  • The decision to offer a DPA will also be subject to the approval of a Crown Court Judge at a preliminary hearing, held in private. The Judge needs to be satisfied that a DPA would be in the interests of justice, and that the proposed terms are fair, reasonable and proportionate. The reasons for his decision would become publicly available on the approval of the DPA.
  • The agreed DPA will require judicial approval in open court.
  • At the expiry of the agreed period, the prosecutor will publish details of how the terms and conditions of the DPA have been complied with.
  • Judicial approval will be required for any proposed variation or termination of a DPA.

What it is hoped DPAs will achieve

The SFO hopes that DPAs will enable it to identify and penalise a greater number of corporate offenders.  By encouraging organisations to self-report (not only their own wrongdoing, but also wrongdoing within their business sector or market), the SFO will be made aware of more crimes and obtain better evidence of them. This should result in more cases being brought to justice, whilst avoiding a full-blown prosecution (which itself has been a limiting factor in sanctioning corporates, given the cost and complexity of the cases involved).

Comment

From the entity in question's perspective, the significant advantage of a DPA is that it offers certainty with respect to the potential liability for economic crimes and allows the matter to be closed off within a reasonable time-frame.  There would also be no formal conviction (although the company would have to publicly admit wrongdoing) and the risk of mandatory debarment from Government contracts would be reduced (provided that the terms of the agreement are complied with).

A risk for companies operating in multiple jurisdictions, however, is that foreign authorities investigating the same wrongdoing may be able to rely on admissions in the DPA in actions brought abroad. Companies which negotiate DPAs will, therefore, wish to ensure that they co-ordinate settlements in multiple jurisdictions.  In addition, DPAs will not extend to individuals involved in the wrongdoing, and a company could still find itself having to participate in those proceedings if the decision was made to prosecute individuals.