25 February 2014

Deferred Prosecution Agreements


Tessa Lorimer
Consultant | UK

What are they?

Deferred Prosecution Agreements (‘DPAs’) are voluntary agreements which came into force on 24 February 2014, pursuant to which a prosecutor and an organisation can agree that, as long as certain terms of the DPA are satisfied the prosecutor will initially suspend and eventually terminate criminal prosecution of the organisation. Essentially, although the organisation will not be pleading guilty to an offence, it will be admitting its wrongdoing and will receive a fine from the judge but will avoid criminal prosecution.

The Crime and Courts Act 2013, which contains the relevant provisions governing the introduction of DPAs, clarifies that individuals cannot benefit from DPAs which can only be entered into by organisations, defined in the Act as being bodies corporate, partnerships or unincorporated partnerships. In addition, DPAs are only available for a specified number of offences including Fraud, Bribery, Money Laundering and Forgery Offences, amongst others.

The decision to enter into a DPA must be taken by the designated prosecutor before proceedings have been commenced. Where a prosecutor believes that a DPA may be suitable, it must apply for a private hearing before the Crown Court for a declaration that entering into a DPA is likely to be in the interests of justice and that its proposed terms are fair, reasonable and proportionate. If such a declaration is made, the parties will negotiate the terms of the DPA, which will need to be approved by the Crown Court in a subsequent hearing before finally coming into force.

The DPA contains a statement of facts regarding the alleged offence, must set out the requirements imposed upon the organisation and must contain an expiry date, following which the prosecution will be discontinued if the terms of the DPA have been satisfied.

The DPA may impose a wide range of requirements upon the contracting organisation, including payment of financial penalties, compensation for the victims of the offence, or disgorgement of the profits made as a result of the alleged offence. If the organisation fails to comply with the terms imposed upon it, the prosecutor may apply to the court to terminate the DPA, following which a prosecution can be brought. If, on the other hand, the organisation does comply with the terms of the DPA, it will remain in force until the expiry date, following which no fresh proceedings may be brought against the organisation for the offence unless information provided to the prosecutor by the organisation proves to be inaccurate or misleading.

Any pecuniary payment imposed on an organisation pursuant to a DPA will be paid into the Consolidated Fund, which is the governmental account which receives criminal fines. It is a requirement of the Act that the financial penalties agreed between the parties should reflect the fine that a court would have likely ordered the organisation to pay on conviction of the alleged offence.

Commentary

The DPA regime has been described as a half way house between a prosecution and non-prosecution outcome to a criminal investigation, but without any of the reputational stigma of a successful prosecution.

This development appears to be an attempt by UK legislators to follow in the footsteps of their US counterparts, where the introduction of similar schemes has proven highly successful. However, some argue that one of the main driving forces behind the introduction of DPAs is the financial benefit to the public purse, with all payments imposed on organisations payable into the Consolidated Fund, which is in effect the main governmental bank account.

It is also unclear how the regime will operate in the case of multi-jurisdictional offences. A DPA entered into in this jurisdiction would only apply to prosecutions brought in England and Wales. However, its existence could potentially be used by prosecutors abroad as evidence of an organisation’s acceptance of liability. Many commentators believe that until truly global settlements can be entered into, agreeing to DPAs merely in one jurisdiction will not be an attractive proposition for organisations that could potentially face prosecution in others.

Furthermore, the position in relation to disclosures made to prosecutors during negotiations that do not eventually lead to a DPA is unclear; in particular, it is not clear whether information gathered in this process could be subsequently used by the prosecutors if the parties are unable to agree to the terms of the DPA.

One of the main arguments put forward by the Ministry of Justice in support of DPAs is that their existence will incentivise companies to self-report their criminality, in the belief that doing so would be to their benefit as opposed to risk having to go through a lengthy and expensive prosecution. However, organisations are concerned that they are not provided with the certainty and guarantees they require in relation to immunity from prosecution before self-reporting or entering into negotiations for a DPA.

On first blush, although DPAs appear to have the potential of being credible alternatives to prosecutions and could be faster, cheaper and more efficient means of concluding cases, there are a number of issues that are causes for concern. Industry experts will not have long to wait before providing an initial assessment as to whether the introduction of DPAs has the potential to change the corporate crime landscape.

Tessa Lorimer Consultant | London

Category: Article