The Government has long protested that the present legal system had inadequate powers to effectively deal with criminal enforcement against commercial organisations in the field of complex and serious economic crime.
Such prosecutions are generally complex and lengthy cases which result in expensive trials.
To tackle this issue on the 25th April 2013, the Crime and Courts Act 2013 was passed into law and making Deferred Prosecution Agreements (DPA) available to prosecutors in England and Wales.
What is a DPA and what effect could it have on me?
A DPA is an agreement between prosecutors and a corporate entity (companies, partnerships, unincorporated associations) whereby the corporate entity agrees to comply with requirements set out by the prosecutor and the prosecutors therefore agrees not to prosecute the alleged offence.
A DPA may impose but are not limited to the following requirements:
- To pay the prosecutor a financial penalty
- To compensate victims of the alleged offence
- To donate money to a charity or other third party
- To disgorge any profits made from the alleged offence
- To implement a compliance programme or make changes to existing compliance programme relating to the polices and or training of employees
- To co-operate in any investigation related to the alleged offence
- To pay any reasonable costs of the prosecutor in relation to the alleged offence or the DPA
Factors considered by Prosecutor
A DPA is a discretionary tool and the prosecutor must ensure that they consider the public interest when deciding if a DPA is suitable in each case.
The Serious Fraud Office and Crown Prosecution Service have released draft guidelines for prosecutors on DPAs.
Before entering into a DPA prosecutors may take into consideration a number of factors including but not limited to:
- A history of similar conduct
- Whether the conduct alleged is part of established business practice of the company
- Ineffective corporate compliance programmes
- Any previous warnings, sanctions or criminal charges
- Failure to report wrongdoing within a reasonable time
- Failure to report properly and fully the true extent of the wrongdoing
- An adverse impact on the economic reputation of England & Wales
- Severe economic harm to victims of wrongdoing
Role of the Court in the UK DPA Model
When designing the UK DPA model it was felt that judicial involvement was essential. The role of the Court is to exert effective judicial scrutiny on proposed DPA's and ensure that they are in ultimately the public interest.
If the prosecutor believes that a DPA is in the public interest they will formally invite the Company to commence negotiations on a DPA. The prosecutor must then make an application to Crown Court on their proposal to enter into a DPA.
The Court will consider if the DPA is in the interest of justice and is fair, reasonable and proportionate. After the negotiations on the DPA are complete the Prosecutor must make another application to Crown Court to approve the terms of the DPA.
Judges may be cautious on agreeing DPAs if they feel that the proposed requirements in the DPA are too lenient and may be seen by the public as "corporate fat cats" negotiating their way out of a criminal prosecution.
The Sentencing Council of England and Wales is to publish guidelines for the Court to ensure judges apply the new regime consistently. However the Crime and Courts Act 2013 provides that any financial penalty should be broadly comparable to the fine that would be imposed following a guilty plea; that is, a one -third reduction. On that basis DPAs should not be viewed by corporate entities the lower penalty option.
Issues to consider before entering into a DPA
If a corporate entity enters into DPA negotiation with the prosecutors then as part of the negotiation process documents are exchanged and admissions made. If negotiations subsequently fail there is no limitation on the use of information obtained by the prosecutor during the DPA negotiation period which may subsequently be used during criminal proceedings brought against the corporate entity.
- Companies also run the risk of waiving privilege if they self report wrongdoing.
- Are there international implications when entering into a DPA? If you enter into a DPA in England what impact could that have on your operations in say the USA and vice versa. If a global settlement is agreed will that be accepted internationally or could you face prosecution in other jurisdictions?
- Impact of DPA on individuals /employees? A corporate entity's criminal liability can only be established through the acts of individuals, generally senior management employees. There is however a potential conflict between the corporate entity and its employees, the corporate entity may be quite keen to enter into a DPA whereas an employee may be more inclined to defend their actions if they believe they have not done anything wrong. There is also the possibility that individual employees may be prosecuted and may not want disclose information as part of the DPA that may incriminate them.
This development is likely to be of use to commercial organisations and prosecutors alike, particularly those companies who may discover criminal offences internally and decide to self report to the authorities. This is now gives a legal framework to overcome difficulties that arose previously in the approval of civil settlements by U.K. courts (notably in R-v- Innospec Ltd )
However DPA's will only be available in the field of economic crime and not for regulatory breaches that leave a commercial organisation facing criminal sanction (e.g. Health & Safety Prosecutions).
In such matters there is only one method that avoids penalty and that is robust compliance programmes that are constantly monitored and reviewed.