On 23 October 2012, the Ministry of Justice (MoJ) published its response to the consultation paper on DPAs, and confirmed that it will legislate to introduce DPAs in England and Wales. The Government intends to include an amendment to the Crime and Courts Bill 2012-2013 to introduce DPAs in England and Wales, and it is expected they will become available to the Serious Fraud Office (SFO) and Crown Prosecution Service (CPS) in early 2014.
A DPA is an agreement between the prosecutor and a company (they do not extend to individuals) that a criminal prosecution for an economic offence (for example bribery, corruption, fraud, or money laundering) will be deferred or postponed if certain conditions are met (for example payment of substantial penalties, making reparation to victims, undertaking reform to prevent such conduct occurring again, and submitting to regular reviews and monitoring). The Government intends to make the legislation retrospective, so DPAs should be available for prior conduct so long as no proceedings have yet commenced. DPAs are an enforcement tool which have already been adopted and utilised in the US, raising $2.5 billion a year in penalties.
The Government will require the Director of Public Prosecutions (DPP) and the Director of the SFO to produce a Code of Practice for Prosecutors on DPAs. Clearly, this will need to address the circumstances in which a DPA (rather than a full criminal prosecution) will be the preferred enforcement route. In addition, the Sentencing Council will be asked to produce sentencing guidelines for offences committed by an organisation that are likely to be encompassed by DPAs.
The DPP or the Director of the SFO must personally exercise the power to enter into a DPA and will be required to hold a preliminary hearing in private before a judge to determine if it would be in the “interests of justice” to agree the DPA and whether the proposed draft conditions of the DPA are “fair, reasonable and proportionate”. If a judge determines that a DPA is appropriate, the terms of the DPA must subsequently be confirmed in open court and must be published, in order to ensure full public transparency of the wrongdoing and agreed sanctions and to meet criticisms – often based on U.S. DPAs – that DPAs allow prosecutors to circumvent the judicial process by reaching an agreement with a defendant out of court and out of the public eye.
Upon the expiry date of a DPA, the prosecutor will publish details of how the DPA has been complied with. If there is a breach of the DPA, this will be publicised and can be contested. Significant breaches of a DPA will need to be dealt with by a judge. The options available to a judge on a finding of a breach will be provided for in the legislation. Judicial approval will be required for any proposed variation or termination of a DPA. There will be no right to appeal any judicial ruling in this process.
The implementation of DPAs in the UK is particularly timely, given the relatively recent updates to the SFO’s policy on self-reporting, which set out that self-reporting is no guarantee that a prosecution will not follow. The Government hope that DPAs will ultimately enable prosecutors to secure tough penalties for wrongdoing and ensure reparation for victims, without the uncertainty, expense, complexity or length of a full criminal trial. Organisations will be encouraged to self-report wrongdoing and be held accountable for their actions but without employees, customers, pensioners, suppliers and investors being unfairly affected and penalised by the impact of a lengthy trial and conviction. DPAs should also ensure more offenders are held to account as the number of cases that can be prosecuted and pursued to full trial is limited.
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.
There are however concerns over DPAs, including that there is no certainty that a negotiated DPA will be approved by a judge; the fact that any admissions made during the DPA negotiations could possibly be used against the company in any subsequent criminal proceedings; DPAs will be made public and so reputational damage is likely to be significant; and DPAs can be used against a company or individual in civil proceedings.
Evidently, the Government will have to ensure that the DPA process is sufficiently clear and consistent to encourage companies to self-report, and that the operation of justice is transparent and open to public scrutiny.
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 (in the US commercial entities often find themselves waiving legal privilege in order to demonstrate cooperation with an investigation). 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 whether to self-report, privilege and confidentiality will need to be closely considered on the facts of each case.
