The Arrival of Deferred Prosecution Agreements in the Uk I Maria CRoNIN From 24 February 2014, the Serious Fraud Office (SFO) and Crown Prosecution Service (CPS) will be able to conclude criminal investigations into co-operating corporate organisations by entering into Deferred Prosecution Agreements (DPAs). DPAs will offer a radical departure from the UK’s traditional approach to corporate criminality and, in conjunction with the Bribery Act 2010, will represent a significant step by the UK government in its bid to tackle serious economic crime. Whilst the introduction of DPAs might be seen by some as bringing “global settlements” within closer reach, we will have to wait and see whether this will become a reality.
I What are DPAs? DPAs will involve the filing in court of agreed charges against a corporation, subject to a condition that the charges will not be pursued if the corporation complies with “a range of tough and stringent conditions including, for example, the payment of a substantial penalty, requirements to make reparation to victims and participate in monitoring for a set period”. A major factor that will be taken into account when considering whether a corporation is eligible for a DPA is when and how it selfreported the criminal activity to the CPS or the SFO. By entering into a DPA, a corporation will avoid the significant harm that would flow from a conviction – such as debarment from participating in government tenders, reputation damage and the expense of defending a long and protracted investigation – whilst at the same time making amends for past misconduct, and implementing systems to prevent any future re-occurrence. Indeed the DPA process might present an attractive alternative for a company that finds itself acutely exposed to the risk of a corporate prosecution.Where, for example, there is evidence of serious harm to
Reunir a los abogados del mundo I 1 ■
2014
victims or endemic economic crime within an organisation, a company’s board will no doubt give considerable weight to the possibility of an early resolution.
NPAs are now a fundamental part of US corporate prosecutions.
I DPAs in the United States
The UK government introduced DPAs in response to growing judicial criticism of civil recovery orders and “US style deals”, which were increasingly being used in place of prosecutions. These were seen as a threat to the UK’s strict division between prosecutorial discretion and judicial independence, which hitherto had prevented any kind of settlement between the prosecutor and defendant.
In the United States (US), DPAs are considered a hugely important weapon in the armoury of the Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC). The US experience originated from a scheme of pre-trial diversion run by the Boys’ Court of Chicago in 1914, to help young offenders avoid the stigma of a criminal conviction. Over time, these schemes were extended to defendants facing minor drug charges and other misdemeanours. In 1992, this process was for the first time adapted by Federal prosecutors in the corporate criminal context, with the first Non-Prosecution Agreement (NPA) reached with the Salomon Brothers for unlawfully auctioning Treasury securities. A decade later, there was a surge in the use of DPAs and NPAs in the US.This was largely due to the catastrophic fallout following the conviction of Arthur Andersen LLP in 2001.
I DPAs in the Uk
Corporations under investigation faced significant difficulties, particularly where they were under investigation in more than one jurisdiction, with little prospect of a “global settlement”. In the case of R v Innospec Ltd [2010] Lloyd’s Rep. F.C. 462 a US company with a UK subsidiary agreed settlements with both the US and UK prosecutors, in lieu of prosecution for offences of corruption. The US and UK officials jointly agreed the sentence. While the US court duly approved the deal, the UK court refused to do so. It was held that the UK prosecutors had overstepped their constitutional role and, as
The UK government introduced DPAs in response to growing judicial criticism of civil recovery orders and “US style deals”, which were increasingly being used in place of prosecutions. The auditing and accountancy firm was alleged to have blocked the SEC’s investigation into Enron PLC. The conviction resulted in thousands of jobs being lost, and investors and creditors losing significant sums. And although, in 2005, Arthur Andersen successfully appealed the conviction to the US Supreme Court1, by this time the damage had already been done. The Arthur Andersen experience continues to be used as a powerful example of the cost of protracted criminal proceedings. DPAs and
such, agreements and submissions of the type that had been put forward could not be approved. Lord Justice Thomas made clear that: “Principles of transparent and open justice require a court sitting in public itself first to determine by a hearing in open court the extent of the criminal conduct on which the offender has entered the plea and then, on the basis of its determination as to the conduct, the appropriate sentence […]
71