DPAs: The way ahead

Deferred prosecution agreements (DPAs) were on the cards in the UK for some years before finally being introduced in schedule 17 of the Crime and Courts Act 2013.

They have been used in a similar form in the US since the early 1990s to avoid costly prosecutions in return for undertakings by the companies involved to implement corporate reform and co-operate with investigations. The big difference in our jurisdiction is that DPAs will require judicial approval, whereas in the US the agreement can be reached between the parties alone.

The concept is inherently simple: a prosecution may be brought against a company for
a criminal offence, but the proceedings are automatically stayed pending the observance of a number of conditions. If the conditions are not observed, the prosecution may be resurrected.

The Serious Fraud Office (SFO) has provided a number of possible conditions, such as a fine, payment of compensation, and co-operation with future prosecutions of the individuals involved.

Civil agreements

Previously, the prosecuting authorities, if minded to settle cases involving allegations of criminal conduct by companies, entered into civil agreements, the terms of which were not made public. As such, they often attracted public concern and criticism.

One of the most notable examples was the settlement reached between the SFO and the engineering company AMEC in respect of payments it received relating to the construction of the Incheon Bridge in South Korea.

While some regarded the
civil settlement route as a pragmatic solution, there was
a prevailing sense that the SFO had undermined the public interest by virtue of this lack of disclosure.

Saving litigation costs was
the primary concern of the prosecuting authorities, as it
is today, but there was also no effective way of enforcing any reform of companies' future conduct.

The apparent transparency of the new DPA system is in stark contrast to a civil court settlement, something which must be taken into account when considering any criticism of it at this stage.

The first DPA

Inevitably, it took a relatively long time for the first DPA to be reached, bearing in mind the complexity of the evidence involved in respect of commercial fraud or wrongdoing. After coming into force in early 2014, the first DPA was not rubber-stamped until late November 2015. The agreement was made between the SFO and the Industrial and Commercial Bank of China (ICBC), previously Standard Bank. The DPA was pre-approved by Lord Justice Leveson after a careful process of negotiation and presentation to the court.

Now that the dust has settled, it is a good time to assess the impact of the first agreement.

Most expected the SFO to test the waters with a smaller case - in that sense, the first DPA was a bold move which garnered much public attention. It was also reached at a time when the beleaguered SFO needed a public boost for its image.

Companies have apparently been clamouring to contact the SFO about a potential DPA since the ICBC case went public, obviously keen to get a foot in the door early and avoid a costly prosecution.

The question is whether this newfound corporate co-operation can be sustained over the longer term, or whether it is simply a short-term trend that might fall away if the conditions become too tight or if the SFO becomes too selective. After all, if there is little certainty of reaching an agreement, the attraction of voluntarily disclosing criminal activity
will soon evaporate.

The judicial check and balance required in the UK should satisfy public concern as long as it is exercised diligently and strictly. Leveson LJ was at pains to point out that he did not reach his decision in the ICBC case lightly: 'Of particular significance was the promptness of the self-report, the fully disclosed internal investigation, and co-operation of Standard Bank. Finally, also relevant were the agreement for an independent review of anti-corruption policies and the fact that Standard Bank is now differently owned...'

We can expect to see more DPAs in future, but the scale
of the uptake will depend on the level of public investment
in the prosecuting authorities
in order to give them the tools to process multiple agreements contemporaneously.

The powers that be may have recognised that resources are far better expended on this new approach. Not only does it have the potential to save costs and secure fines and compensation, but it may also be effective in achieving a semblance of self-regulation. The cynical might suggest that this is just another example of a diluted form of justice for the sake of cost-cutting.

For now, the jury is out and may not even be required.

Paul Lazarus is a senior solicitor at Sonn Macmillan Walker @SMW_Law www.criminalsolicitor.co.uk

Copyright & permissions