On 27 June 2013, the United Kingdom Serious Fraud Office released a draft Code of Practice for DPAs, which sets out the rules and procedure for initiating and entering into a DPA. The draft Code allows for interested parties to provide their comments and feedback on these rules and procedures until 20 September 2013. This consultation period will allow for greater transparency and understanding by all parties – including prosecutors, lawyers and companies – on the concept of DPAs and their potential viability as an alternative to full-on prosecution.
Why the need for a DPA?
Since the turn of the millennium there has been a growing concern over just how effective the United Kingdom Government is at battling commercial corruption. A series of measures have been passed over the years, including the Fraud Act of 2006, the Attorney General’s Guidelines on plea discussions (2009), and the Bribery Act of 2010. Despite these measures, it is reported that commercial corruption still costs the United Kingdom close to £73 billion per year.
One of the most obvious challenges to effective governmental action against commercial corruption is that traditional prosecutions are laborious, slow and expensive. Another criticism is that United Kingdom law on corporate criminal liability has not been tailored to meet the realities of the modern commercial organisation. Current law only allows for successful criminal prosecution and indictment where the prosecutor can prove that a corrupt mind existing at the board level or equivalent directed the fraudulent activities in question. Considering that corruption can stem from lower levels within a company, this outdated law does not provide prosecutors with the teeth to clamp down on corporate corruption.
With these hurdles hampering the government’s ability to prosecute commercial corruption, a more pragmatic approach was needed. This has resulted in the initiation of DPAs in the United Kingdom – a remedy which has, for the past few years, been used successfully by prosecutors in the United States.
How does a DPA work in the United Kingdom?
The process for entering discussions for a DPA is set out in the CCA and draft Code. The CCA informs that DPAs may be entered into for crimes of fraud, bribery and money laundering. The draft Code states that sole discretion to initiate negotiations with the accused regarding a DPA lies solely with the prosecutor, and the accused is under no obligation to entertain such negotiations.
The general grounds for determining whether a DPA is appropriate are as follows, and must be determined by the prosecutor:
- Sufficient evidence exists regarding the defendant’s commission of the offence
- The public interest would be better served by the prosecutor entering a DPA rather than a full-blown prosecution.
The draft Code sets out specific considerations for the above grounds, and these considerations must be taken into account.
After commencement of negotiations, but prior to agreement on terms, the prosecutor must, in a private hearing before the Crown Court, show that entering into the DPA is in the interests of justice and that the proposed terms of the DPA are fair, reasonable and proportionate.
Submission of a DPA requires a formal statement of facts to be provided, but the accused is not required to make any admissions of guilt.
The hallmark of the DPA is, of course, a series of requirements that must be followed by the accused as a precondition to preventing the recommencement of the prosecution. There are no set requirements that the parties must agree upon, but typical terms may include the following:
- payment of penalties
- bolstering of the company’s internal compliance programme
- remedial steps to correct any on-going illegal behaviour
- disgorgement of profits
- cooperation with investigations.
Differences between United Kingdom and United States DPAs
There are several key differences between the DPAs that currently exist in the United States and the DPAs that will become part of United Kingdom jurisprudence. Major differences include:
- United Kingdom DPAs can only be entered into with organisations, while in the United States they can be brokered with individuals
- United Kingdom DPAs are limited to commercial crimes, while in the United States they are applicable to health and safety and environmental concerns
- United Kingdom DPAs will likely require extensive judicial oversight, while in the United States the courts only review the DPA after the parties reach an agreement on terms
Concerns still exist regarding how DPAs will fare in the United Kingdom. There is little to no explanation about the threshold question for DPAs – How does one show whether a DPA is “in the interests of justice”? There is also concern over how disclosure made during a DPA process in the United Kingdom will affect cross-border disputes – Will a DPA entered in the United Kingdom allow the company to escape further litigation of the same or related matter in another jurisdiction where acts, omissions or other related events took place?
There are also questions around some of the practical issues – How will documents made available by the defendant company at the associated hearings be used? How will the monitoring process, laid out in the draft Code, actually work? What sort of reputational damage will companies who enter DPAs suffer?
The prognosis for DPAs in the United Kingdom may benefit from reliance on the largely successful use of this mechanism in the United States, but many of the above questions can only be answered the hard way – through trial and (hopefully little) error. The advent of DPAs in the United Kingdom is still a big step in the right direction in the fight against corruption. While the law pertaining to their use will eventually settle, the culture of settling matters in this way will take time in the United Kingdom.