Westlaw Insight (Deferred Prosecution Agreements)

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<ul><li><p>Deferred prosecution agreements: bribery</p><p>Latest Update</p><p>19 October 2016</p><p>Author(s)</p><p>Paul Raudnitz - QEB Hollis Whiteman Chambers</p><p>Section 45 and Sch.17 of the Crime and Courts Act 2013 (CCA 2013) introduced for the first time intothe Law of England and Wales, the concept of a Deferred Prosecution Agreement (hereafter referredto as a "DPA") as a means of enabling a corporate body to make full reparation for criminal behaviourwithout the collateral damage of a conviction. Reputational and financial damage through criminalprosecution has the potential to risk jobs and the economic stability of the company itself, thusimpacting employees and shareholders who may have been in no way involved in the corruption (SFO Guidance on Deferred Prosecution Agreements).</p><p>Overview of Topic</p><p>1.DPAs in the law of England and Wales have been broadly modelled on the system in theUnited States. However, as noted by the Solicitor General at the time that the 2013 Act wasintroduced (Edward Garnier QC), DPAs in the US system "are concluded and promulgatedwith little, if any, judicial oversight" (Deferred Prosecution Agreements -Sir Edward GarnierQC, MP, New Zealand Journal, December 2012). An essential ingredient of DPAs asintroduced by the Crime and Courts Act 2013 is therefore, the involvement of the courts ateach stage of the process.</p><p>2.To date there have been two DPAs successfully concluded in England and Wales:"Standard Bank" and "XYZ Ltd".</p><p>3.The DPA in overview: A DPA is a voluntary agreement between a designated prosecutorand a person ("P") such that in exchange for P's compliance with various strictrequirements, the prosecutor will suspend, and may eventually discontinue, the criminalprosecution of P (CCA 2013 Sch.17 para.1).</p><p>4.P may only be a body corporate, a partnership or an unincorporated partnership. DPAs arenot available to individuals (Sch.17 para.4(1)). At time of writing, a designated prosecutormay only be the Director of the Serious Fraud Office ("SFO") or the Director of PublicProsecutions ("DPP") (Sch.17 para.3(1)(a)-(b)). CCA Sch.17 para.3(1)(c) allows for otherprosecutors also to be "designated" by an order made by the Secretary of State.</p><p>5.Schedule 17 para.6(1) requires the Director of the SFO and the DPP to issue a joint Code</p><p>Page 1</p><p>http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I4F87C840B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508B2E80B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I85CF2510B09F11E280A6F376A946814Bhttp://www.sfo.gov.uk/publications/guidance-policy-and-protocols/deferred-prosecution-agreements/http://www.sfo.gov.uk/publications/guidance-policy-and-protocols/deferred-prosecution-agreements/http://www.edwardgarnier.co.uk/sites/www.edwardgarnier.co.uk/files/dpas__article_by_sir_edward_garnier_qc_mp.pdfhttp://www.edwardgarnier.co.uk/sites/www.edwardgarnier.co.uk/files/dpas__article_by_sir_edward_garnier_qc_mp.pdfhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508B5591B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508BCAC1B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508BA3B1B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508BA3B1B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508C3FF0B0A411E2B7A0E11E7EB499C3</p></li><li><p>for prosecutors giving guidance on the general principles to be applied in determiningwhether a DPA is likely to be appropriate in a given case. A prosecutor must take accountof the Code in exercising functions under Sch.17.</p><p>6.The criminal prosecution subject to suspension under the DPA procedure must be for aspecified offence listed in Pt 2 to Sch.17. Included within these offences are the commonlaw offences of conspiracy to defraud and cheating the public revenue and a variety ofstatutory offences for economic crimes (e.g. under the Bribery Act 2010, the Companies Act2006, the Fraud Act 2006 and the Proceeds of Crime Act 2002).</p><p>7.In deciding whether to consider a DPA, the prosecutor must first consider the Full CodeTest. The evidential stage must either be met or the prosecutor must have a reasonablesuspicion that P committed the offence and reasonable grounds for believing that furtherinvestigation would result in the evidential stage being met (Joint Code of Practice on DPAs,para.1.2(i)). The public interest stage will require that the public interest be best served byentering into a DPA with P, rather than bringing a criminal prosecution (Joint Code ofPractice on DPAs, para.1.2(ii)).</p><p>8.A fundamental feature of DPAs is that they are not available as of right to commercialorganisations facing prosecution for a specified offence - an invitation to negotiate a DPA isa matter for the prosecutor's discretion (Joint Code of Practice on DPAs, para.2.1). In fact,the SFO's first two successful DPA agreements (considered below) have revealed theparamount importance of full cooperation with the SFO throughout the investigative process(by contrast, in what was the first SFO prosecution under s.7of the Bribery Act 2010, therelationship between Sweett Group Plc and the SFO was fraught with difficulties).</p><p>9.Factors in favour of prosecution (and therefore against a DPA) may include:</p><p>a.The seriousness of the offence;</p><p>b.A history of similar conduct;</p><p>c.The conduct alleged is part of the established business practices of P;</p><p>d.P has not been able to demonstrate a significant improvement in its complianceprogramme since the offence was committed;</p><p>e.Failure to notify the wrongdoing within reasonable time of the offending conduct comingto light (Joint Code of Practice on DPAs, paras 2.4 - 2.8.1) .</p><p>10.Factors militating against prosecution (and therefore in favour of a DPA) include:</p><p>Page 2</p><p>http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508B2E80B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508D7870B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508B2E80B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I05B093C0461511DFAA038E3B03782429http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I67088A508B0211DBB4C6A18EEE1C8BDDhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I67088A508B0211DBB4C6A18EEE1C8BDDhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=ID9FDA5C0751A11DBB6BD9A07698D500Fhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I5FA30B41E42311DAA7CF8F68F6EE57ABhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I14499B72461511DF8F7ED103420FF1FAhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I05B093C0461511DFAA038E3B03782429http://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdf</p></li><li><p>a.Co-operation;</p><p>b.A lack of history of similar conduct;</p><p>c.The existence of a proactive corporate compliance programme;</p><p>d.The offending represents isolated actions by individuals;</p><p>e.The offending is not recent and P in its current form is effectively a different entity fromthat which committed the offences;</p><p>f.A conviction is likely to have disproportionate consequences for P;</p><p>g.A conviction is likely to have collateral effects on the public, P's employees andshareholders or P's institutional pension holders (Joint Code of Practice on DPAs, paras.2.4 - 2.8.1).</p><p>11.Procedure for a DPA: A new Pt 11 to the Criminal Procedure Rules 2015/1490 wasintroduced for the DPA process. This, and the Joint Code on DPAs, contains much of themandated procedure for DPAs.</p><p>12.The negotiation phase begins with a formal letter of invitation to P setting out the basis forthe negotiations (Joint Code of Practice on DPAs, para.3.5). If P chooses to engage in thenegotiations, then the prosecutor will send a second letter outlining the process and settingout various undertakings (for example, in relation to confidentiality) (Joint Code of Practiceon DPAs, para.3.6). Either party can withdraw from the negotiating process at any stage.Should it be the prosecutor who withdraws, then the Joint Code of Practice suggests that itwould "ordinarily be appropriate" to provide P with the "gist" of the reasons for so doing (Joint Code of Practice on DPAs, para.3.2).</p><p>13.Whilst negotiations are on-going, but prior to the terms of the DPA being finalised, theprosecutor must apply to the Crown Court for a declaration that entering into a DPA with Pis likely to be in the interests of justice, and the proposed terms of the DPA are fair,reasonable and proportionate (CCA 2013 Sch.17 para.7(1)). The court must give reasonsfor its decision on whether or not to make a declaration (Sch.17 para.7(2)). Both thePreliminary Hearing and declaration will be private (Sch.17 para.7(4)). If a declaration ismade, negotiations will continue to finalise the terms of the DPA. There will then be a FinalHearing where a declaration may be made that the DPA in its final form is in the interests ofjustice and that its terms are fair, just and proportionate (Sch.17 para.8). If a declaration isnot made, the prosecutor may make a further application to the court.</p><p>Page 3</p><p>http://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=IBB60C85031B211E59817E4E57CD98BBEhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I2B6C487031B011E5B69A9D16AE8A15E6http://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://www.cps.gov.uk/publications/directors_guidance/dpa_cop.pdfhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508C3FF2B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508C3FF2B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508C3FF2B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508C8E10B0A411E2B7A0E11E7EB499C3</p></li><li><p>14.What is clear from the second DPA (against XYZ Limited) is that although the final hearingwill be published and the making of the DPA will be announced, the court is alive to theconcerns of potential prejudice to on-going criminal prosecutions against individuals. In thatcase, the judgment was published in a redacted form pending the outcome of concurrentcriminal proceedings against former employees of the company.</p><p>15.Content of DPA: The DPA "must contain a statement of facts relating to the allegedoffence, which may include admissions made by P" (Sch.17 para.5(1)). It must also includethe requirements with which P must comply, and may stipulate what consequences willfollow from non-compliance.</p><p>16.Schedule 17 para.5(3) states that:</p><p>"the requirements that a DPA may impose on P include, but are not limited to, thefollowing requirements-</p><p>(a) to pay to the prosecutor a financial penalty;</p><p>(b) to compensate victims of the alleged offence;</p><p>(c) to donate money to a charity or other third party;</p><p>(d) to disgorge any profits made by P from the alleged offence;</p><p>(e) to implement a compliance programme or make changes to an existing complianceprogramme relating to P's policies or to the training of P's employees or both;</p><p>(f) to co-operate in any investigation related to the alleged offence;</p><p>(g) to pay any reasonable costs of the prosecutor in relation to the alleged offence or theDPA.</p><p>"</p><p>17.Schedule 17 para.5(4) states that the amount of any financial penalty imposed under theDPA must be "broadly comparable" to the fine that the court would have imposed followinga guilty plea to the alleged offence.</p><p>18.A new Definitive Guideline for Corporate Offenders on Fraud, Bribery and MoneyLaundering was introduced by the Sentencing Council on 31 January 2014. This will assistin the provision of a transparent and consistent approach to the setting of a financial penaltyas required by the Joint Code of Practice.</p><p>19.The DPA must also contain an expiry date upon which the prosecutor will give notice that itdoes not wish the proceedings to continue (Sch.17 para.5(2)). No fresh proceedings may beinstituted against the company for the offence unless it is revealed that P providedinaccurate, misleading or incomplete information to the prosecutor; and P knew or ought tohave known that the information was inaccurate, misleading, or incomplete (Sch.17para.11(3)).</p><p>Page 4</p><p>http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508BF1D1B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508BF1D1B0A411E2B7A0E11E7EB499C3http://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508BF1D1B0A411E2B7A0E11E7EB499C3http://www.sentencingcouncil.org.uk/wp-content/uploads/Fraud_bribery_and_money_laundering_offences_-_Definitive_guideline.pdfhttp://www.sentencingcouncil.org.uk/wp-content/uploads/Fraud_bribery_and_money_laundering_offences_-_Definitive_guideline.pdfhttp://login.westlaw.co.uk/maf/wluk/ext/app/document?src=doc&amp;linktype=ref&amp;context=17&amp;crumb-action=replace&amp;docguid=I508...</p></li></ul>