Deferred Prosecution Agreements in the UK: Do Companies Need to Bare All?
Since 24 February, the UK Serious Fraud Office ("SFO") and Crown Prosecution Service ("CPS") have been able to enter into Deferred Prosecution Agreements ("DPAs") with corporates facing allegations of economic crime (unlike in the US, DPAs are not available to individuals). Under a DPA, criminal proceedings against a corporate defendant are stayed in return for payment of a financial penalty and compliance with other terms specified in the agreement. This new means of case resolution was introduced by the Crime and Courts Act 2013.
The concept of DPAs is borrowed from the US where their use is well established, but the practical application of DPAs in the UK is likely to differ somewhat from the US experience. On 11 February, the SFO and CPS published the Deferred Prosecution Agreements Code of Practice ("Code of Practice") setting out how DPAs will operate. The guidance is fairly clear but hardly reassuring for corporates that may wish to contemplate entering into a DPA. The guidance on when the prosecution may consider a DPA appropriate begins with this rather gloomy warning:
An invitation to negotiate a DPA is a matter for the prosecutor's discretion. P (the corporate under suspicion of wrongdoing) has no right to be invited to negotiate a DPA. The SFO and CPS are first and foremost prosecutors and it will only be in specific circumstances deemed by their Directors to be appropriate that they will decide to offer a DPA instead of pursuing the full prosecution of the alleged conduct. In many cases, criminal prosecution will continue to be the appropriate course of action. An invitation to enter DPA discussions is not a guarantee that a DPA will be offered at the conclusion of the discussions. (Para 2.1 Code of Practice)
Companies hoping to avail themselves of a DPA will, however, have to act quickly at the start. The most important consideration over which it has control is the decision whether or not to self-report and co-operate with the prosecutor. Failure to notify the wrongdoing to the prosecutor within a reasonable timeframe or reporting the wrongdoing to a prosecutor but failing to verify the initial report are both deemed factors which a prosecutor should view as favouring a decision to prosecute. (Code of Practice 2.8.1 (v) & (vi)).
Conversely, considerable weight tending against prosecution attaches to:
…a genuinely proactive approach adopted by P's management team when the offending is brought to their notice, involving within a reasonable time of the offending coming to light reporting P's offending otherwise unknown to the prosecutor and taking remedial action.... (Code of Practice 2.8.2 (i))
Of interest is paragraph 2.9.2 which states that the prosecutor will, in considering the public interest, take account of the extent to which the offending company involved the prosecutor in the early stages of the self-report and took its guidance. This is difficult to square with the SFO's current practice of non-engagement with corporate offenders and their representatives. To the extent that the Code of Practice signals a return to a sensible dialogue between the parties at the earliest stages of an investigation, it is to be welcomed.
Companies that have committed unlawful acts and hope to negotiate a DPA must therefore lay themselves bare with no assurance that by doing so they will secure a DPA. Moreover, if the company is not invited to enter into DPA negotiations or if those negotiations fail, anything provided to the prosecutor before the formal invitation to commence negotiations will be admissible against the company at trial. The decision to make a formal self-report in the hope of securing a DPA is therefore a high-risk strategy. It is made yet more unpredictable by the uncertainty surrounding the approach the judiciary will take to agreements reached between company and prosecutor.
In contrast to Civil Recovery Orders, DPAs will make public the details of the corporate wrongdoing with proceedings to formally ratify the DPA taking place in open court.
Given the uncertainty, corporates and their legal advisers will await news of the first DPAs with some interest.
Lawyer Contacts
For further information, please contact your principal Firm representative or the lawyers listed below. General email messages may be sent using our "Contact Us" form, which can be found at www.jonesday.com.
Sion Richards
London
+44.20.7039.5139
srichards@jonesday.com
Adam Brown
London
+44.20.7039.5292
abrown@jonesday.com
Charles M. Carberry
New York / Washington
+1.212.326.3920 / +1.202.879.5453
carberry@jonesday.com
Steven W. Fleming
Sydney
+61.2.8272.0538
sfleming@jonesday.com
Sheila L. Shadmand
Dubai
+971.4.709.8408
slshadmand@jonesday.com
Harriet Territt
London
+44.20.7039.5709
hterritt@jonesday.com
Hank B. Walther
Washington
+1.202.879.3432
hwalther@jonesday.com
Peter J. Wang
Shanghai / Beijing
+86.21.2201.8040 / +86.10.5866.1111
pjwang@jonesday.com
Glyn Powell
London
+44.20.7039.5212
gpowell@jonesday.com
This Commentary is a publication of Jones Day. The contents are for general information purposes only and are intended to raise your awareness of certain issues (as at March 2014) under the laws of England and Wales. This Commentary is not comprehensive or a substitute for proper advice, which should always be taken for particular queries. It may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at its discretion. The mailing of this publication is not intended to create, and receipt of it does not constitute, a solicitor-client relationship.
