Pinsent Masons - Deferred Prosecution Agreements May Not Offer Enough Protection To UK Companies

A government consultation on introducing DPAs closes on Thursday 9 August, with legislation expected next year.

Pinsent Masons says that the Government needs to do more to ensure DPAs give companies confidence that they will be immune from prosecution in other jurisdictions once they have entered into a DPA in the UK. Pinsent Masons points out that economic crime often crosses borders and therefore more than one country may have jurisdiction.

DPAs act as a plea bargain, and would allow companies to publicly admit wrong-doing while paying penalties, undertaking internal reforms, or agreeing to external monitoring, in exchange for immunity from prosecution (unless they breach the terms of the DPA).

Barry Vitou, Partner at Pinsent Masons, says: “‘Global settlements’ need to be achievable. A memorandum of understanding needs to be reached between the UK and the US – and other jurisdictions – on how cases involving concurrent jurisdiction will be handled. DPAs won’t be an effective or attractive resolution if companies could still face prosecution overseas.”

In recent years, the US Department of Justice has pursued bribery and fraud cases against a number of British and European companies.

Barry Vitou continues: “For companies to be encouraged to self-report to the UK authorities and to be incentivised to enter into a DPA, they need to know that it will lead to complete closure of the issues covered by the DPA. The Government’s proposals have a blind spot when it comes to cases involving multiple jurisdictions. Unless this is corrected, the initiative might fall apart.”

“Even within the UK, jurisdictional issues still need to be resolved.”

“Currently, the criminal authorities of England & Wales and Scotland both have jurisdiction in relation to bribery committed overseas by UK companies. Clarity and certainty is needed as to how DPAs will work in cases of shared jurisdiction within the UK. DPAs should ideally be UK wide with similar regimes operating in England, Wales, Northern Ireland and Scotland."

SFO ‘sticks’ needed to go with DPA ‘carrot’

Pinsent Masons adds that the introduction of Deferred Prosecution Agreements (DPAs) needs to be backed up by new investment in anti-corporate crime enforcement if they are to fulfil their potential.

Pinsent Masons says that DPAs will provide a major new weapon in the SFO's fight against economic crime and will incentivise companies to self-report white collar crime.

However, Pinsent Masons argues that government attempts to use DPAs as ‘carrots’ need to be backed up with a hefty ‘stick’ in the form of a stronger and better resourced Serious Fraud Office.

Barry Vitou says: “David Green QC has taken over at the SFO with some far-reaching plans for improvement. He needs an updated toolkit from government, to which DPAs will contribute, but most importantly he needs more investment in resources to beef up the SFO’s firepower.”

“While the Government has announced some extra SFO funding, this doesn’t go far enough, especially when you compare it to the resources at the disposal of the corporates they investigate, or similar agencies overseas.”

“Incentives to self-report work best when the alternative – being found out by enforcement agencies – is too much of a risk. Working on a small budget and with the limitations imposed by that, the SFO still isn’t considered enough of a risk in the City to add to the incentives to self-report.”

The Ministry of Justice hopes that DPAs will incentivise self-reporting for two reasons:

• The ministry believes they could prevent ‘forum shopping’ amongst guilty corporates. DPAs would remove the uncertainty companies face in the UK legal system after they have pleaded guilty to charges – judges can currently ignore plea deals made with prosecutors. Instead, some suggest that corporate defendants agree to a deferred prosecution deal in the US to avoid prosecution in the UK under double-jeopardy rules. This denies UK prosecutors the chance to secure restitution, compensation, or convictions.

• DPAs allow corporations to be punished for wrongdoing without risking the mandatory debarment from government contracts that prosecution can bring; most bribery offences result in mandatory debarment.

Barry Vitou comments: “DPAs have real benefits, and they will be a key part of the UK’s fight against corporate crime. Their introduction should encourage companies to root out corporate criminality, to clear the slate and move towards culture where corporate offending does not pervade."

“DPAs have the advantages of penalising companies, enabling swifter restitution and rehabilitation, and reducing the risks to innocent directors, employees, and stakeholders.”

Barry Vitou continues: “The government currently lacks the right tools and incentives to encourage self-reporting. DPAs should help plug this gap. There is also the problem that there is little certainty that deals made with prosecutors by self-reporting corporates will survive in the courtroom. DPAs should help here, but there is still more that the Government can do on this ‘certainty’ issue.”