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Deferred prosecution regime must be extended to Scotland, expert says

Plans to allow businesses in England and Wales to enter into US-style 'plea bargains' in relation to economic crime could be undermined by a failure to create an equivalent regime in Scotland, an expert has warned.

Tom Stocker, a Scotland-based anti-corruption expert with Pinsent Masons, the law firm behind Out-Law.com, said that failing to introduce deferred prosecution agreements (DPAs) as a law enforcement tool north of the border would create an "unworkable" corporate crime regime. Crimes committed by UK companies are usually subject to concurrent jurisdiction, meaning that both the Serious Fraud Office (SFO) in England and Wales and the Crown Office in Scotland are entitled to prosecute.

Justice Minister Damian Green announced last week that new laws would be passed to introduce DPAs from early 2014. The new tool will encourage businesses to self-report instances of economic crime in return for more lenient treatment, including the opportunity to avoid a criminal investigation and potential prosecution if strict conditions set by an independent judge are fulfilled. However, there are currently no proposals to introduce a similar regime in Scotland.

Stocker explained that having two separate UK enforcement models would create "ambiguity and uncertainty" for businesses operating in both jurisdictions. This would undermine any incentive to self-report, he said.

"We made the point during the consultation period that global settlements need to be achievable," he said. "It remains insufficiently clear to businesses operating on both sides of the border whether plea bargains entered into with the SFO in London will be respected by the Scottish authorities. Scottish companies could also be at a disadvantage to companies in England and Wales if DPAs do not extend to Scotland."

The new DPAs will allow organisations in England and Wales to voluntarily admit to wrongdoing and resolve to make things right. Where a prosecutor, such as the Crown Prosecution Service (CPS) or SFO agrees that a DPA is an appropriate course of action, it will be able to defer prosecution in exchange for a range of stringent conditions.

The agreement will be made in open court and details of the wrongdoing and sanctions published. If the prosecutor is satisfied that the organisation has fulfilled its obligations by the end of the deferral period there will be no prosecution, but if the conditions are not met then the organisation could still be prosecuted.

Depending on the circumstances of the case a DPA may include payment of substantial penalties, the need to compensate victims and submitting to regular reviews and monitoring. Firms could also be asked to undertake reform to prevent the conduct in question from occurring again.

Commenting on the original announcement, white collar crime expert Barry Vitou of Pinsent Masons described the new agreements as offering prosecutors a "better way" of dealing with corporate wrongdoing. "The present choice, either to prosecute or not, is deeply unsophisticated," he said.

Tom Stocker described Scottish criminal procedure as "archaic" in its methods of dealing with corporate offending. In addition, enforcement authorities on both sides of the border needed greater resources in order to effectively tackle complex cross-border crime, he said.

The new regime could also cause problems for multinational businesses, such as those operating in the energy and financial services sectors, Stocker said. He called for the UK to investigate the potential for agreements with authorities in other jurisdictions, such as those in the US, on how concurrent jurisdiction will be handled at an international level.

"Economic crime almost by definition crosses borders and therefore more than one country may have jurisdiction," he said. "In the case of the US it can be enough that money, emails or telecommunications pass through it in order for its authorities to have jurisdiction. If it becomes public that an organisation in the UK has entered into a DPA with the SFO, will that raise a flag to the US authorities that there is something going on that they should be investigated?"

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