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Monday
Jul232012

U.K. DPAs? Not So Fast . . . .

In a perfect world the Solicitor General will get his proposals for deferred prosecution agreements (DPAs) through the House in their current form. Those who then discover ‘economic crimes’ within their organisations will queue up on Elm Street to disclose their corporate wrongs, hundreds of millions will be paid over in fines and compensation orders and all this will be achieved without an extra penny being added to the Serious Fraud Office’s budget.

There is, of course, an on-going consultation period, due to close on the 9th of August. And perhaps the plans will change between now and then. However, if DPAs do end up looking anything like the proposals, perhaps nirvana may be just around the corner for Edward Garnier QC MP.

For my part, I am afraid that any resemblance will be slight. Why, you may ask, such scepticism? After all, DPAs are very successful tools in the U.S.

The consultation paper points to the Department of Justice’s success in securing DPAs, and so it should.  That success can be measured in several ways:

  • corporate self- disclosure;
  • self-investigating;
  • the negotiation and payment of penalties measured in their hundreds of millions of dollars; and
  • the imposition of monitors to ensure there is no speedy recidivism.

Why then, success in the US and my gloomy prediction of failure – or at least very limited success – here?

The answer is reassuringly straightforward: the Department of Justice can offer certainty of outcome, which is what corporations entering negotiations want most of all. Under the new proposals, the SFO cannot.

Why? Because the new scheme envisages a continuing and central role for the judiciary.  A Judge will decide, perhaps with the help of counsel appointed by the court, whether:

  • it is in the interests of justice to sanction a DPA;
  • the content of the proposed DPA was ‘fair, reasonable and proportionate’;
  • to approve the final content of the DPA;
  • a DPA should and could properly be varied;
  • there has been a breach of a DPA; or 
  • a DPA should be terminated.

In order to get before a Judge though, a corporation will have to make substantive and incriminating disclosures to the SFO. This, I would suggest, is an unattractive proposition which will deter many companies from starting down this route.

There are a number of other disincentives contained within the proposals.

First, there is no protection from double jeopardy. Therefore, full and detailed disclosure in open court in England may well lead to prosecutorial and regulatory action elsewhere, particularly in the U.S. Conversely, this is not the case if a deal is done with the Department of Justice (because the U.K. recognises the double jeopardy rule).

Second, information disclosed in open court – and particularly the details of admissions – will be admissible in civil process relating to the same subject matter. Those admissions will be permissible here and overseas.

Third, little or no thought has been given to what obligations may be put on a corporation to undertake further investigation and disclosure in the event that an individual (or individuals) are criminally charged in relation to the same subject matter. This may increase the corporation’s exposure and lead to reconsideration of the DPA.

In Innospec in 2010 Lord Justice Thomas said:

(the) corruption of foreign government officials or foreign government ministers is at the top end of serious corporate offending both in terms of culpability and harm … fines in the US are substantial … no one was able to suggest any reason for differentiating in financial penalties.  Indeed there is every reason for states to adopt a uniform approach.

So, there is not even a regulatory arbitrage advantage in doing a deal in the U.K. Financial penalties at least will be the same.

Therefore, if you have a corporate issue and the conduct is covered by U.S. jurisdiction (and if you’re a multinational business, it almost certainly will be), the obvious place to form an orderly line is not Elm Street at all, but rather 950 Pennsylvania Avenue.

Before we cry ourselves to sleep once again that nirvana is not all that was promised, it is worth taking a moment to reflect here. In maintaining the role of the Judiciary, the proposals preserve the rule of law and, more specifically, judicial oversight of prosecutorial zeal by the State. There are many in the U.S. who would welcome such oversight of the Department of Justice. After all, the rule of law is true nirvana…

_________________

Bill Waite is a founder of The Risk Advisory Group (a sponsor of the FCPA Blog) and an expert on anti-bribery and corruption legislation. He formerly practiced as a criminal barrister before joining the Serious Fraud Office in 1991 as a prosecutor. He can be contacted here.

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