Changes to the draft Crime and Courts Bill, currently before the House of Lords, that will establish the new framework have been introduced today. The announcement comes as part of the Government's response to a public consultation process, which closed in August.
Justice Minister Damian Green said that the new arrangements would give prosecutors an "effective new tool" to tackle economic crime.
"Fraud alone is estimated to cost the UK £73 billion each year, yet far too few serious cases are brought to justice," he said. "It is clear we must find new and better ways of ensuring organisations who commit criminal wrongdoing do not get away with it. DPAs... will ensure that more unacceptable corporate behaviour is dealt with including through substantial penalties, proper reparation to victims and measures to prevent future wrongdoing."
A spokeswoman from the Ministry of Justice (MoJ) told Out-Law.com that the first DPAs should be made available from early 2014, subject to Parliamentary approval.
The new DPAs will allow organisations to voluntarily admit to wrongdoing and resolve to make things right. Where a prosecutor, such as the Crown Prosecution Service (CPS) or Serious Fraud Office (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 occurring again.
According to the MoJ, 86% of the respondents to its consultation agreed that DPAs had the potential to improve the way economic crime was dealt with. Criminal prosecutions against complex, global companies can now take several years and cost millions of pounds with no guarantee of a successful outcome, it said.
Barry Vitou, an expert in white collar crime with Pinsent Masons, the law firm behind Out-Law.com, said that the new agreements would offer prosecutors a "better way" of dealing with corporate wrongdoing and would allow businesses to resolve criminal exposure more efficiently.
"The present choice, either to prosecute or not, is deeply unsophisticated," he said. "The potential upside for ethical corporations is clear - hand over the bad apples themselves and corporates could avoid public trials - with all the extremely damaging publicity that brings with it. If DPAs can be implemented properly then the SFO could benefit from a dividend as businesses clear the skeletons out of the closet and come forward about past crimes that they have uncovered."
UK prosecutors can currently negotiate a form of plea agreement with organisations, but those companies still face criminal punishments that can harm their reputation and restrict their trade. Businesses that do make plea agreements also have no guarantees that courts will accept those agreements.
In other jurisdictions, such as the US, organisations can negotiate settlements with prosecutors with a degree of certainty over the scope of their punishment. However, Barry Vitou said that there would be a "marked difference" between the UK system and that in the US due to the involvement of an independent judge in the UK process.
In a statement, Solicitor General Oliver Heald said that he was "confident" that DPAs would become an "invaluable tool" for the SFO and CPS.
"In cases where a company accepts wrongdoing, and is committed to put things right, a DPA will mean that it must comply with stringent conditions to compensate and ensure there are no repeat incidents, whilst involving a lengthy and expensive prosecution with the prolonged uncertainty it brings for the victims, blameless employees and others dependent on the fortunes of the company," he said. "There will always be cases where the public interest requires a full criminal prosecution and DPAs will allow prosecutors to focus more of their resources on these cases."
Editor's note 24/10/12: A quote from Barry Vitou in this story was amended for clarity.