Government consults on proposals for deferred prosecution agreements framework

The Ministry of Justice (MoJ) has opened a consultation (56-page / 244KB PDF) on 'deferred prosecution agreements' (DPAs) which the Government said it hopes will provide "swifter alternatives to prosecution which can deal with wrongdoing effectively, proportionately and with a greater degree of certainty".

The MoJ said DPAs would be open to companies on a purely voluntary basis in circumstances where they wish to own up to offences of fraud, bribery or money laundering.

Under the new framework judges would have the final say on whether DPAs formed between prosecutors and businesses were legitimate or whether prosecutions should still be sought for any wrongdoing. Companies that have DPAs approved by judges could still face future criminal proceedings if they breach the terms of those agreements, the MoJ said.

The MoJ admitted that there would be "risks" for companies making admissions and handing over documents to prosecutors as part of working towards a DPA because judges could still reject the agreement. However, it said that it was "vital" that judges are involved in the process in order to ensure "public confidence in the justice system".

"The public need to have confidence that a prosecutor is not entering into a 'cosy deal' with a commercial organisation 'behind closed doors'," the MoJ said. "We therefore believe that there should be judicial involvement from an early stage whereby the proposed DPA is considered at a preliminary hearing before it returns for final judicial approval."

"Once a DPA is finalised and approved, we believe that details of the agreement should be published, as would most court proceedings ... subject only to restrictions relating to, for example, other ongoing prosecutions. Nonetheless, we consider it important that the initial stages of the process (i.e. until the point at which the DPA has been approved in principle by the court) are not conducted in public."

"The prosecutor and the commercial organisation should be able to have free and frank discussions without the fear of potential adverse consequences which might arise were it to become known that a DPA was being considered. This would be analogous to current practice, such as the confidentiality agreements which can be used in plea discussions on serious and complex fraud cases, and the 'without prejudice' discussions which can take place in civil disputes," the MoJ said.

In forming DPAs prosecutors and firms must give regard to what an appropriate punishment would be for firms' wrongful behaviour, the MoJ said. They must also consider whether the agreement acts to reduce crime, rehabilitate offenders, offer public protection and give restitution to victims, it said.

The MoJ said that it expects prosecutors and companies will most commonly negotiate financial penalties as a means of punishment under the DPAs framework, and that further agreed conditions to "deter future offending", such as requiring firms to alter their governance and disciplinary procedures, may also be agreed. Additionally, the "terms and penalties" negotiated may also include a condition that firms make "compensatory payments" to those affected by its "offending behaviour".

A new 'code of practice' should be established that sets out the circumstances "in which a prosecutor could legitimately consider entering into a DPA with a commercial organisation, the principles applying to such a decision, the permissible parameters and circumstances which might suggest a DPA was unsuitable," the MoJ said.

Further guidelines on both the procedural elements involved in working towards a DPA and what the terms of such agreements should include should also be drafted, it said.

In addition "a narrative guideline" could set out "principles for courts to follow when determining the appropriateness of a particular DPA," the Department said.

"Such a guideline might include material on relevant factors to consider when assessing the seriousness of the offending behaviour, and how the penalty should relate to any hypothetical sentence that might have been imposed had the commercial organisation been convicted of an offence," it said. "It could also give a non-exhaustive set of examples of penalties or conditions that may be appropriate for particular types of offending behaviour."

In the UK at the moment prosecutors can 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.

Anti-corruption law expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said that DPAs were a necessary new tool required for enforcement of economic crimes in the UK.

"The UK prosecutors' toolkit is in serious need of the DPA regime," he said. "The present system encourages enforcement arbitrage with other countries which makes no sense."

"The launching of the formal government consultation today is a welcome step and follows an informal consultation process which kicked off in October last year in our offices.  We shall be feeding into this review and we would be delighted to hear readers' views," Vitou said.

The MoJ said that the current enforcement regime does not offer sufficient "incentives" to companies "to engage and cooperate with UK authorities at earlier stages to achieve better outcomes" to economic crimes.

"At present, the general criminal law proceeds on the basis that the only circumstances in which an organisation can make admissions of wrongdoing and be punished are in the context of criminal proceedings which result in a conviction and sentence by a competent court," it said. "Restitution and punishment will only occur where commercial organisations are prepared to engage and plead guilty to a criminal charge or against whom the legal and evidential difficulties of proving corporate liability can be overcome."

"From the perspective of victims, no order can be made for restitution until the offender has been convicted, and there are limited opportunities to pursue civil remedies against a commercial organisation," it said.

The MoJ consultation is open until 9 August. The proposed new regime would only be affective in England and Wales, although the MoJ said it would hold talks with the devolved administrations in Scotland and Northern Ireland in an attempt to implement the proposals in those countries also.

"If we can encourage companies to self-report and come clean, pay penalties and mend their ways, the time and expense of investigations and prosecutions will be better spent elsewhere, enabling us to bring more individuals and companies to justice," Solicitor General Edward Garnier said in a statement.

"An important aim of any DPA system would be to allow investigators and prosecutors to focus resources on those cases where a prosecution is in the public interest - and there will always be some where it is the only option," he said.