Are you in compliance?

Don't miss out! Sign up today for our weekly newsletters and stay abreast of important GRC-related information and news.

Get updates on Compliance Week offerings, including new features, databases, research, and other resources, along with announcements of upcoming Webcasts, conferences, seminars, CPE/CLE opportunities and more.

Published every Thursday, Compliance Week Europe offers a condensed summary of risk, audit, and compliance news either originating in Europe, or of special interest to European compliance professionals. This newsletter will follow developments by the European Commission, as well as those of national governments across the region, or any U.S.-based news that might have consequence across the Atlantic. Frequency: weekly; Thursday a.m.

A fresh edition of Compliance Week delivered via e-mail and online every Tuesday morning, relentlessly focused on the disclosure, reporting and compliance requirements of our 25,000+ paying subscribers.

Published every Friday, Compliance Weekend was launched at the behest of subscribers, and offers a quick Plain English review of the week's key developments. We hope you enjoy this supplement to Compliance Week's Tuesday edition.

Britain Mulls Use of DPAs

Jaclyn Jaeger | July 30, 2012

The U.S. Justice Department has grown increasing reliant on deferred prosecution agreements that allow prosecutors to require corporate reforms and other penalties in exchange for holding off on pursuing a conviction. Now the British government may be getting into the act.

The U.K. Ministry of Justice published a much-anticipated consultation paper recently on whether to adopt DPAs in an effort to fight corporate bribery and corruption without having to win a conviction in every case. While the program, which provides a tool to for the Justice Department to insist on reforms in cases that could be difficult or expensive to prosecute, has been in use in the U.S. since 1991, the idea has little grounding in British law.

“It's quite a novel concept for the U.K.,” says Mark Beeley, a partner in the London office of law firm Vinson & Elkins. “We don't have plea bargaining here, so it's raised all sorts of moral and ethical concerns in terms of whether it should be happening.” 

The U.K.'s Solicitor General and Serious Fraud Office are firmly in support of adopting the use of DPAs in Britain. As the consultation paper points out, enforcement agencies often rely on companies to self-report wrongdoing due to a lack of tools and resources. Without the ability of prosecutors to offer a plea deal, however, companies have little incentive to self-report, especially if doing so may result in a criminal conviction.

“Our ambition is to ensure that a higher proportion of economic crime is identified, investigated, and dealt with,” the paper states. “DPAs are a tool that seeks to achieve these goals while being transparent and consistent.”

The use of DPA by prosecutors is not without controversy. Some critics say they are applied inconsistently and that they let some companies off the hook too easy and fail to send the same message that a conviction would. Mike Koehler, an assistant professor of Southern Illinois University School of Law and an outspoken critic of DPAs, says one concern is that in the consultation paper the Ministry of Justice relies on the assertion that DPAs have been “successfully adopted” in the U.S. In Koehler's view they have not.

In a comment letter to the Ministry of Justice, Koehler says he cautioned that DPAs' measure of success should not be based on the number of enforcement actions alone. The more options an enforcement agency has at its disposal, the more enforcement actions will result, he says. “But quantity of enforcement actions doesn't necessarily mean quality of enforcement actions.”

Yet supporters of the measure say the benefits outweigh the risks. “The biggest thing a deferred prosecution agreement brings is certainty,” says Tom Fox, an independent FCPA compliance consultant and lawyer. Companies know what the penalties are going to be, and they know what actions they will need to take, he says.

“It's quite a novel concept for the United Kingdom. We don't have plea bargaining here, so it's raised all sorts of moral and ethical concerns in terms of whether it should be happening.”

—Mark Beeley,
Vinson & Elkins

More Judicial Oversight

While the adoption of DPAs in Britain would build on measures used by U.S. enforcement agencies, the U.K. does not plan on replicating it exactly, if it does decide to go down the DPA road. For example, the British government says it would require far more judicial oversight of the program than exists in the United States.

Under the U.K. system, the prosecutor and corporate defendant would have access to criminal courts at an early stage, whereby a judge would assess whether a DPA is appropriate. “Where the alleged wrongdoing is most serious, or the public interest would otherwise require it, a criminal prosecution would continue to be the most appropriate course of action,” the paper states.

If deemed appropriate, the parties may then negotiate proposed penalty terms, which may include: financial penalties, restitution for victims, disgorgement of profits, and monitoring or additional reporting requirements.

In order to determine whether proposed terms appear “fair, reasonable and proportionate” and are “in the interests of justice,” a judge would give the DPA final approval. Details of the final and approved DPA would then be published.

The additional judicial oversight could make negotiating a DPA tricky. The parties involved—Crown Prosecution Services and the corporate defendant—would need to craft a DPA which will pass judicial scrutiny, says Fox. “If a company is afraid that a judge will impose higher penalties, that probably means the agreed upon penalty is set too low.” To ensure against that, he says, parties may want to review prior agreements or judicial mandated sentences, fines, and penalties to present to the U.K. court to justify the DPA that they have jointly agreed to submit to the court.

Such a process is a marked departure from the U.S., where the judiciary does not take part in plea negotiations and only approves deferred prosecution once the prosecutor and corporate defendant reach an agreement. “The concept of judicial involvement—or really any meaningful judicial involvement—in the United States as to DPAs is simply not there,” says Koehler.


The following excerpt from the Ministry of Justice's Consultation Paper explains the intended purpose of deferred prosecution agreements if introduced in the United Kingdom:

A DPA will not be, and is not intended to be, a sentence upon conviction for an offense. However, depending on the circumstances of an individual case, a DPA might fulfill some or all of the purposes of a sentence. Currently courts must have regard to five different purposes when dealing with an offender (whether an individual or an organization) in respect of the offense committed:

  • punishment;
  • reduction of crime (including by deterrence);
  • rehabilitation of offenders;
  • public protection;
  • restitution to victims.

We consider that a DPA should fulfill similar purposes, and that the parties and court should be required to have regard to these purposes when agreeing a DPA. However, these matters would need to be considered in light of the fact that there will not have been a prosecution or a conviction.

The terms and penalties that could be required under a DPA would be framed to address purposes that are relevant to the individual offense. For example:

  • our assumption is that the most common type of condition under a DPA would be a financial penalty.
  • reduction of crime (including by deterrence): conditions to deter future offending might include changes to organizational governance or disciplinary procedures within a commercial organization that enters into a DPA.
  • reparation to victims: a condition might include compensatory payments to those affected by a commercial organization's offending behavior, or an organization's staff meeting with those affected to discuss the impact of the wrongdoing, be held directly to account and to apologize.

Key principles underpinning DPAs

We believe that DPAs need to have two key principles to be effective in commanding public confidence and tackling economic crime committed by commercial organizations:

  • Transparency: to provide a process which encourages potential defendants to discuss ‘without prejudice' and to ensure that the operation of justice is transparent to the public; and
  • Consistency: to ensure both prosecutor and commercial organization are working from common principles when entering into the DPA process, and to give both an indication of the likely package of terms, including a penalty, which a court would approve.

Source: Ministry of Justice.

In order to facilitate “free and frank discussions,” the initial stages of the process will be conducted in private. In a comment letter to the Ministry of Justice, the City of London Law Society, which represents more than 15,000 individual and corporate attorneys, wrote that the potential adverse consequences associated with any publicity should be minimized up to trial or final resolution of an agreement, particularly when the judge may not necessarily support the DPA as an appropriate course of action.

A judge's published decision stating the unsuitability of a DPA in a particular case would be “difficult to exclude from jurors' consideration in any subsequent trial, and the reasons for the judgment may prove highly prejudicial to the defendant,” the letter stated. “Such concerns may deter corporate defendants from considering the DPA process as a viable option which may minimize the proposed system's effectiveness.”

While DPAs are under consideration for use in the British legal system, their close cousin, non-prosecution agreements, are not. The Ministry of Justice rejected the idea outright in the consultation paper. “Despite the effectiveness of the U.S. model, the lack of judicial oversight is likely to make it unsuitable for the constitutional arrangements and legal traditions in England and Wales. We have concluded that non-prosecution agreements are not suitable for this jurisdiction due to their markedly lesser degree of transparency, including the absence of judicial oversight,” the paper stated.

In its comment letter, the City of London Law Society additionally suggested that “serious consideration” also be given to the issue of privilege. “If the use of DPAs were to widen here, as it has in the United States, a danger may arise that it may become expedient for prosecutors to expect a waiver of privilege as a sign of cooperation.”

Because enforcement regulators often coordinate their efforts in bribery and corruption investigations, legal experts say U.S.-based companies should be watching the U.K. deliberations over DPAs closely.

 “You are effectively entering into a guilty plea,” which the Justice Department can use as evidence against the company's U.S. operations in parallel investigations, says Beeley. So for U.S. companies that are found in violation of the Bribery Act, it will be important to ensure that entering into a DPA in Britain also satisfies any DPA that is reached in the U.S.

“For multinational companies, there is going to have to be an awful lot of coordination to make sure that if you're doing a deal, it's a global deal,” says Beeley. Thus, discussions that companies normally would have with the Justice Department as it applies to FCPA violations, “you now would want to have in parallel—and possibly in conjunction—with the Serious Fraud Office,” he says.

The Ministry of Justice is seeking comment until Aug. 9, with implementation to follow in early 2014 or 2015.