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ETA for DPA's 2014

2 June 2013

The Crime and Courts Act has received Royal Assent, meaning that deferred prosecution agreements (DPA) are set to come into effect next year. Here, we consider the implications of DPA’s for those under investigation.

The predictions proved accurate. DPA’s are now officially set to become part of the UK legal system. The arrival of DPA’s comes as no big surprise. But it does mean large changes are likely in how some of the major investigating authorities will deal with those they believe have behaved outside of the law regarding corporate crime.

At this stage, precise details are not readily available. The Director of Public Prosecutions (DPP) and the Serious Fraud Office (SFO) have indicated that a draft Code of Practice for Prosecutors will be available for consultation shortly. It is expected that this will give us more precise information about DPA’s in this country; most notably when they will be considered appropriate. But while the exact detail is not yet available, we do know that DPA’s will see law enforcement regarding corporate crime undergoing something of an Americanisation. And this is perhaps as good a reason as any to urge businesses to make sure that they are functioning in total accordance with UK law.

Up until now, the SFO has made no secret of the fact that it often finds it hard to secure convictions in some cases. It even has difficulty sometimes in obtaining enough evidence for a prosecution. This has ruled out the chances of a conviction on many occasions. But it has also made it extremely hard to force companies the SFO suspects of wrongdoing to change the way they function to make sure any illegal behaviour is not repeated. For this reason, DPA’s are seen by UK authorities as a major step forward.

A DPA involves the authorities coming to an arrangement with a company that is suspected of wrongdoing. Under a DPA, a company can voluntarily admit wrongdoing and give an undertaking to put things right. In return for such an undertaking, the SFO or other investigating authority defers any criminal prosecution on condition that the company makes certain agreed changes to put right the wrongs that have been identified. It is not a formal let off for the company as it has to put everything right otherwise it could still face prosecution. As an example, prosecution of a company could be deferred for an agreed amount of years while the company pays a fine, removes staff known to be guilty of wrongdoing, moves out of the country or sector where it acted illegally, compensates those who suffered from its actions or agrees to be monitored as it introduces anti-corruption measures. If the company keeps its side of the bargain, the prosecution is never brought at the end of the deferral period. But if the company fails to meet its terms under the DPA, the prosecution will go ahead.

Any DPA will be made in open court, with details of the company’s wrongdoing and the sanctions against it made clear. It is the clearest indicator that companies cannot view them as a get out of jail free card. Yes, the immediate prospect of prosecution is removed. But companies have to work hard to get their house in order if they are to avoid prosecution at the end of the deferral period. And companies cannot continue acting inappropriately in the belief that they will be able to escape prosecution by entering into a DPA. For one thing, there is no clear guidance yet on what cases the authorities will consider suitable for DPA’s. And for another, the decision on whether a DPA is to be offered instead of bringing an immediate prosecution will not be the company’s to make.

It is vitally important, therefore, that companies see the formal announcement of the arrival of DPA’s as a reminder of the need to make sure they are legally compliant – not an excuse to turn a blind eye to illegal activity being carried out in its name. In the US, DPA’s are viewed as a success for helping the US Department of Justice tackle bad practice and illegal behaviour in many companies. There is little reason to believe that similar success could not be achieved in the UK. At present, companies in the UK can deny all wrongdoing and take their chances in a trial; if an investigation ever goes that far. Once DPA’s come into effect in the UK, such companies would be wise to view them as something that allows the authorities to function more effectively.

DPA’s may not lead to many more prosecutions. But they may well be the incentive for the authorities to pursue investigations that they may previously have dropped due to the slender prospect of a prosecution. A DPA gives the authorities another way of approaching corporate crime. It can place the onus on a company to clean up its act without having to obtain a conviction. As a result, companies should be viewing the arrival of DPA’s as a firm but fair reminder to sort their affairs out. A DPA does not mean a prosecution will follow but it is still one extra route that the authorities have at their disposal to try and obtain one.

It looks like DPA’s will change the corporate landscape; giving both sides a chance to put their case and find a mutually acceptable solution. Critics may claim the DPA penalises a company without ever producing enough evidence for a conviction. Yet no DPA will be entered into unless both the authorities and the company accept and acknowledge that there has been wrongdoing. Similarly, it would be wrong to say that DPA’s effectively let the company off. In agreeing to enter a DPA, a company has to admit any criminal behaviour. This can still mean that individuals guilty of criminality can be prosecuted.

There is much to be done before the first DPA’s are created in the UK. But they are coming. And the authorities will be doing all they can to make sure that DPA’s are never a mere emergency exit for firms looking to dodge the consequences of their illegal actions.


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