Letters of the Law

Deferred prosecution deals: a sign of things to come?

Agreements between prosecutors and companies have proved effective overseas

PUBLISHED : Tuesday, 05 August, 2014, 4:29am
UPDATED : Tuesday, 05 August, 2014, 4:29am

Although suspended prison terms are an established feature of the legal landscape, deferred prosecution agreements (DPA) are not, and this may have to change.

The DPA, which is an agreement between a prosecutor and a corporate entity to halt a prosecution, is an exciting new weapon for prosecutors to use in combating economic crime. If there is enough evidence to prosecute a company, and it is in the public interest to prosecute, the DPA enables the indictment, once preferred, to be suspended for a defined period, if its terms are met. It is, therefore, a novel example of diversionary justice at work in the corporate sector.

Since 2000, the US Department of Justice has entered into over 250 publicly announced DPAs, and Britain has followed suit. The DPA has, since February 24 this year, also been available to British prosecutors. Under a joint code of practice, adopted by the Serious Fraud Office (SFO) and the Crown Prosecution Service, a prosecutor may, at his or her discretion, initiate confidential negotiations with a company over suspending the prosecution, provided that the company is able to play "an informed part in the negotiations", and "is not misled as to the strength of the prosecution case".

In deciding whether a DPA is appropriate, the prosecutor needs to consider such things as the seriousness of the offence, whether the company has an effective corporate compliance regime, and if a conviction will have disproportionate consequences for the company, and others.

Previously, a company convicted of a serious offence could be fined and even wound up, which was harsh on employees and shareholders. SFO director, David Green QC, explained that the DPA will "avoid that collateral damage and provide a welcome addition to the prosecutor's toolkit for use in appropriate circumstances".

Before a DPA is settled, the company must accept its terms, which can be draconian. These may include compensation for victims, a fine, meeting prosecution costs, helping authorities, implementing a compliance programme, and disgorging illicit profits. If the DPA is breached, the prosecution may, with the consent of a judge, be resumed.

Although some fear the DPA might enable white collar criminals to escape justice, Green emphasised that prosecution "remains the preferred option for corporate criminality". In Britain, moreover, the DPA is subject to judicial oversight.

Once a prosecutor has negotiated the preliminary terms of an agreement with a company, there will be a confidential hearing before a judge, who must decide if the terms are fair, reasonable and proportionate, and whether a DPA is suitable. Once a DPA is approved, the judge will give his reasons in open court.

Last year, HSBC Holdings, facing criminal proceedings in the United States over its financial activities, entered into a DPA with prosecutors, the terms of which included forfeiture, civil penalties and an admission of wrongdoing.

When endorsing the agreement, US District Judge John Gleeson said: "Taking into account the fact that a company cannot be imprisoned, it appears to me that much of what might have been accomplished by a criminal conviction has been agreed to in the DPA."

The Law Reform Commission, which recently examined suspended prison sentences, should now consider if the DPA will help local prosecutors to combat economic crime, just as it is helping prosecutors elsewhere.

Grenville Cross SC, an honorary professor of law at the University of Hong Kong, is the vice-chairman of the senate of the International Association of Prosecutors