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Deferred Prosecutions: Deferring Justice

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About The Author

Brent Esler (Guest Contributor)

Brent is a recent graduate of Queen's University Belfast attaining a master's degree in Legal Science. As a student, Brent gained variety of legal experience, having undertaken internships with the Ministry of Justice, A&L Goodbody and Eversheds Ireland. These facilitated exposure to numerous practice areas and industry sectors. After graduating, Brent joined an international commercial firm as a Legal Professional. Outside of work, Brent is a keen cyclist.

This article seeks to explain how the state uses Deferred Prosecution Agreements (DPAs). Arguing that such agreements can be impractical and counter-productive, it contends a recent settlement with Standard Bank and other examples from the US show that it is not in the public interest to pursue DPAs.

What are Deferred Prosecution Agreements?

DPAs are permissible by virtue of Schedule 17 of the Crime and Courts Act 2013 and the Code of Practice. In effect, the Act allows prosecutors to suspend proceedings against a company charged with criminal offences of an economic nature, subject to conditions such as co-operation, fines and reparations. Prosecution will resume if the company does not meet the conditions of the agreement.  Section 2.8.2 of The Code notes that an important element in determining co-operation will be providing reports on internal investigations, including source documents; creating a controversial condition of waiving legal privilege. In practice, the legislation will be used predominantly to penalise companies that have breached the Bribery Act 2010.   Contrasting to the US, UK prosecutors must prove 'a directing mind' knew of and was complicit in the misconduct.  Tesco Supermarkets ltd v Nattrass 1971 2 all ER 127 restricts this principle to actions of the Board of Directors, Managing Directors and other superior officers that speak and act as the company. Put simply, it is much harder to demonstrate corporate liability under the UK's burden of proof than the US.

To a certain extent, DPAs resemble the European Commission and CMA's leniency policies, endorsed as a tool to meet the increasing political demand for corporations to account for criminal conduct. I agree with such leniency strategies that secure further individual and corporate convictions, especially with respect to cartels, where a company implicates numerous other companies, which will subsequently lead to those companies facing harsh punitive measures and individual prosecutions. This is an effective measure in tackling salient issues of public interest such as insider trading and market manipulation. However, I do not believe that DPAs will have similar effect if the legislation is to be used predominantly in bribery cases due to the directing mind principle and other conflicting principles contained within the legislation. I contend that DPAs merely allow corporate entities to better mitigate the repercussions of criminal activity; benefiting from undue leniency, a lack of a criminal conviction and continued access to lucrative public contracts. These luxuries are not afforded to individuals under UK criminal procedures.

The Serious Fraud Office (SFO) were granted judicial approval for the first DPA in November 2015 with Standard Bank, based on allegations that contravene the Bribery Act. Consequently, Standard Bank agreed to pay financial penalties of $25.2 million in criminal fines, $7 million in compensation to the Government of Tanzania and £330,000 in costs to the SFO. In addition, Standard Bank agreed to co-operate with an independent review by PWC and implement its recommendations on anti-bribery and corruption controls.  It is generally accepted that deferring prosecutions are intended to achieve efficient and effective deterrence, but it is difficult to evaluate the success of this objective because in the UK, a DPA has been issued only once. However, we can learn from some examples in the US. 


In 2015, Standard & Poor settled with the US Justice Department over their alleged inflation of subprime-mortgage bonds, a major contributor to the 2008 global financial crisis.  The settlement amounted to $1.5 billion, the equivalent of a year's operating profits, together with a year ban on rating certain securities. I have noted this example because it is nonconforming to the majority of corporate pre-trial settlements in the US. Standard & Poor appear to have been subjected to significant chastisement because they initially defended the allegations. Although there are recent settlements that exceed $1.5billion, the majority of settlements equate to a much lesser fraction of the defendant's profits. The SFO's recent settlement with Standard Bank appears to follows this principle.

The UK should not follow the US inspired approach of replacing investigations with DPAs because it has the potential to mitigate accountability, diminishing the importance of individual criminal wrongdoing and allows for a veil of corporate liability. The SFO will encourage a company to identify the roles of individuals; however, it is the company that ultimately decides what shall be disclosed and whom it incriminates. This sits uneasy with the 'directing mind' principle; the high burden of proof in the UK means that companies are likely to disclose out of necessity and it is difficult to see how this will bring about an increase in individual prosecutions. 

The extraterritorial reach of the UK's Bribery Act means individuals identified by companies, will often escape the reach of the SFO. The Bribery Act punishes companies with entities that commit offences outside the UK, yet has no power to punish individuals outside the UK.  If we consider the Standard Bank case noted above, the executives in question will not face prosecution in UK courts, but rather in Tanzania by the Prevention and Combating of Corruption Bureau. Historically, this has not always brought adequate redress because prosecutions often result in only a fine or suspended sentence.  Similarly, in the Standard Bank case, the SFO alleged that the bribery policy was unclear and not reinforced, yet it seems difficult to contemplate that the executives were ignorantly breaking the law.

I maintain that the procedures used to implement DPAs in the UK are counter-intuitive. Under the Code of Practice, collateral damage to innocent employees and shareholders are considered to be in the public interest; a determining factor in the viability of a DPA. This creates incongruous terms because the public interest therefore includes the economic interests of the company itself.  Further, it is a common complaint of US defence attorneys that prosecutors overreach and pressure companies into pre-trial settlements in circumstances where the possibility of a conviction is questionable. The UK has more protections in this regard, as DPAs are judicially approved. However, the Code of Practice notes that there is no requirement for a formal admission of guilt but that there must be an agreed statement of facts. Consequently, if the DPA is not approved by a court, the SFO or CPS can use that statement in pursuing any further prosecutions of the company or individuals.  Additionally, the higher threshold of a 'directing mind' in many cases could produce similar complaints as there is potential for the SFO to use this as a fact-finding mission.


DPAs create a flawed paradigm where all stakeholders have an incentive that averts justice. The state is willing to engage in DPAs to alleviate political pressures and the financial burden concerned with investigating companies. Likewise, companies will engage to moderate financial penalties and preserve the right to tender for lucrative public contracts. The requirement to waive privilege means many companies will only agree to a DPA as a last resort - if they stand to benefit from a better deal.  I would argue that any company that discloses information under a DPA, does so, not founded by an upstanding moral character or a social responsibility, rather because it is the most effective strategy in dealing with an issue that they will ultimately be forced to confront. The current legislative framework and concept of DPAs do not work. Reducing litigation costs should not supersede the interests of achieving a just remedy. The SFO has a duty to the public to investigate and hold corporate criminals accountable for their actions. They should not discharge this duty by awarding the defendants a larger stake in their prosecutorial fate.

There is no evidence to suggest that DPAs will increase compliance by way of deterrence, nor is there evidence that they achieve a just result that benefits the UK citizenry.  The use of DPAs to date or lack thereof, suggests that there will not be an overwhelming increase in corporate penalties and that the impact of DPAs will be minimalistic. What is the enduring benefit of issuing companies with undue leniency? I do not foresee DPAs shaping a change in corporate culture if we reward financial institutions that deliberately disobey the law. If we are to continue to imprison individuals for blue-collar acquisitive crime, then white-collar executives that embezzle, defraud or misappropriate millions should face comparable prosecution and imprisonment.

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Tagged: Commercial Law, Criminal Law

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