Canada: UK And Canadian Anti-Corruption Legislation – Deferred Prosecution Agreements

When a firm discovers potential offences under UK and/or Canadian anti-corruption law, we are often asked to advise on how best to mitigate the risks. A new approach for the UK is the entry into of Deferred Prosecution Agreements ("DPAs") which can help minimise the adverse consequences of any breach of anti-corruption law. This article looks at key features of DPAs in the UK and its first UK application as well as at the status of these issues in Canada.

This is the third instalment in our series comparing and contrasting anti-corruption law and enforcement in the UK and Canada. For a quick reference guide of UK and Canadian anti-corruption law, please see the following link.

For an explanation of the extra-territorial application of UK and Canadian anti-corruption law, please see the following link.

Key Features of UK DPAs

DPAs came into force in the UK under the Crime and Courts Act 2013 and became available as an enforcement tool on February 24, 2014 following consultation and publication of a DPA Code of Practice ("the Code") on how they will be used. Key features include:

  1. DPAs are at the discretion of the prosecutor and a company has to be invited to enter into a DPA.
  2. DPAs will only be entered into where the public interest is not best served by mounting a prosecution.
  3. The Code sets out a list of factors that the prosecutor may take into account when deciding whether or not to enter into a DPA. DPAs are unlikely to be appropriate for serious offences and early and full co-operation by the company is a key factor.
  4. Proceedings are automatically suspended where a company is charged with a criminal offence (fraud, bribery or other economic crime) and a DPA is entered into.
  5. In the DPA, a company agrees to various conditions often including financial penalties, compensation and future co-operation. If the company does not comply with the conditions in the DPA, the prosecution may resume.
  6. The DPA process is supervised by a judge and the court has to declare that the DPA is in the interests of justice and the proposed terms are fair, reasonable and proportionate.
  7. DPAs apply to organisations not individuals.

The Standard Bank Deferred Prosecution Agreement

Background: The first DPA in the UK was entered into by Standard Bank and the UK Serious Fraud Office ("SFO") and approved by the UK court on November 30, 2015. This arose after Standard Bank self-reported the matter to the SFO, retained solicitors to conduct an internal investigation, and submitted the findings to the SFO. Standard Bank agreed in the DPA that it had failed to prevent bribery contrary to Section 7 of the Bribery Act 2010.

Facts: Standard Bank won a financing mandate to raise funds for the Government of Tanzania. However, one of its sister banks paid 1% of the monies raised to a 3rd party company which included as its chairman the Commissioner of the Tanzanian Revenue Authority (a member of the Government of Tanzania). Another director of the company was the former Chief Executive of the Tanzanian Capital Markets and Securities Authority.

Terms of the DPA: Standard Bank agreed that it had failed to prevent bribery by persons associated with it, namely the sister bank and its senior executives. The terms of the DPA included payment of compensation of over US$7 million to the Government of Tanzania; payment of US$8.4 million (the amount of profit on the transaction) and payment of US$16.8 million (as a financial penalty) to the SFO, and payment of the costs of the SFO investigation. Standard Bank also agreed to fully co-operate with the SFO, be subject to an independent review of its current anti-bribery and corruption policies, and implement the recommendations of the independent reviewer.

Notable Features: It is the first case where a DPA has been entered into in the UK and the SFO has advised that it will serve as a template for other DPAs. As the first DPA in the UK, it has many notable features. In particular, it again illustrates the extra-territorial application of the UK bribery law with the bribery in this case committed overseas in Tanzania (please see our previous e-alert above on the extra-territorial application of UK and Canadian anti-corruption law).

UK DPAs – a good choice for a company?

In many cases, a DPA will be beneficial to a company. However, companies need to weigh carefully the pros and cons of agreeing to a DPA in the particular circumstances. Whilst there are obvious advantages to agreeing DPA's in terms of avoiding contested criminal proceedings having regard to time, cost, reputation, commercial effect, potential for reduced penalties (the Code states that the financial penalty is to be broadly comparable to a fine that the court would have imposed following an early guilty plea), and the potentially devastating impact that a criminal conviction could have on a corporate entity, there are risks and potential drawbacks. These include the risk that information submitted where no DPA is concluded will be used to assist with a subsequent prosecution. The terms of the DPA may include onerous sanctions such as monitoring which may not be imposed following a court process. It is also unclear how a UK DPA and information supplied as part of it may affect potential prosecutions in other jurisdictions. The entry into of a DPA by a corporate will not affect the investigation and prosecution of individuals who committed the bribery offence. Finally, if the terms of the DPA are not complied with and prosecution continues, any admissions of liability in the DPA will mean that conviction is almost inevitable.

DPAs in Canada?

At the present time, Canada has no DPA mechanism. This has important implications for Canadian companies as well as UK and other companies subject to Canadian jurisdiction.

If Canadian authorities wish to impose criminal penalties on a company that has committed violations of the Corruption of Foreign Public Officials Act ("CFPOA") or the anti-corruption provisions of the Criminal Code, the company must be convicted. To date, only three companies have been convicted under the CFPOA, all pursuant to guilty pleas: Hydro Kleen was penalized $25,000 in 2005, Niko Resources was penalized $9.5 million in 2011 and subject to probation and monitoring for three years, and in 2013 Griffiths Energy was penalized $10.35 million.

A criminal conviction can have significant reputational and financial consequences for a company that extend well beyond the payment of a multi-million dollar fine. For example, under Canada's new Integrity Regime, a CFPOA conviction will lead to 5 to 10 years debarment from doing business with the federal government (for more on this, see Canada Implements New Integrity Regime for Public Procurement), a potentially disastrous outcome for companies that rely on the federal government for a significant portion of their business.

Not surprisingly, a number of companies and commentators in Canada have been calling for the implementation of a DPA mechanism in order to level the playing field with companies in the United States and the UK where these agreements are currently available. These mechanisms play an important role in encouraging companies to come forward and voluntarily self-disclose anti-corruption violations. Although it is still early days for the UK DPA process, it is clear that under the US regime, DPAs and non-prosecution agreements ("NPAs") have resulted in firms self-disclosing violations, paying significant penalties, and implementing remedial measures often under the supervision of a monitor.

There is a strong argument that the appropriate use of the DPA option in the context of complex white-collar criminal matters, such as those involving foreign corruption, promotes the efficient use of limited public prosecutorial and investigative resources and avoids the debilitating impact that a criminal conviction has not only on the company itself but on innocent stakeholders, including its employees. At the same time, experience to date indicates that DPAs result in more penalties and remedial action than would otherwise be the case absent these settlement mechanisms.

Notably, in Canada there is no formal process or practice for voluntary self-disclosure of anti-corruption violations. Crown prosecutors have the discretion to decline prosecuting where they determine that a prosecution would not best serve the public interest or there is no reasonable prospect of conviction based on the available evidence. Certainly, a company self-disclosing to Canadian authorities can make arguments that it has cleaned up its act and a prosecution does not serve the public interest.

Indeed, there are public examples from time to time of the Canadian authorities declining to prosecute companies that self-disclose – most recently, Nordion Canada, after making a disclosure to Canadian and US authorities in August of 2012 and conducting an independent internal investigation, was notified by the Royal Canadian Mounted Police that they would be taking no further action on the matter. However, there is presently no program or practice in place that provides any assurance to a company that voluntarily discloses CFPOA violations that Canadian authorities will not seek penalties – and without a DPA or similar mechanism in place, the only means of assessing such a penalty is to obtain a conviction of the company.

Without these settlement mechanisms in place, there are many Canadian companies that will be reluctant to self-disclose foreign bribery issues (subject of course to any disclosure requirements under securities laws). For Canadian companies whose activities also fall under US and UK jurisdiction, they will have the additional challenge of determining whether to disclose in those jurisdictions with more favourable processes, knowing that if they do, disclosure to Canadian authorities will most likely be necessary but the process and outcome will be far less certain in Canada.

Will DPAs be introduced in Canada?

In addition to the existing regimes in the United States and the UK, the adoption of DPAs is now under serious consideration in Australia and France. With expanding enforcement of foreign corruption laws and the implementation of an aggressive federal debarment regime, there is now significant impetus for Canada to implement such a settlement mechanism.

In our view, it is not question of if, but rather when and what form DPA implementation will take.

Canada will no doubt look to the DPA mechanism in the UK and the US DPA regime and its substantial record over the past decade or so. In the latter case, we expect Canadian authorities to take note of recent US efforts to refine and clarify elements of these settlement processes to address some of the criticisms that have arisen over the years, including concerns that executives involved in violations have been able to avoid criminal prosecution when a company negotiates a DPA. For example, the September 9, 2015 Memorandum from US Deputy Attorney General Sally Yates ("Individual Accountability for Corporate Wrongdoing") and the April 6, 2016 US Department of Justice FCPA Enforcement Plan and Guidance now make it clear that to receive cooperation and voluntary self-disclosure credit the company must provide all relevant facts about the individuals involved in any violation.


The UK anti-corruption regime has now embraced DPAs and we are likely to see many more DPAs in 2016. There are many factors set out in the Code to be considered by a UK prosecutor before entering into a DPA. However, a key factor is co-operation and a genuinely proactive approach by the company's management when the offence comes to their attention including reporting the offence and taking remedial actions. It is therefore likely that DPAs will be used for the most part primarily where the company has co-operated with prosecutors.

For now, without any access to DPA and voluntary disclosure mechanisms to address potential anti-corruption violations, companies subject to Canadian jurisdiction are at a significant disadvantage to their US and UK counterparts. They will have to carefully consider on a case-by-case basis whether voluntary self-disclosure to the Canadian authorities is in their best interest in light of the absence of any DPA option.

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