UK: UK Legislation Permitting Deferred Prosecution Agreements Is Approved

On 25 April the Crime and Courts Bill received Royal Assent and became the Crime and Courts Act 2013 ("the Act").1 Section 45 and Schedule 17, Parts 1, 2 and 3, of the Act introduce into UK law for the first time the concept of deferred prosecution agreements (DPAs).2

The legislation is not yet in effect, and is not likely to be in effect before February 2014. In the intervening period a Code for Prosecutors must be published by the Director of the Serious Fraud Office (SFO) and the Director of Public Prosecutions (DPP). It is also understood that the UK Sentencing Council will be producing guidance on financial penalties for companies convicted of criminal offences.

As discussed in the 2012 FCPA Year in Review,3 the introduction of DPAs would be a significant development in the enforcement of UK criminal law. Their introduction not only causes UK law to align more closely with the US, but also raises the prospect of global settlements in multi-jurisdictional cases involving fraud, corruption or money laundering. It remains uncertain what effect this development will have on Bribery Act enforcement and the "no more deals" approach adopted by the Director of the SFO.4 Nevertheless, the possibility of less leniency for Bribery Act violators-even if they self-report-continues to underscore the need for companies subject to the UK Bribery Act to adopt compliance programs and procedures sufficient to satisfy the Bribery Act's "adequate procedures" defence if they are forced to defend themselves before a more focused SFO in the future.

The rationale for introducing DPAs

The central premise behind the introduction of DPAs, as set out in the Ministry of Justice Consultation paper,5 is that corporate crime in the UK is difficult to investigate and difficult and costly to prosecute, resulting in prosecutors needing new tools to tackle these issues more effectively.

One of the problems in prosecuting corporates in the UK is that the law of corporate criminal liability requires prosecutors to show that the "directing mind and will" of the commercial organisation had the necessary criminal mental element or "mens rea" for the offence. This can be difficult to prove in large and sophisticated commercial organisations. Although the introduction of the section 7 offence in the Bribery Act 2010 went some way to alleviate that issue by removing the requirement for a fault element,6 it was still felt that the current justice system was inadequate to deal effectively with criminal enforcement against commercial organisations. Prosecutors did not have adequate tools to do much beyond criminal prosecution or civil.

Judicially sanctioned DPAs are seen as a mechanism not only to incentivize companies to self-report, but also to improve corporate compliance systems, and to facilitate repayment of monies to victims, all at a reduced cost to the regulator.

Overview of the Legislation

The specific parts of the legislation that introduce DPAs are short and predominantly process-driven. They give very little detail about the underlying factors that will or should be taken into account by either the prosecutor or the judge prior to, during or after the DPA process is concluded. That detail is to be provided in the Code for Prosecutors.

Section 45 of the Crime and Courts Act 20137 simply states that:

"Schedule 17 makes provision about deferred prosecution agreements."

Schedule 17 is divided into parts 1-3.

Part 2 Paragraphs 15-29 list the offences for which a DPA may be entered into. Broadly speaking, these are fraud, bribery and money laundering offences. Repealed offences, such as the Prevention of Corruption Act 1906 and the Public Bodies Corrupt Practices Act 1889, repealed by schedule 2 to the Bribery Act 2010 on 1 July 2011,8 are not listed.

Part 3 includes transitional provisions. Of particular note is that the statute applies retrospectively – conduct which occurred prior to the commencement date (which has not yet been set) may be dealt with by entering into a DPA (Schedule 17 Para 39). It may be that corrupt conduct occurring prior to the implementation of the Bribery Act in July 2011 could be dealt with by a DPA, under Paragraph 30, which states that "This schedule applies in relation to conduct occurring before the commencement of this schedule as if an offence specified in this part included any corresponding offence under the law in force at the time of the conduct."

Part 1 lists the "characteristics" of a DPA. Structurally the UK DPA is very similar to its US counterpart. Paragraph 1 describes a DPA as "an agreement between a designated prosecutor and a person ("P") whom the prosecutor is considering prosecuting for an offence specified in part 2."

The prosecutor and the company will be bound by that written agreement (Schedule 17: Para 1(2)). The agreement between the prosecutor and the company will contain a statement of facts, which may, but is not required to, include admissions of guilt by the company (Schedule 17: Para 5(1)).

Conditions (or "requirements") will be imposed upon the company, and will include matters such as the payment of a financial penalty (to be comparable to the fine that could have been imposed after a guilty plea and the 1/3 sentencing discount that applies in the UK), the compensation of victims, disgorgements of profits, implementation of a compliance programme, co-operation with investigations into the offence, and payment of prosecution costs (Schedule 17: Para 5(3) (a)-(g)). The DPA will last for a fixed term, and have an expiry date specified (Para 5 (2)).

Court proceedings will commence by the prosecutor preferring or laying the indictment. If the DPA is agreed the proceedings are "automatically suspended" and not to be recommenced unless an application is made to the Crown Court (Schedule 17 Para 2 (1)-(3)). Once the DPA successfully concludes, the prosecution must give notice to the court that the suspended proceedings are to be "discontinued." The proceedings can only be reopened if inaccurate, misleading or incomplete information was provided to the prosecutor (Schedule 17 Para 11 (1)-(4)).

Comparison with the US Model

In spite of the similarities, there are a number of critical differences between the UK legislation and the procedure adopted in the US:

First and foremost, DPAs will only be available to two designated prosecutors, the Serious Fraud Office and the Crown Prosecution Service, with the heads of both organisations, the DSFO and the DPP, personally responsible for the decision to enter into a DPA (Schedule 17 Para 3(1), 3(2)).

Secondly, the only persons capable of entering into a DPA with a prosecutor are bodies corporate, partnerships and unincorporated associations. By contrast with the US approach, they will not be available for individuals (Schedule 17 Para 4 (1)).

Thirdly, the only offences for which DPAs will be available are those listed in Schedule 17 Part 2 of the Act. Essentially this limits their use to fraud, bribery and money laundering type offences.

Fourthly, the legislation introduces transparency and openness to the whole process by mandating the prosecution to publish the actual DPA, the declaration of the court and the reasons set out at the preliminary and final hearings, and (in cases where the court initially declined to make a declaration), the reasons for that decision as well.

The most important distinction between the UK and the US procedures lies in the role given to the judiciary in the process. The key decisions as to whether a DPA proceeds, whether the company is in breach, or whether to vary a DPA all rest with the judiciary.

After negotiations have commenced, but prior to the DPA being agreed, the prosecutor must apply to the court for a declaration. This will be at a preliminary court hearing conducted in private. The test that the judge has to apply is whether entering into a DPA is "likely" to be "in the interests of justice," and that the "proposed terms" of the DPA are "fair, reasonable and proportionate" (Para 7 (1)). If such a declaration is made the parties can then proceed to agree and finalise the DPA. The judge will then be asked to re-apply the same tests to the finalized DPA, i.e. that it is in the interests of justice, and that the terms are fair reasonable and proportionate (Para 8 (1)). The judge must give reasons for making or not making a declaration. The formal approval of the DPA and the reasons must be in public, in open court (Para 8 (6)).

If the prosecutor believes that an approved DPA has been breached, an application to the court will need to be made. It is the judge who will decide whether there has been a breach, and the decision will be made on the balance of probabilities. In the event that a breach is found, the court can ask the parties to agree a remedy, or can simply terminate the DPA (Para 9).

Furthermore any variation to the terms of the DPA can only be made by the judge making a further declaration that the proposed variation is in the interests of justice and that the terms are fair reasonable and proportionate (Para 10). Variations will only be contemplated either where there has been a breach and the judge asks the parties to agree a variation, or where due to unforeseen circumstances a variation is needed to avoid a potential breach.

Implications going forward

The former Solicitor General, Sir Edward Garnier QC MP, indicated that there would be a limited pool of experienced judges who would be used to adjudicate on matters pertaining to DPAs. In spite of this assurance, there will undoubtedly be a large degree of corporate nervousness about the ability of the judiciary to overturn carefully crafted proposed DPAs. Such nervousness is unlikely to dissipate until a number of DPAs have successfully been navigated through the courts.

Prior to the legislation coming into effect, a number of other critically important issues will need to be resolved, which may also be determinative of the future success of DPAs.

First, the SFO and CPS must produce and consult upon a Joint Code for Prosecutors, which will guide prosecution decision making. The Code will state the principles to be applied in determining whether a DPA is appropriate in any given case and the use that can be made of information given to the prosecutor in the course of the negotiations. It may also provide further information as to when variation and breach should be applied for (Para 6 (1), (2)).

Secondly, the Sentencing Council is likely to produce sentencing guidance for corporate criminal fines, in particular for those offences that DPAs are available for - bribery, fraud and money laundering.9 The financial penalty for a DPA must be "broadly comparable to the fine that a court would have imposed ....following a guilty plea" (Para 5 (4)). A guilty plea in the UK permits a maximum one-third reduction in the financial penalty, and a DPA may likewise contain a maximum one-third reduction in the financial penalty.

Insufficient certainty or clarity as to the likely penalties combined with the fear that the judiciary may overturn draft agreements will cause companies and advisers to think twice about proceeding down the DPA route. Insufficient protections for materials handed over to prosecutors, and their potential subsequent use in civil or criminal proceedings may also have the same effect.

Irrespective of how these matters develop, what is clear is that companies potentially subject to the far-reaching provisions of the Bribery Act have an even greater incentive to bolster their compliance programs and procedures. Complying with and evidencing the Bribery Act's "adequate procedures" defence will be the best protection in any investigation, whether under the Bribery Act or the FCPA.

Lanny Breuer described US deferred prosecution agreements as having a "truly transformative effect .... on corporate culture."10 It is unclear whether their UK counterpart will be as "transformative," but what is certain is that their introduction will increase the options for both prosecutors and companies.



2. NPAs will not be available in the UK.

3. 2012 FCPA Year in Review (Feb 19, 2013).

4. Serious Fraud Office chief David Green tells business: 'No more deals' The Times, Alex Spence (Apr 27, 2013).


6. Section 7 (1) Bribery Act 2010 Failure of commercial organization to prevent bribery. "A relevant commercial organization ("C") is guilty of an offence ...if a person ("A") associated with C bribes another person intending to obtain or retain business for C...But it is a defence for C to prove that C had in place adequate procedures..."


8. The Bribery Act 2010 (Commencement) Order 2011 No. 1418 (C. 54)

9. Fraud Cases highlight sentencing debate" Financial Times, Caroline Binham (Mar 15, 2013).

10. Lanny A. Breuer, [former] Assistant Attorney General for the Criminal Division, U.S. Department of Justice speech to the New York City Bar Association (Sept. 13, 2012). Full text available at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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