Deferred prosecution agreements to be made available next week as new guidance published

Publishing finalised guidance (26-page / 350KB PDF) on the circumstances in which new deferred prosecution agreements (DPAs) could be made available, the Serious Fraud Office (SFO) and Director of Public Prosecutions (DPP) said that the use of DPAs could be appropriate in cases where the public interest was not best served by prosecution.

"At present, when a company is convicted of a criminal offence, a court can impose a fine or put it out of business by winding it up," said SFO director David Green. "Both these outcomes can cause collateral damage to employees and shareholders who may be blameless. DPAs avoid that collateral damage and provide a welcome addition to the prosecutor's tool kit for use in appropriate circumstances."

"But DPAs are not a panacea, nor are they a mechanism for a corporate offender to buy itself out of trouble. The most important features of the DPA regime outlined in the code are judicial oversight, and unequivocal cooperation from the corporate. Prosecution remains the preferred option for corporate criminality," he said.

DPAs will be made available to prosecutors in England and Wales from 24 February 2014. The new powers  are  designed to encourage businesses to self-report wrongdoing in the hope of more lenient treatment, including the possibility of avoiding a criminal investigation and potential prosecution if strict conditions set by a judge are met.

Depending on the circumstances of the case a DPA may include payment of substantial penalties, the need to compensate victims and submitting to regular reviews and monitoring. Organisations could also be asked to undertake reform to prevent the conduct in question from occurring again. The agreement will be made in open court, with details of the wrongdoing and sanctions published. If the prosecutor is satisfied that the organisation has fulfilled its obligations by the end of the deferral period there will be no prosecution, but if the conditions are not met then the offender could still be prosecuted.

The new guidance was published in draft form for consultation last year. It sets out the factors that prosecutors should take into account before deciding to enter into a DPA with a corporate offender, and outlines the process that must be followed. A two-stage test should be applied before deciding that a DPA is an appropriate course of action, including an 'evidential' stage and 'public interest' stage.

The prosecutor must either be able to show that the evidential stage of the Full Code Test in the Code for Crown Prosecutors is satisfied, or that there is "at least a reasonable suspicion based upon admissible evidence" that the crime has taken place combined with "reasonable grounds for believing that a continued investigation would provide further admissible evidence within a reasonable period of time". The prosecutor must also establish that the public interest would be properly served by not prosecuting and instead entering into a DPA. A civil recovery order may still be appropriate in cases where the tests in the evidential stage are not met.

"A key takeaway is that regulators will give significant weight to cooperation from corporates when assessing whether or not to prosecute corporate in the UK," said white collar crime expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com. "This follows the US approach where self reporting, followed by a negotiated plea bargain and fines running into hundreds of millions has become the norm."

"UK regulators hope that the UK will follow in US footsteps. The proof of the pudding will be in the eating - but do not expect immediate results," he said.