Deferred prosecution agreements (DPAs) have become a regular, although infrequently used, feature of the UK legal landscape in recent years.

Since DPAs were introduced in the UK in 2014, the Serious Fraud Office (SFO) has agreed nine in total: one in 2015 (Standard Bank); one in 2016 (Sarclad); two in 2017 (Rolls-Royce and Tesco); two in 2019 (Serco Geografix and Güralp Systems); and three (thus far) in 2020 (Airbus, G4S Care and Justice Services and Airline Services Limited).

The UK numbers do not quite compare with the USA, which had concluded 15 DPAs in just the first seven months of this year – six more than have been concluded in the UK since they became available six years ago. But there are indicators suggesting we might be seeing a shift towards a more American approach to aspects of British justice, specifically regarding the way corporate liability is dealt with in the UK. This may have an effect on future DPAs.

Since taking up the role of SFO Director in August 2018, Lisa Osofsky - an American-British lawyer who previously worked for the FBI and Department of Justice - has brought in members of both US organisations to advise SFO staff. She has also appointed a white-collar crime lawyer and former US prosecutor on secondment as an investigations adviser and has made it clear that the secondments will continue. Against such a background, it is important for those in business to understand DPAs and the significant differences between the use of them in the US and UK legal systems.

The Arrival of the DPA in the UK

DPAs originated in the US, where they have been in use for decades. In comparison, they are relatively new to the UK. Other countries, including France, Singapore, and Australia, have either introduced or are considering DPAs.

On February 24, 2014, DPAs became available to prosecutors in the UK for the first time, under the provisions of Schedule 17 of the Crime and Courts Act 2013; which was given Royal Assent on 25 April 2013.

A DPA can be used in the UK in potential cases of fraud, bribery and other economic crime. It is an arrangement reached between a prosecutor and a company to resolve a matter that could otherwise have been prosecuted. The agreement allows a prosecution to be suspended for a defined period, provided that the company meets certain specified conditions. A DPA is made with the approval - or under the supervision - of a judge.

The introduction of DPAs into the UK signified a change in the approach to corporate criminal liability; bringing it closer to that taken by the US. But while UK DPAs have a lot of similarities to their US counterparts, there are differences in law and in the way they are utilised by enforcement agencies.

Notable Differences

Scope and application

In both the US and UK, DPAs apply to organisations. In the US, they can also apply to individuals. This is not the case in the UK; although the terms of a DPA concluded with a company can have an effect on an individual’s criminal or civil liability.

The bodies that are able to enter into a DPA with a company also differ between the UK and the US. Under Schedule 17, Part 1 of the Crime and Courts Act, only “designated prosecutors’’ can enter  a DPA in the UK. Designated prosecutors in the UK include the SFO and the Director of Public Prosecutions (in England and Wales). In the US, however, the scope of bodies able to enter a DPA is much wider. Federal, state and county prosecutors and those in other positions with the authority to enforce federal and state regulations have the power to enter into a DPA.  This may go some way to explaining why more corporate DPAs are concluded in the US.

The sheer size of the US compared to the UK may also be a factor in its greater use of DPAs. But another reason for the disparity between the numbers of DPAs in the UK and US may well be differences in the legal framework.

The concept of respondeat superior – meaning an employer is responsible for the acts of its staff and agents - makes corporate criminal liability a realistic prospect in the US when those working for a corporation are involved in criminal activities. This makes the possibility of prosecution relatively straightforward, which may then lead to a matter being resolved by a DPA. In the UK, however, the absence of this concept means that the so-called identification principle is used to determine whether the offender was a “directing mind and will” of the company. This has proved an obstacle in the UK to establishing corporate liability. The greater the difficulty in establishing corporate liability, the less likelihood of a prosecution which, in turn, means less chance of a DPA being decided.

At present, the only strict liability corporate criminal offences the UK has are failure to prevent bribery, under Section 7 of the Bribery Act 2010, and the two offences of failure to prevent tax evasion contained in the Criminal Finances Act 2017. As these offences apply retroactively – in that they only apply to acts of criminal facilitation that occurred after the date the law was enacted - they are not likely to aid the SFO in its ongoing and historic investigations.

Judicial Involvement

Probably the single most important distinction between the US and the UK approach is the role of the judiciary in the DPA process.

In the US, DPAs are negotiated by prosecutors with little judicial involvement. Generally, the US judiciary approves DPA terms without significant amendment before they are made public. Whereas in the UK, judicial approval is required to initiate negotiations, enter into a DPA and modify its terms.

There have been criticisms that the lesser judicial role in DPAs in the US means that too much power in the process is in the hands of prosecutors. The UK prosecutor, however, must obtain Crown Court approval for a DPA on two occasions. The prosecutor has to satisfy the court in a preliminary hearing that the DPA that is proposed is both fair, reasonable and proportionate and in the interests of justice.  After the terms of the DPA have been agreed, the prosecutor will then attend a final hearing; during which the court will again examine whether the terms of the DPA are in the interests of justice and are fair, reasonable, and proportionate. If they are, the DPA will be approved. The court can reject the DPA at either of these stages – an indicator of just how more important judicial involvement in the DPA process is regarded in the UK compared to the US.

Offences covered by DPAs

In the UK, as mentioned earlier, DPAs can only apply to offences of fraud, bribery and other economic crime. In the US, however, DPAs can be used for a wider range of wrongdoing, although they are most commonly used now for bribery and corruption, environmental and health and safety offences. The US authorities have a wider discretion when it comes to their use, although there are restrictions on cases involving national security, foreign affairs and the conduct of government officials.

Co-operation and internal investigations

In the US, there is a presumption that a company will receive a DPA if it co-operates. In the UK, there is no such presumption. Co-operation is only one of many factors the UK prosecutors will take into consideration, and co-operation will not guarantee any particular outcome.

The UK and US also differ in their approach to internal investigations. In the US, a company that is in the midst of contemplating a DPA and is conducting an internal investigation is free to interview witnesses at will. In the UK, however, a company conducting an internal investigation requires approval from the SFO prior to interviewing witnesses and taking any disciplinary action. The company should also refrain from showing a witness any document that he or she may not have already seen. In the US, no such pre-approval is needed

Conclusion

The UK approach to DPAs is certainly modelled on the US DPA process, and the current Director of the SFO appears attracted to the idea of bringing the UK more in line with the US system. But there are marked differences and it seems, at least for now, we are some way off the American model.

What is clear is that these differences could potentially create complex issues for a company trying to ensure a DPA in both countries. DPAs are well established in the US and, with a raft of guidance and precedent concerning their negotiation and settlement, allow for greater certainty.  In the UK DPAs are relatively new, and there are difficulties in establishing corporate criminal liability. There is, therefore, no absolute formula for a successful self-referral process. As a result, there is no guarantee that undertaking certain exercises will result in a DPA as opposed to a prosecution in the UK.

This is why companies and their advisors have to consider, on a case-by-case basis, the best strategy in relation to the specific set of facts and circumstances that confronts them.