6 July 2012

Corker Binning partner highlights drawbacks of proposed DPAs

In an article in New Law Journal, “What is the story?” NLJ 4 July 2012, David Corker, partner, Corker Binning, highlights some potential drawbacks of the proposed DPAs

What’s the story?

Are the MoJ’s claims about DPAs more mythical than real, asks David Corker

Last month the Ministry of Justice (MoJ) published a consultation paper on deferred prosecution agreements (DPAs). While it promotes the supposed advantages of DPAs, it is important during the consultation period which ends in early August, to consider their potential drawbacks, namely: under-investigation of egregious corporate crime, lack of transparency and, as the MoJ accepts has happened in the US following the advent of DPAs, a shift of power and responsibility concerning criminal justice from the judiciary to the prosecutor.

The third option

It is proposed to make this new enforcement method available where companies have admitted their complicity in economic crime such as bribery. A DPA is a third option between a non-prosecution and prosecution outcome to a criminal investigation, although it is much more similar to the latter. Despite the company not pleading guilty to any offence, it admits its wrongdoing and receives a sanction (a fine) imposed by a judge in a public hearing. This can happen because, as part of the DPA, the putative prosecutor and accused agree in advance of court a statement describing the company’s criminality and what the sentence should be. This is then presented to a judge for approval.

This is a novel approach to resolving cases of serious crime. In R v Innospec[2010] Crim LR 665, the courts held that such a deal was not permissible as a prosecutor should never present a sentence proposal to a court. The MoJ in effect wants to overturn this ban by legislation which would enable a prosecutor to do that under the auspice of a DPA.


In its paper, the MoJ contends that the virtue of a DPA is that it incentivises companies to self-report their criminality as they can forecast with far greater confidence than at present what the eventual sentence would be. Such a greater degree of certainty will apparently result in “more timely and effective processes and best use of resources”. In other words, many expensive investigations and lengthy court proceedings where prosecutions are contested will be avoided. The MoJ believes that the availability of a DPA will lead to two seemingly paradoxical consequences: greater enforcement of the criminal law and a huge saving in enforcement agency resources.

The context for this MoJ initiative is probably the ill-fated outcome of the Serious Fraud Office’s (SFO) attempt to prosecute British Aerospace (BAE) for overseas corruption. After a seven year investigation, the SFO was forced in 2010 into agreeing a humiliatingly derisory plea agreement which minimised and misrepresented the company’s wrongdoing in order to induce it to admit the minor offence of failing to maintain adequate accounting records. This setback has unsurprisingly stimulated a law reform project concerned with whether a more effective enforcement approach to corporate crime can be implemented.

DPA alternatives

In proposing a DPA, the MoJ has rejected alternative reform possibilities which are barely mentioned in its paper. For example, changing the law on criminal corporate liability as happened when the offence of corporate manslaughter was created so that the need to prove a rotten apple in the boardroom or “a directing mind and will” was abolished in favour of liability arising from a collective failure.

Another approach could have extrapolated the innovative model of liability introduced by s 7 of the Bribery Act 2010: lack of adequate procedures designed to prevent offending. Liability on this basis would provide a company with the greater certainty which the MoJ contends is so essential. A company could be confident in that admitting to an isolated criminal act would be unlikely to result in a charge so long as it otherwise had a commitment to prevention.

Despite it being a major problem for the SFO in both the Innospec and BAEprosecutions, an issue which is not addressed in the paper is the unwillingness of prosecutors in other countries, especially the US, to collaborate with their UK counterparts. It is this lack of collaboration which has historically meant an agreement of a US plea deal or DPA is likely to frustrate criminal cases here because of the combination of the US’s assertion that it has global jurisdiction and the double jeopardy proscription. The omission of discussion of this issue suggests the MoJ has concluded the US’s promotion of its national interests where there is a jurisdictional overlap is an intractable problem and the antidote is to make a DPA available here also. The hope being that such parity will inhibit the ability of multinational companies to forum shop for the lightest penalty and so encourage them to cooperate more with a UK prosecutor. While this pragmatism is understandable, the risk is that we import an enforcement tool which is ill-suited to our criminal justice system.

Risks of under-investigation

The MoJ envisages the promulgation of a new and bespoke CPS code dealing with when it would be appropriate for a prosecutor to offer a DPA. Bearing in mind the paper’s references to resource-saving and speed in resolving investigations, it is likely that the new code will not stipulate—as the existing code does—that a proper investigation of the suspected criminality must be undertaken prior to a decision being taken as to whether to prosecute or not. Omitting this means a DPA can be offered despite there having been only a superficial investigation. Moreover, a prosecutor could elect to rely only upon the fruits of a purportedly thorough internal investigation which the company then disclosed to the prosecutor in order to display its co-operation. The risks of relying upon such an investigation are obvious because of the danger of bias. For example, deflecting blame onto ex-employees instead of acknowledging a systemic or institutional failure. Or insidiously conducting a sham probe.

In an era of steep cuts to enforcement agency budgets and an emphasis upon performance targets, a prosecutor may be unduly tempted to regard resort to a DPA as an attractive means to resolve a case because it offers a relatively easy cash deal (maybe with a portion of it going to the agency) and it helps to create an illusion of rigorous enforcement as the company concerned is willing to make admissions as a precursor to a DPA.

Lack of transparency

Under-investigation inevitably means lack of transparency, in that the settlement reached between the two parties may misdescribe to the company’s advantage the underlying criminality. As Thomas LJ warned inInnospec, “for the criminality of corporations to be glossed over”. One lesson from the debacle in the BAE case was that when a prosecutor is anxious to abandon an investigation and compromise a case by means of a settlement with the company, the resulting agreed description of its criminality presented to the court and public can be a travesty of the truth.

An ability to settle cases without an antecedent adequate investigation is not necessarily to a company’s advantage. A prosecutor faced with a seemingly weak case which will probably not stand up in court if it is contested now has another option other than either persevering with the investigation or, more likely, dropping it altogether: why not offer a DPA? So companies can become prey to unjustified pressure to pay over a substantial sum of money to avoid the risk of litigation.

If DPAs are to be introduced, it is essential that the discipline and rigour which generally feature in an investigation when there is an expectation of a contest in court is not jettisoned. A DPA code of conduct must insist that a prosecutor cannot contemplate offering a DPA until after they have decided that there is sufficient evidence to prosecute.

Reaction of the UK judiciary

The UK judiciary is hostile to the MoJ’s proposal. The judgments in theInnospecDougall and BAE cases are in part statements of principle that serious criminal offending should be dealt with only by the courts and that the incentive for co-operation should be a lesser sentence and not the avoidance of public accountability before an independent judge. The US experience of DPAs provides ample grounds for concern. Judges in US courts whose role is supposedly to ensure that the proposed DPA is fair and reasonable decline to examine them. As the MoJ’s paper admits, US judges instead defer to the parties’ agreement on the assumption that the prosecutor knows best insofar as justice and the public interest is concerned. The peremptory judgment of the US Court of Appeals last March in SEC v Citicorp was primarily a denouncement of a first-instance judge who believed that he was entitled to second-guess the propriety of what he felt was a derisory settlement in favour of the accused.

The MoJ contends that its UK prototype of a DPA would place the judge at the centre—transparency, it says, is crucial. Leaving aside this reassuring rhetoric, it will of course ultimately be the judiciary’s choice whether it robustly demands proper case preparation by a prosecutor to ensure there that the court has sufficient information about the company’s criminality or whether it drifts into passivity and so follows the US road.

But some of the details in the MoJ paper are not reassuring in this regard. First, the judge would only be equipped with “an outline of the agreed basic facts” when determining whether a DPA and its terms are appropriate. Such limited disclosure hardly amounts to transparency and appears to foreshadow a judge unless they are particularly assertive, being expected to endorse a DPA on the basis of flimsy and partial information. Second, the MoJ proposes appointing a panel of experts to provide sentencing guidance which judges would be required to follow except in special circumstances. Third, in terms of a court acting in public, the paper contemplates that the terms of the DPA “could be publicly outlined and explained”, which disturbingly suggests that the court can be asked to keep certain facts confidential.


The difficulty with the MoJ’s proposal is the Janus-like character of its basic premise, that a DPA will enable a company to have certainty about the sanction it would face while judicial independence or primacy in the realm of sentencing will be preserved. Surely, if a judge retains an untramelled discretion to reject a proposed deal on the grounds that it is not in the public interest or interests of justice then as now for a company deciding whether to report itself, there will be significant uncertainty about where the process will lead. Bearing this in mind, together with the fact that the discount for co-operation with a DPA will never be greater than for a company who did not self-report but got caught (although in the former there is no conviction) may mean that what the MoJ claims will be the motivator for self-reporting, a prosecutor’s ability to offer a specific DPA, is more mythical than real.

A DPA undoubtedly has attractions for a system which is obviously failing to prosecute corporate white-collar crime effectively. But there are serious risks: corruption of the quasi-judicial role of the prosecutor and the loss of judicial independence.

David Corker, partner, Corker Binning.