The principle that a company can be subject to criminal sanctions is now well and truly established in our legal system. Often, a case of corporate manslaughter will capture headlines, with column inches being given over to the examination of a company’s conduct in court.
Increasingly, companies are coming under close scrutiny in relation to their economic affairs. The determination of the authorities, coupled with public expectation that wrong-doers will be punished, means that solicitors are handling increasing numbers of cases involving alleged fiscal offences committed by firms.
Here, Ison Harrison looks at the Deferred Prosecution Agreement, a method of dealing with such cases- and one which is gaining in prominence.
What is a DPA?
When a DPA is proposed, it means that the agency in question feels that there are sufficient grounds for a prosecution. Only two agencies have the power to offer a DPA: the Serious Fraud Office or the National Crime Agency.
DPAs are only available where ‘economic crime’ is said to have taken place.
How does the DPA work?
- Individuals cannot be offered a DPA- it is a measure which applies only to companies.
- The relevant legislative provisions are contained within schedule 17 of the Crime and Courts Act 2013. This means that although a case is started in the Crown Court, it is automatically suspended upon court approval of the DPA.
- As long as the company obeys certain conditions, the prosecution is suspended for a set amount of time. The conditions can differ from case to case, as can the time period.
What can be included within a DPA?
Schedule 17 of the CCA permits a number of requirements to be set out, which may include paying monies to charity, payment of compensation to victims, and a financial penalty.
The company may also be ordered to make changes to its compliance and training programmes. Unsurprisingly, they can also be ordered to pay the ‘reasonable costs’ of the prosecution.
What are the logistics of a DPA?
The DPA itself will be drafted by the investigating authority and must then be signed off by a judge. There are two tests which the judge must deem to be satisfied: the DPA must be in the interests of justice, and its terms have to be fair, reasonable and proportionate.
What happens if the DPA is breached?
The case will be brought before a court and breach proceedings will commence.
In accordance with the legislation, the civil standard of proof applies. This means that although a DPA is ostensibly a criminal law matter, a lower burden of proof applies than in criminal cases. The question that is asked is: on the balance of probabilities, has a breach of the DPA taken place?
We have not yet seen a breach occur, so we do not know what remedial action would be ordered by a court should it happen. As DPA use becomes more widespread, this ought to become clearer over time.
What happens once the DPA has ended?
Each DPA has a set expiry date. When that date has been reached, the prosecutor will make an application to court in order to discontinue the criminal proceedings.
Examples of DPAs
- The Serious Fraud Office (SFO) is presently overseeing a series of DPAs, all applying to major companies. The first was issued in 2015 against Standard Bank, and the others were implemented in 2017 against Rolls-Royce and Tesco respectively.
- In Rolls Royce’s DPA, the company was ordered to pay £497,252,645, inclusive of a staggering financial penalty which was set at £239,082,645.
- Rolls Royce was also ordered to meet the SFO’s costs in full, which were put at around £13m (particularly noteworthy when you recall that ‘reasonable’ is the definition used in the legislation!)
Surely only big business needs to care about this?
This isn’t necessarily the case. The relevant laws do not stipulate that a company needs to be of a certain size before a DPA can be considered, and an expert solicitor will be able to advise if they are suitable in any given situation. They can also advise as to the content of the document and its implications.
It only applies to a company; I don’t need to worry….
Not quite. Even if a corporate entity has been made subject to a DPA, this does not mean that individuals are necessarily off the hook; they can still be prosecuted even after the DPA has been implemented.
In Tesco’s case (see ‘Examples of DPAs’), three executives were put on trial in relation to allegations of fraud, despite the action against Tesco itself. They were unable to shield themselves by virtue of their employment.
If you have any queries relating to DPAs, our Regulatory Law team can help. All matters are handled in the strictest confidence.