In the latest ‘Straight to the Point of Dispute Resolution’ video disputes Partner, Adrian Lifely talks to Head of Business Crime, Jeremy Summers about Deferred Prosecution Agreements (DPAs).
Read the transcript.
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AL: Hello my name’s Adrian Lifely, I’m a commercial disputes partner at the law firm Osborne Clarke, I’m also an accredited mediator. In this series called straight to the point of dispute resolution, I discuss various important topics relating to dispute resolution in the UK. In the next few episodes of the series I want to focus on various specialist practice areas and this time I want to look at business crime and to do that I’ve got Jeremy Summers who is Osborne Clarke’s Head of business crime with me. Jeremy welcome to straight to the point of dispute resolution. Today the topic you want to discuss I believe is what’s called Deferred Prosecution Agreements and to get us started I wonder if you could please just explain to us what they are and what the objective of Deferred Prosecution Agreements is?
JS: Certainly, well Deferred Prosecution Agreements (DPAs) are a new tool on the the UK landscape, they’ve been in force since February 2014 and one of their core objectives was to make it easier to deal with corporate wrongdoing. In the UK there has been a belief that it’s very difficult to prosecute companies and that’s because to prosecute a company you have to show that the person responsible for the underlying wrongdoing is a senior person in the company and is the controlling mind of the company. So DPAs are a means whereby a company could be sanctioned but not face a full prosecution so it’s cheaper, it’s quicker and hopefully as far as the authorities are concerned it’s more effective. The one important point to bare in mind at this stage though is that DPAs are only available for corporates and not for individuals.
AL: I see, so far what uses have been made of DPAs in the UK?
JS: Well the first DPA came in, in 2015 and there have been five since. Four have involved high profile companies, Rolls-Royce, Tesco, Serco and Standard Bank. The fifth was a smaller steel related company in Sheffield called Sarclad. Three of them have involved overseas corruption; two, Tesco and Serco have looked at UK based accounting irregularities. Now even though there is not a full prosecution, you still end up with very large sanctions being paid and so far over £500 million has been paid by those companies and that all goes to the country.
AL: Ok, lets dive into that a little bit more, how to they work?
JS: Well in the UK as apposed to the US where DPAs first started there’s a very high degree of court scrutiny. But the first thing that has to happen is that a prosecutor has to be satisfied that there’s sufficient evidence there to present a realistic prospect of a conviction were there to be a prosecution. But that it’s in the public interest not to prosecute and to go for a DPA. If the prosecutor thinks that’s the position, he and the company has to go to the court as a private hearing and the court will agree in principle that a DPA is appropriate. The parties will then go off, they will agree the order that they’ll ask the court to impose and they’ll agree a statement of facts which is the issues that underlay whats gone on and why the DPA is being issued. They then go back to court;
the court approves the order, there is a fully public hearing, the order and the statement of facts get published – so there will be media scrutiny around that. But provided the company or the business complies with the order, that’s the end of it. In contrast, if the company were to breach the order, they could be prosecuted later and at that point the evidence that it has given to the prosecutor, to enable the prosecutor to decide whether a DPA is appropriate, can then be used against the company.
AL: So if a company is interested in going down the DPA route, how should the company go about that? What should it do?
JS: Well the Serious Fraud Office has produced a code which explains how DPAs work in practice. They set out a number of factors, some of which will point in favour of a DPA and some will point the other way. Two to highlight at this stage, firstly, that it’s almost certain that the company will have to have self reported. So to tell the authorities something they didn’t already know. And secondly, there will be a need to cooperate with the authorities through out the lifetime of the investigation and that can be years as opposed to months. And what does full cooperation look like? Well the SFO now say it’s more than is simply required under the law, it will almost certainly involve giving evidence which the authorities can then use to prosecute senior officials within the company and may also involve waving privilege over material that otherwise wouldn’t have to go to the authorities.
AL: So one of your jobs crucially I guess is to advise clients on the likelihood of the authorities accepting a case for a DPA process.
JS: Absolutely, and it’s a very finely balanced exercise, it’s one that has to be undertaken with great care. My advice would certainly be don’t rush in and take your time to understand what the issues really are.
AL: Yes because it’s quite a process of to and fro, and there are various stages at which the wheels could fall off I imagine.
JS: Absolutely, and there is no guarantee that a DPA will be offered, and in that event, the evidence that is given could be used against the company. So as I say, it is a very finely balanced exercise.
AL: So if one sees the DPA process through to the conclusion, what kind of consequences or financial penalties should a company be ready for?
JS: Well most obviously Adrian, a company or a business is going to have to pay a financial sanction equivalent to a fine. That is going to be calculated by the court in accordance with the seriousness of the underlying issues and by reference to the to the sentencing guidelines so it will be similar in many ways to what would happen if you had gone to court. Beyond that, if a party has lost out because of the actions of the company or the business then compensation can be ordered to be paid to the loosing party if I can put it like that. The court may require that remedial processes and procedures are put in place so that whatever has gone wrong can’t happen again. In theory there is the possibility to appoint a monitor at the cost of the company to ensure that those remedial processes are in place. And last but not least, the cost of the SFO or the police in investigating and bringing the proceedings are going to have to be borne by the company.
AL: And in relation to the financial aspects can you give any kind of guidance about the perimeters for that? How much could a fine be?
JS: Well if one looks at Rolls-Royce, including costs it was in the region of £500 million, so not cheap.
AL: Ok so finally and here’s the thing, what would your top tips be the for a company that finds itself in this kind of predicament?
JS: I think as I say, don’t rush. Make sure you understand the issues, the law can be very complicated. So for example, an overseas bribery offence might have occurred, but it might not engage the bribery act. So make sure you understand what has happened and what the implications are, for that you need to take proper advice. And then finally, if you are going to engage in the process, make sure that you have all your ducks in a row so that if you do need to cooperate with the authorities over a lengthy period of time, you can do so without compromising the ongoing running of your business.
AL: So before you contact the authorities do all that preparatory work?
JS: Absolutely, do all your preparatory work so that as far as is possible, you can have that as a separate aspect of the business, but the underlying business, the issues through which you make money can carry on.
AL: Great well thank you very much Jeremy, I think that was very enlightening and as always, I always say at the end of these videos please don’t rely on this and take your own advice about your own specific situation if you find yourself needing advice on DPAs. Thank you.