Deferred Prosecution Agreements: a brave new world for commercial organisations | Fieldfisher
Skip to main content

Deferred Prosecution Agreements: a brave new world for commercial organisations

Tony Lewis


United Kingdom

Deferred Prosecution Agreements (DPAs) became available for use on 24 February 2014.

Article first appeared on on 4 March 2014

Deferred Prosecution Agreements (DPAs) became available for use on 24 February 2014. Ten days earlier, the Serious Fraud Office (SFO) and Crown Prosecution Service (CPS) published the Code of Practice for the UK’s DPA system (the “Code” 1). Together with the Guideline for Sentencing corporate offenders, published in January 2014 2, and changes to the criminal procedure rules, the framework for DPAs is now complete. For commercial organisations DPAs herald a new era, bringing with them the prospect of managing outcomes in the face of legislative creep, which increasingly seeks to criminalise business related behaviour. Particularly in Bribery Act cases, where “adequate procedures” should provide a complete defence to corporate liability, the introduction of DPAs may provide a cushion in those cases where those adequate procedures prove to be inadequate in practice.

In this article Tony Lewis and Hannah Piper of Fieldfisher examine some of the issues that commercial organisations will need to consider when deciding whether to pursue a DPA.

DPAs – scope and application

For readers new to the subject, an explanation of DPAs is required. In brief, a DPA is an agreement between a prosecutor and a commercial organisation that the prosecutor is considering prosecuting. DPAs provide a mechanism for effectively settling criminal liability without prosecution, in return for the commercial organisation agreeing to a number of terms and conditions. The terms might include paying a penalty, compensating victims of the alleged offence, paying the prosecutor’s costs, implementing a compliance programme and cooperating in any investigation related to the alleged offence.

DPAs are not available to individuals. Only bodies corporate, partnerships and unincorporated associations may enter into a DPA. DPAs may be entered into in respect of a range of fraud and corruption-related offences, including theft and bribery, as well as money laundering offences under the Proceeds of Crime Act. It is anticipated that DPAs will become common in Bribery Act cases, where commercial organisations face strict liability (without knowledge of the corrupt behaviour) for actions of associated third parties, wherever in the world that activity takes place.

The Code identifies the criteria that prosecutors will apply in selecting potential defendant companies that will be offered DPAs, the process for negotiation such agreements, anticipated terms and overseeing DPAs. Under a DPA, criminal proceedings against the commercial organisation will be suspended while it obtains. On expiry of the DPA, the criminal proceedings will be discontinued.

The invitation to negotiate a DPA is at the prosecutor’s discretion. When considering whether a DPA is likely to be appropriate, the prosecutor will have regard to various codes of practice, including the Code. DPAs are entirely voluntarily and an organisation is under no obligation to accept an offer to enter into one.

The incentive for a commercial organisation to enter into a DPA is an expectation that the agreed penalties will be less onerous than the penalties on conviction. It will also escape the stigma of prosecution and conviction (and potential contractual debarment). Above all, a DPA represents a managed contractual outcome that provides certainty within a reasonable time frame for shareholders and other stakeholders.

Considerations for commercial organisations

1. Evidential threshold

The Code provides that to enter into a DPA, the prosecutor must have some admissible evidence to support their reasonable suspicion that the commercial organisation has committed an offence, and reasonable grounds to believe that continued investigation would provide further admissible evidence within a reasonable period of time, in order that the evidence taken altogether would establish a realistic prospect of conviction. The requirement for at least some admissible evidence aims to tackle the concern in relation to the draft code that the evidential standard for entering into a DPA was too low and might allow prosecutors to initiate a negotiation without evidence sufficient to secure a criminal conviction. However, from a commercial organization's perspective, the lower threshold allows flexibility to enter into discussions at an early stage of an investigation, when a potential criminal offence is suspected, but the investigation has not reached a stage where a fact pattern is made out to support that suspicion.

It should also be noted that DPA negotiations are not a one-way street; commercial organisations can expect to glean information from the prosecutor as to the potential case they face. The Code makes it clear that whilst negotiating a DPA, prosecutors have an ongoing duty of disclosure to the commercial organisation. Negotiations should be fair and commercial organisations should not be misled as to the strength of the prosecution case against them.

2. Confidentiality / publicity

A DPA must be court-approved. In order for a DPA to come into force, the court must be satisfied that the DPA is in the interests of justice, and its terms are fair, reasonable and proportionate. The negotiation process leading up to the DPA should be confidential. However, if the court approves the DPA it must give reasons for doing so in public. Furthermore, the DPA will be published unless the prosecutor is prevented from doing so by an enactment or if there is a risk of prejudicing other legal proceedings. The DPA must contain a statement of facts relating to the alleged offence; these may include admissions of guilt, but there is no requirement for a formal admission of guilt.

In light of the above, it is clear that even when a DPA can be achieved, a commercial organisation needs to consider carefully the potential impact of the agreed statement of facts. That statement could spawn investigations by other regulators or prosecutors elsewhere in the world, and also potential civil claims by third parties.

Of course, the same may also result if a commercial organisation enters a guilty plea, or is successfully prosecuted. At least in the DPA process the commercial organisation will be involved in the negotiation of the statement of facts with a view to managing the potential fallout.

The greater danger for commercial organisations is that, having entered into a dialogue regarding a DPA, the discussions fail, and no agreement is reached, or the court fails to endorse the proposed DPA. In those circumstances, the Code makes it clear that documents provided to the prosecutor during the course of any negotiation would be available for use by the prosecutor in a subsequent prosecution of the organisation. Such documents might include, for example, an internal or independent investigation report conducted by the company or witness interviews. There is undeniably a tension between acting in good faith in the hope of entering into a DPA and the risk that disclosed materials will be available to a prosecutor should a DPA not be entered into.

3. Self-reporting and cooperation

The Code identifies that self-reporting by companies is a factor that will weigh in favour of a DPA being offered. How early a selfreport is made will be a consideration and companies should be aware that the prosecutor will factor in whether any actions taken as a result of not self-reporting sooner may have prejudiced the investigation. This will involve the prosecutor critically assessing any internal investigation to determine if it may have led to material being destroyed or may have given rise to the opportunity for fabrication. If the prosecutor considers an internal investigation may have afforded such opportunities this could adversely affect the opportunity to enter into a DPA.

With regards to cooperation, the DPA Code also states that “considerable weight may be given to a genuinely proactive approach” adopted by a commercial organisation's management. This would involve reporting offending to the prosecutor within a reasonable time of it coming to light, taking remedial actions and, where appropriate, compensating victims. It is also clear from the Guideline for Sentencing for financial crimes committed by corporate offenders, that cooperation will significantly reduce potential fines.

There is, however, a tension between self-reporting/cooperation on the one hand, and the sanctity of legal privilege on the other. The Code confirms that legal privilege is safeguarded by the DPA process. If an internal investigation into suspected offences is conducted by lawyers on behalf of a commercial organisation, then any privileged documents generated are protected from disclosure to third parties, including prosecutors. A commercial organisation therefore has some ability to manage the flow of information to a prosecutor. However, the Code also states that a DPA will normally include a warranty from the commercial organisation and (with consent) its legal advisors that the information provided to the prosecutor, upon which the DPA is based, does not knowingly contain inaccurate, misleading or incomplete information relevant to the conduct that has been disclosed to the prosecutor. The requirement for a warranty, particularly in relation to the completeness of information, does not sit easily with the principle of protection for legally privileged material.

4. Officers / employees

If a DPA is considered appropriate for an organisation, it is likely that the operating and directing minds responsible for the criminal activity of the organisation will be criminally prosecuted. Within the DPA process, it is clear that the commercial organisation and its officers and employees do not necessarily share a common interest. A company conducting a thorough investigation and providing evidence to a prosecutor may well expose employees to the risk of criminal investigation and potential prosecution.

One concern over the draft DPA Code related to employees being compelled to cooperate with their employer’s investigation. Law enforcement agencies would then be able to exploit the information that employees have provided in an internal investigation. It may well be considered by the employer that it is in the interest of the organisation to disclose such material to the prosecutor under the DPA system. There is a concern that this could compromise an employee’s privilege against self-incrimination, which raises the issue of whether employees can refuse to answer questions during an internal investigation conducted by their employer. The only comfort from the SFO and CPS in this regard is that the use of interviews in any proceedings would be governed by the laws of evidence, said to provide the appropriate protections on a case by case basis.

The practical effect of the introduction of DPAs for commercial organisations is that employees are more likely to be hung out to dry

5. Sentencing / penalties

The Sentencing Guideline will inform the level of financial penalties available under DPAs. Any financial penalty under a DPA must be broadly comparable to the fine that would be imposed following a guilty plea. Currently, guidelines provide for a maximum of a one-third reduction following an early guilty plea, although the reference to "broadly" may give some scope for further flexibility. There may also be an additional reduction where the commercial organisation assists the prosecution, for example, in the investigation or prosecution of offending by others.

The Sentencing Guidelines also provide that penalties should be considered in light of a commercial organisation’s means. Whilst a commercial organisation would never voluntarily enter into a DPA that would tip it into insolvency, the Guidelines make it clear that putting an offender out of business may be an “acceptable consequence” in some “bad” cases.

A brave new world indeed.




Tony Lewis heads the corporate crime team at Field Fisher Waterhouse LLP, and Hannah Piper is an associate in the team.

Sign up to our email digest

Click to subscribe or manage your email preferences.