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Plea agreements won’t play a big role in U.K. enforcement

Photo courtesy of the U.K. Ministry of JusticePassing legislation instead of applying resources is always tempting for governments. In the U.K., the process of providing legislative form over that of financial substance is now focused on providing the Serious Fraud Office with the ability to use Deferred Prosecution Agreements (DPAs). The legislative consultation period for this proposal closed in August and enabling legislation may be expected in due course.

In the U.S., DPAs along with Non-Prosecution Agreements are often deployed by well-funded enforcement agencies to avoid expensive investigations and trials in circumstances where potential defendants have made full disclosure and agreed to remedy the defalcations, often involving the use of external monitors from major accountancy and legal practices. For a potential defendant, not only will a trial and possible conviction be avoided but also there will be no risk of debarment from public procurement contracts (otherwise the consequence of conviction).

Interestingly, one of the main planks used by the U.K. Government in its consultation exercise for DPAs is that of the financial risks posed for its enforcement agencies by expensive fraud investigations and prosecutions proceeding to trial. This is somewhat revealing, for in contrast, the U.S. system of DPAs is predicated on the risk for potential defendants of not merely a trial but the potentially crippling investigative process. This may well be open to abuse, but the perceived risk for potential defendants only exists because the enforcement agencies are properly funded and can effectively tackle potential defendants and their often well-funded professional advisors.

There are a number of jurisdictional reasons for the prevalent use by U.S. agencies of DPAs which may not apply to the U.K. First, the discretion to conclude a DPA is vested in the enforcement agencies. In contrast, the U.K. Government proposes that there should be judicial regulation or supervision of DPAs. Second, it is much easier for US anti-fraud enforcement agencies to establish corporate criminal liability through vicarious liability rather than through the U.K.’s more restrictive “directing mind and will” test for fraud prosecutions. Third, the U.S. seeks to maintain a global whip hand by not recognizing the concept of autrefois acquit or convict, common in other jurisdictions, leaving potential defendants in double or triple jeopardy unless a DPA can be concluded in the US.

The multi-jurisdictional nature of corruption will present serious challenges for an already hard-pressed enforcement agency and judiciary when seeking to put together effective international related DPAs. As most countries have implemented anti-corruption legislation, each may wish to bring its own anti-corruption proceedings, particularly, where large financial penalties can be extracted. So obtaining cross-jurisdictional co-operation may prove extremely problematical. Indeed, it is perhaps a little surprising that the Government should seek to press ahead with DPAs without first trying to secure co-operation from other EU countries as a counterweight to the jurisdictional strength of the U.S.

Consequently, the U.S. will remain the first port of call for DPAs. In the U.K. they are likely to be useful only in a very limited number of national cases where a potential defendant has already decided to plead guilty and seeks to limit the amount of retribution. The Government’s own legislative impact statement for DPAs estimated an annual saving for the SFO of no more than between £0.8 million and £1.2 million. That may represent a substantial saving by reference to the SFO’s shrunken budget of £30 million but it’s really a nominal amount.

The introduction of DPAs may be ineffectual and if only for that reason, largely unobjectionable. What is objectionable is that a leading OECD country having belatedly implemented anti-corruption legislation, should then proceed to emasculate its main anti-corruption agency, through lack of resources. To justify this by reference to financial austerity does not set a great example for other less fortunate countries that are being encouraged to implement and enforce effective anti-corruption legislation.


Alistair Craig is a commercial barrister now practising in London having recently returned from Singapore. He can be contacted here.

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