The mechanics of Deferred Prosecution Agreements in the UK

Speech to the C5 7th Advanced Forum on Anti Corruption on the role of prosecutors and the court

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Sir Oliver Heald QC MP

Thank you for inviting me to give the opening speech. It’s a great pleasure to have the opportunity this morning of speaking about deferred prosecution agreements, or DPAs. Treating economic crime more seriously and taking steps to combat it more effectively were key commitments in the Coalition agreement published in May 2010.

As a result of the Government introducing DPAs into England and Wales - through the Crime and Courts Act 2013 - a significant step forward has been taken, adding an important new tool for prosecutors in tackling serious economic crime. The Government’s aim is to implement this in February 2014.

It’s vitally important to have a comprehensive approach to tackling economic crime by commercial organisations. That means having a variety of effective law enforcement measures. A full prosecution will often be entirely justified, but there must also be alternatives such as civil recovery or deferred prosecution agreements available in appropriate circumstances.

You will have seen the Government’s initial plans for DPAs published for consultation last year: Consultation on a new enforcement tool to deal with economic crime committed by commercial organisations: Deferred Prosecution agreements (May 2012). The response to that consultation, which closed in August 2012, was overwhelmingly positive, with 86% supporting the proposals.

Subsequently, I was pleased to represent the Government in the House of Commons for the DPA provisions in the Crime and Courts Bill, as it made its passage through Parliament. As you will know Royal Assent was granted on 25 April 2013. Section 45 of the Crime and Courts Act 2013, in an elegantly short clause, simply provides: ‘Schedule 17 makes provision about deferred prosecution agreements’. So it is to that Schedule that I will turn my attention in a moment. But it is worth highlighting – something that was emphasised in the House of Lords debates – that DPAs are a new concept for our criminal justice system.

The impetus for DPAs came from UK law enforcement agencies indicating that they did not have all the requisite tools to tackle corporate economic crime effectively. They pointed out that DPAs had been common practice in the United States for many years. The first corporate DPAs in the United States date back to the early 1990s and they have been of great assistance to the authorities there.

I’m going to focus on three main areas today. First, I will talk about the mechanics of the DPA process, providing an outline of how DPAs might work in practice. Secondly, let’s look at the role of the prosecutor in the process. I’m delighted to confirm that tomorrow the Director of Public Prosecutions and the Director of the Serious Fraud Office will be issuing their anticipated consultation on the draft DPA Code for Prosecutors. This will be an operational document for prosecutors, but as a Law Officer and superintending Minister accountable for the work of the Crown Prosecution Service (CPS) and the Serious Fraud Office (SFO), I will attempt to foreshadow some areas of interest and encourage you to respond to the consultation. Thirdly, I hope you will find it helpful if I touch on the role of the court in what will be a novel procedure for them.

The Mechanics of Deferred Prosecution Agreements

I will not descend too much into the detail of what is contained in Schedule 17 of the Act as I would not wish the procedure to be thought about purely in mechanistic terms - neither by prosecutors, nor those advising corporates. It will be how it works in practice that will count. Inevitably, the correct process – as set out in Criminal Procedural Rules (also being consulted upon from tomorrow) will have to be followed. But after more than 20 years spent at the Bar; then as Minister responsible for fraud prosecutions in the Department for Social Security; more recently as someone who worked with the Council of Europe’s Group of States Against Corruption and as a member of the House of Commons Committee which debated what is now the Bribery Act; and now from the perspective I have as Solicitor General – I believe it’s always important to think about the bigger picture of how this measure is going to work out in practice.

So how will the DPA model work? There are essentially four stages:

Stage one: awareness of a potential DPA

The first stage is that there will need to be a trigger to make the prosecutor aware of a potential criminal course of conduct by the commercial organisation that could be the subject of a DPA. That may arise in different ways: it may be through a self-report by the company. It could also be as a result of a whistle-blower or by the prosecutor’s own initial investigation. In reality there is likely to be a dialogue between the prosecutor and commercial organisation from an early stage to identify a potential DPA case. But in cases where a company is prepared to accept its wrongdoing, and is committed to put things right, a DPA with stringent conditions will potentially offer an appropriate outcome.

Stage two: invitation by the prosecutor to enter into DPA negotiations

The second stage is for the prosecutor to formally invite the company to enter into DPA negotiations. The draft DPA Code for Prosecutors sets out how this should happen and you will be able to observe when you see the consultation document tomorrow that the process draws on the procedural steps which are in the Attorney General’s Guidelines on Plea Discussions in Cases of Serious or Complex Fraud.

If the prosecutor decides to offer the company the opportunity to enter into DPA negotiations, it will do so by way of a formal letter of invitation outlining the basis on which negotiations will proceed. During this stage the particulars of the alleged offending will need to be established and potentially appropriate terms discussed. A DPA may include a broad range of terms, some of which are detailed in a non-exhaustive list in paragraph 5 of Schedule 17.

Stage three: potential DPA agreed by the prosecutor and the organisation

The third stage is for the parties to voluntarily agree, or not as the case may be, a potential DPA. When considering whether a DPA may be appropriate the prosecutor will take into account the factors contained in the DPA Code for Prosecutors itself and also have regard to existing guidance including the Code for Crown Prosecutors; the Joint Prosecution Guidance on Corporate Prosecutions; and the Joint Prosecution Guidance on the Bribery Act 2010.

The DPA Code for Prosecutors will be publicly available and published by the Directors’ once the consultation process on the draft DPA Code has been completed. So for those advising corporates you will be able to see the important factors that will be taken into account by prosecutors.

For example, in the draft DPA Code, a public interest factor in favour of prosecution is if there is a history of similar conduct (including prior criminal, civil and regulatory enforcement actions against it). A public interest factor against prosecution is if there has been a genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice, involving self-reporting and remedial actions. These are just examples of course so please look out for the consultation document tomorrow for further details.

Stage four: court approval

The fourth stage, assuming the prosecutor and organisation have reached agreement on a potential DPA, is for the court process to commence, as set out in Schedule 17 of the Act and in due course the Criminal Procedural Rules in relation to DPAs. I will not rehearse the court process stage in detail, because I believe it is quite familiar to those with an interest in this area. In summary there are two hearings which are set out respectively at paragraphs 7 and 8 of Schedule 17 of the Act.

Firstly, there is the Preliminary Hearing, which will be held in private in order to preserve confidentiality at an early stage. The timing of a preliminary hearing will vary on a case by case basis. Clearly a great deal of the groundwork will need to have been done before the potential DPA case ever reaches court. However, the application with supporting documents (including a statement of facts) must be submitted to the court before the preliminary hearing; and the prosecutor must apply to the Crown Court for a declaration that: (a) entering into a DPA with the organisation is “likely to be in the interests of justice,” and (b) “the proposed terms of the DPA are fair, reasonable and proportionate.” Secondly, at the subsequent Final Hearing, the prosecutor must apply to the Crown Court for a declaration that the DPA is in the interests of justice, and the terms of the DPA are fair, reasonable and proportionate. If the DPA is approved, the court must give its declaration to that effect in an open final hearing.

The role of the prosecution

A DPA is a discretionary tool for the prosecutor and may only be entered into by a designated prosecutor: namely the DPP, the Director SFO, or any prosecutor designated by an order made by the Secretary of State. It is important to note that a designated prosecutor must exercise personally the power to enter into a DPA, although there is a limited exception if that person is unavailable.

The DPP and Director SFO must also (as required by paragraph 6, Schedule 17 of the Act) jointly issue a Code for Prosecutors giving guidance on the general principles to be applied in determining whether a DPA is likely to be appropriate in a given case. The draft DPA Code makes clear that the SFO and CPS are first and foremost prosecutors and it will only be in specific circumstances deemed by the Directors to be appropriate that they will decide to offer a DPA instead of pursuing the full prosecution of the alleged criminal conduct. The CPS has its own specialist casework Central Fraud Division headed by Sue Patten as well as the work undertaken in individual Areas. It’s clear that Director of the Serious Fraud Office (DSFO), David Green CB QC has given a renewed focus on the prosecution of economic crime; and his approach is very much to concentrate on the most complex and serious cases, the types of cases which the SFO was introduced to tackle. These include cases which undermine confidence in UK Financial PLC in general and the City of London, and serious bribery and corruption cases.

The traditional approach of investigation and prosecution of economic crime is often appropriate. That does not mean it should be the only approach. In appropriate circumstances, as the Directors’ have made clear, there is a place for deferred prosecution agreements and indeed other existing tools such as civil settlements under Part 5 of the Proceeds of Crime Act 2002 as illustrated by the SFO’s civil recovery settlement with Oxford University Press in July 2012.

The role of the court

Let me finally touch on the role of the court. In the DPA model devised for England and Wales, judicial involvement in the process is considered essential: court approval is needed for a DPA to come into effect. The model was designed very much with this in mind. We wanted effective judicial scrutiny – not “rubber stamping” - of proposed DPAs. The judge will ultimately decide whether the DPA is in the interests of justice and whether the terms of the agreement are fair, reasonable and proportionate.

The Preliminary Hearing gives the judge the opportunity to suggest modifications to the proposed terms or indeed reject the proposed DPA if it is not considered to be in the interests of justice. Yet it is this process of being able to bring a potentially appropriate DPA case to the court that can give the parties involved a degree of certainty of outcome that has previously not been possible.

It is impossible to banish uncertainty but it can be reduced. The other related component of all this is the size of the financial penalties involved. The forthcoming consultation by the Sentencing Council on a draft guideline for fraud, bribery and money laundering offences , which includes draft guidance for sentencing corporate offenders, may well help in this regard. You will note that Schedule 17, paragraph 5(4) states that any financial penalty is to be “broadly comparable to a fine that the court would have imposed on conviction for the alleged offence … following a guilty plea.” So the parties and courts will have regard to relevant sentencing principles and guidelines in order to determine the appropriate level for a financial penalty in an individual case.


I am confident that DPAs will enable prosecutors to take appropriate action against commercial organisations involved in economic crime, and that they will work well alongside existing methods. DPAs will not be a substitute for investigations or prosecutions but an additional weapon in the prosecutor’s armoury which will provide them with greater flexibility to pursue an alternative outcome in appropriate cases.

Thank you again for inviting me and I hope you have a productive and enjoyable conference.

Published 28 June 2013