The U.S. has a long history of using deferred prosecution agreements (DPAs) to resolve allegations of misconduct against corporates. DPAs are popular, as they reduce the need for an expensive and lengthy trial while allowing for restitution and recompense. The U.K. followed suit in 2013, introducing DPA legislation in Schedule 17 of the Crime and Courts Act. “The DPA is a useful tool for British enforcement authorities and corporates alike,” says Caroline Black, a white-collar partner from Dechert’s London office. “It allows for the swift investigation and reporting of issues, and a resolution that penalizes the corporate and incentivizes compliance. The DPA also ensures an outcome absent a conviction.”
In the U.K., DPAs are used by the Serious Fraud Office (SFO) and the Crown Prosecution Service (CPS). The arrival of Lisa Osofsky as director of the SFO in 2018 marked a major turning point. Osofsky is a former U.S. prosecutor and corporate monitor. Since her appointment, she’s hired practitioners from the FBI and Department of Justice (DoJ) to advise U.K. SFO staff. So far, there have been 12 DPAs since the legislation was introduced. The most significant DPAs to date include those of Rolls-Royce, Standard Bank, Tesco, and Airbus — all major corporates.
“The U.K. has its own distinct model, led by the SFO,” says Caroline Black from Dechert. “Although some within the criminal justice system see the U.S. approach as the ideal, our own particular rules of law, evidence, and procedure ensure that we have a uniquely British approach.”
Caroline Black was on the Dechert team advising aircraft manufacturer Airbus, which was accused of paying bribes to secure aircraft contracts across the world. A DPA was agreed in January 2020, under which Airbus agreed to pay nearly $4 billion to the British, U.S., and French regulators. This was a landmark as the largest DPA settlement coordinated across jurisdictions.
“Corporate crime is increasingly cross-border — be it corruption, market misconduct, tax evasion, or fraud,” says Caroline Black of Dechert. “This has led to an international response with increasing and effective communications between regulators around the world. For the responsible corporate looking to put its past misconduct behind it, a coordinated settlement is a highly cherished prize.”
The benefits of a coordinated global settlement include one “bad news day.” The alternative is a drip-feed of negative press in each jurisdiction — not good for any corporate’s reputation.
Another crucial advantage is potentially avoiding the duplication of fines across jurisdictions, with just one headline sum. But what are the possible pitfalls of engaging with multiple regulators on one matter?
“From a corporate and professional perspective, an adviser must ensure that the company does not get caught in the middle of competing regimes,” says Caroline Black of Dechert. “This requires skillful management and negotiation to ensure equality of information between parties and ‘playing with a straight bat.’” Knowing when to push back, when to enlist the help and guidance of the regulator, and facilitating regulator-to-regulator discussion is essential, she says.
Differences Between the US and UK
When the U.K. incorporated DPAs into its legal framework, the U.S. approach was intensely debated, with several core differences emerging in the U.K. model.
“There is a greater level of judicial oversight in the U.K. DPAs are also available only to corporates, not individuals,” says Caroline Black of Dechert. By contrast, in the U.S. DPAs extend to individuals as well. Another key difference is that in the U.S. a greater emphasis is placed on self-reporting at the invitation and sentencing stage. “In the U.K. the prosecutors view the corporate’s conduct and cooperation in the round prior to issuing,” says Caroline Black of Dechert.
The U.S. also differs in having non-prosecution agreements (NPAs), which are not used in the U.K. Under an NPA the regulator agrees not to prosecute if a corporate meets its obligations for a set period. An example is the NPA that formed part of the $282.7 million global settlement negotiated between Walmart and the DoJ in 2019. Walmart was accused of making historical illegal payments in multiple jurisdictions through local intermediaries, kick-starting a wide-ranging investigation lasting seven years. Such payments violate the Foreign Corrupt Practices Act (FCPA) which is vigorously enforced by U.S. regulators. Dechert’s white-collar team negotiated the global resolution, reaching an initial settlement in 2019. “The closest tool to an NPA in the U.K. is a civil consent order using the Proceeds of Crime legislation and an immunity. Another option is a restricted use undertaking under the Serious Organised Crime and Policing Act 2005,” says Caroline Black of Dechert. “Such agreements are not frequently used and are fraught with difficulty.”
International Take-Up of DPAs
DPAs are becoming a more widely available tool across the world. At the latest count, DPAs are also available — or due to be available — in Canada, Japan, Singapore, and Australia. Brazil has a leniency program under the Brazilian Anti-Corruption Act (commonly known as the Clean Company Act), meaning corporate cooperation can lead to a reduction in sentencing or sanctions immunity. “The availability of alternatives to prosecution worldwide serves to encourage corporate cooperation and coordination of resolutions across borders,” says Caroline Black from Dechert.
The Future for DPAs in the UK
DPAs in the U.K. are only going to rise. Although criticized in some quarters for sending the message that some corporates are “too large to prosecute,” they have practical advantages. Corporates can make reparations for past misconduct without the negative consequences of a conviction. Prosecution risks putting viable corporates out of business for historic misdemeanors, leading to harsh consequences for investors and employees. And in the current economic climate, the cost savings on lengthy and time-consuming trials is valued. With the growth of DPA frameworks worldwide, it looks as if we will see more large coordinated settlements in the future.