The deferred prosecution agreement, a new way of dealing with corporate crime in the UK

In the United Kingdom, the Crime and Courts Act 2013, which received Royal Assent last April, created the “Deferred Prosecution Agreement”. This new instrument will help prosecutors to deal with corporate crime.

The deferred prosecution agreement is a new enforcement tool that prosecutors will be able to use in the UK in matters concerning criminal activities of corporate organisations. Instead of prosecuting a company for a specified offence, the prosecutors can enter into an agreement with the company upon approval of the court. The company will have to comply with the requirements imposed by the prosecutors, so that the indictment will be dismissed. Individuals cannot conclude such an agreement with a prosecutor.

The deferred prosecution agreement typically requires the company to first acknowledge its involvement in the crime. Then the prosecution will impose a financial penalty. Finally, the company needs to implement internal changes as well as cooperate with the investigation itself. Other provisions can be naturally found and will be decided on a case-by-case basis.

In the beginning of the 20^th century, the deferred prosecution agreement technique was used in the US as an alternative disposition in juvenile cases in order to avoid the stigmatisation of young offenders. Since then, the concept has grown from drug cases to more recently the financial crime sector.

Many arguments support such a mechanism. It has been argued for example that such an agreement allows prosecutors to avoid expensive full criminal investigations and trials. It requires companies to comply with decisions and remedial measures, causing limited disruptions to the company compared to a criminal conviction.

However, the practice of the deferred prosecution agreement has been criticised. From a theoretical standpoint, this agreement implies an inequality between corporate crimes and “regular” crimes, for which such a settlement cannot be used. Consequently, it creates the assumption that the first category is less serious. On a more practical note, this enforcement tool can be seen as a convenient way of hiding serious crimes, and the real offender might even never be prosecuted. Furthermore, the financial penalty will be suffered by the shareholders of the company, party to the agreement, instead of the wrongdoer. The company itself could be tempted to blame junior employees in order to protect more experienced staff members and conceal serious failings at a high level.

Despite some reluctance and criticism, notably with regard to various consequences of the US equivalent instrument that have been viewed as unwanted, the introduction of the deferred prosecution agreement in the United Kingdom was met with lively interest. It has been recognised that the system in the UK was inadequate for dealing with companies, especially when serious economic crimes are concerned, not to mention that the growing internationalisation in this area aggravates the current problems. Currently, prosecutors dealing with corporate crime have to rely on criminal prosecution or pursuing a civil recovery order against the corporate organisation. The government is interested in the potential advantages of such an instrument due to the possibilities it offers to reduce costs, obtain financial gains and avoid uncertainty.

The government set up a consultation for which responses were received from prosecutors, members of the judiciary and legal profession, businesses, academics and regulatory bodies. Among these people, 86% of the respondents agreed that the proposed new enforcement tool would improve the way in which prosecutors deal with corporate crime[1].

This enthusiasm for deferred prosecution agreement led to the enactment of the Crime and Courts Act 2013. This Act, which sets up the deferred prosecution agreement, received Royal Assent on 25 April 2013. Optimistic estimations suggest that the first agreement may be entered into in early 2014, and that the number of deferred prosecution agreement concludes each year must be around ten[2].

Pour aller plus loin : O’Brien & Dixon: Enforcing Compliance or Privileging Unaccountability? The Efficacy and Dangers of Deferred Prosecutions in the Corporate Sector, September 2012, CLMR Research Paper Series, Working Paper No. 12-3

Julien Koch