A Sting in the Tail? The Use of a Corporate Deferred Prosecution Agreement in subsequent Investigations against Individuals

In the UK, the Serious Fraud Office seem finally to be exercising their powers to enter into Deferred Prosecution Agreements with corporate entities. And with offences such as s.7 of the Bribery Act importing corporate strict liability and an apparent government appetite to extend potential criminal liability for corporates in a similar way, this may well become the growth area which was originally predicted. However, as a potential resolution to alleged wrongdoing, they still seem a relatively alien creature in our jurisdiction and a number of questions remain unanswered.

Corporate investigations and prosecutions are often multi-jurisdictional. One issue which may come back to haunt both corporates and the individuals affected is whether the content and terms of a DPA may be admissible in a subsequent prosecution. The answer to that might appear straightforward, particularly being admissible against the corporate which itself made the admission, but is less likely to be so in practice. For example, if Company A accept in a DPA that their directors B, C and D facilitated bribes and the financial effect was X, to what extent might those corporate admissions be admissible against subsequent prosecutions of individuals B, C and D?

I am currently part of a team arguing this point, albeit relating to the admissibility of a US DPA in the Greek courts. We understand the point has not been argued before. In the US, a DPA is a contract between the prosecutor and the corporate or individual defendant. It is typically drafted on the prosecution view of the facts and a corporate defendant has little ability to negotiate changes. Indeed, it may be in the company’s interests that the terms of the DPA are as wide as possible, in order to limit any future litigation. Further and unlike in the UK, the agreement becomes effective without any judicial oversight at all. In this sense, their terms are not evidence and are inherently unreliable, particularly against non-parties. One can see how it is therefore arguable that no weight should be attached to the contents of a US DPA, other than proving the fact of an agreement, even in jurisdictions such as Greece where the laws of admissibility are more limited.

Could a similar argument be made in relation to a UK DPA? Arguably, statements of fact made by a corporate entity in a UK DPA would amount to hearsay in prosecutions of individuals, as they would be statements other than those made by a person while giving oral evidence in the proceedings, relied upon for the truth of any fact or opinion stated. Admissibility of hearsay in UK criminal proceedings is governed by the Criminal Justice Act 2003 which, by s.114(1) enacts the basic rule that hearsay is inadmissible unless it can be brought within a statutory exception, a common law exception, all parties agree to it being admitted or the court regards it in the interests of justice to admit it. As to the latter test, the Court would be obliged to consider factors set out at s.114(2) such as the probative value of the evidence to an issue in the proceedings, whether oral evidence of the matter could be given and the amount of difficulty in challenging the statement. Accordingly, where corporate admission in a DPA did not directly address an ex-employee’s position and/or where there is no good reason why a senior officer could not attend court to give oral evidence, it is difficult to see how a UK court would find it was in the interests of justice to rely upon the DPA in this way.

However, of course one of the key differences with a UK DPA is that it is the subject of significant judicial oversight. Judicial approval is required at a preliminary hearing and subsequently, with a Judge determining whether the agreement is transparent, proportionate and in the public interest. That is not the only difference with a US DPA. It will be interesting to see, given that exposure to judicial approval, whether a DPA might be admitted as evidence in a future prosecution of individual ex-employees, whether in the UK or other jurisdictions. What is more certain is the inevitable tension and conflict of interest which can arise between the corporate who is negotiating a DPA and the individuals it points its finger at as the ex-bad apples of the organisation. It is vital that those competing interests are protected throughout any internal investigation, DPA negotiation and any subsequent criminal or civil investigation.

I will keep you posted as to how the argument is received by the Greek courts!