A recent report from TI Canada’s volunteer legal committee called “Another Arrow in the Quiver? Consideration of a Deferred Prosecution Agreement Scheme in Canada” outlines the pros and cons of DPAs and how they work in other jurisdictions.
DPAs are agreements between enforcement authorities and a corporation whereby the authorities agree to refrain from prosecuting the corporation for certain apprehended offences provided that the corporation makes various undertakings and other public interest criteria are met.
“If you look at the United States they’ve had very active enforcement of the Foreign Corrupt Practices Act and the vast majority of cases in the U.S. involve resolutions and settlements with corporations,” says Mark Morrison a member of the TI Canada board of directors and a lawyer at Blake Cassels & Graydon LLP in Calgary.
Morrison adds there is a “higher level of maturation” of the ability of enforcement in the U.S. to work with businesses to promote a great culture of self-reporting and a more collaborative approach to white collar enforcement.
It’s not the first time the idea of DPAs in Canada has been raised. Last spring a report from the Institute for Research on Public Policy suggested DPAs as one way the federal government could deal more effectively with corporations caught up in wrongdoing.
“In effect what you see is by giving companies — particularly those where there are new boards of directors or management that have identified a problem and want to move on with business — if you give them a DPA, if properly structured it creates the opportunity for increased transparency by still bringing these cases forward and the individuals who engaged in the wrong doing can be held accountable and also create an environment where the kind of conduct subject to DPAs doesn’t stay buried but is brought to the surface, and sending the appropriate message of deterrence going forward.”
The TI Canada report looks at both the U.S. and U.K. approaches to DPAs and highlights key differences. One of the significant differences is that in the U.S. there are settlements that happen between the authorities and companies with no independent oversight. In the U.K. the DPA regime is one where the court is involved in the proceeding and there is judicial oversight.
TI Canada is advocating that if the government does choose DPAs it should follow an approach closer to the U.K. model than the U.S. model to increase the transparency of any resolution process.
“The notion of judicial oversight used in the U.K. was one on balance we thought was a better way to do it than the U.S. approach of settlements, potentially under the table,” says Morrison.
The most recent DPA settlement in the U.K. involved Rolls-Royce PLC. In January the Serious Fraud Office entered into a DPA with the company’s civil aerospace and defence businesses, and its former energy business. The DPA was approved by the president of the Queen’s Bench division.
The agreement followed a four-year investigation into bribery and corruption around conduct that spanned three decades. The conduct covered by the agreement took place across seven jurisdictions: Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia.
In the Rolls-Royce case the judge ruled in a public hearing at the Royal Courts of Justice that the DPA’s terms were “fair, reasonable and proportionate and that the DPA was in the interests of justice.” The judge also agreed the total sum in the U.K. settlement of 671 million-pounds ($831 million), “reflected the gravity of the conduct, the full cooperation of Rolls-Royce PLC in the investigation, and the programme of corporate reform and compliance put in place by new leadership at the top of the company.”
The resolution is the highest ever enforcement action against a company in the U.K. for criminal conduct.
If a company doesn’t honour the conditions set out in the DPA the prosecution may resume. An investigation into the conduct of individuals in the Rolls-Royce case continues.
“Part of what is an attractive feature of a DPA is that it allows both the prosecution side and the company side the certainty of resolution of proceeding and it needs to be a hallmark of any DPA regime,” Morrison says.
When DPAs are used there are certain safeguards in place and one is that individual wrong doers be held to account. In the Canadian context of DPAs, Transparency International says if properly designed and implemented, they could have the potential to support increased enforcement of anti-corruption laws and increased self-disclosure and compliance by corporations.
For a DPA scheme to be effective, it should be enacted through specific legislation, carried out under transparent judicial purview and include specific measures aimed at the following objectives:
• Financial reparations
• Sincere compliance reform
• Accountability of individual wrongdoers.
“I think as far as public interest goes there is that notion of holding people accountable and by more cases being brought and more conduct coming to light there will be more white collar enforcement,” says Morrison.