Deferred prosecution agreements: to be or not to be?

Reforms to Australia’s foreign bribery laws proposed in 2017 and again in 2019 included a deferred prosecution agreement (DPA) scheme. When the reforms lapsed and were proposed for a third time in 2023, the DPA scheme was omitted. However, when the reform Bill recently came before the Senate, the opposition proposed amendments to the Bill to reinclude the DPA scheme. We consider whether the introduction of a DPA scheme is appropriate to expand the range of tools for criminal law enforcement in Australia.

Introduction

On 22 June 2023, the Federal Government introduced the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023. The latest Bill follows the previous Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019, which in turn followed the previous Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017. The previous Bills lapsed in Parliament and were not passed.

The latest Bill contains the same key amendments to the foreign bribery provisions in the Commonwealth Criminal Code as the previous Bills, including the introduction of a new offence for companies that fail to prevent foreign bribery by “associates”, with a defence if the company can establish that they had in place “adequate procedures” to prevent such conduct.

If enacted, these amendments will be some of the most significant in some time for transnational Australian corporates and their compliance teams. See our previous coverage here and here for more information.

The previously proposed DPA scheme is not included in the latest Bill. The latest Bill introduces a new offence that casts a wide net of potential liability, but corporates will not have the DPA avenue to explore as an alternative to prosecution. DPAs will not, without further reforms, be available for other serious corporate offences such as false accounting, money laundering and sanctions violations.

What are DPAs?

DPAs are voluntary, negotiated settlements between prosecutors and defendants. DPAs are used in both the US and UK for serious corporate offences.

Under a DPA scheme, where a company or company officer has engaged in serious corporate crime, prosecutors have the option to invite the company to negotiate an agreement to comply with a range of specified conditions.

These conditions typically require the company to cooperate with any investigation, admit to agreed facts, pay a financial penalty and implement a program to improve future compliance.

A company will not be prosecuted in relation to the matters that were the subject of the DPA provided that the company complies with its obligations under the agreement.  

A breach of the terms of a DPA may result in the prosecuting agency commencing prosecution or renegotiating the terms of the DPA with the company.

DPA schemes, including those contemplated for Australia, include safeguards to ensure that DPAs are only used in appropriate circumstances, taking into account other available enforcement and prosecution options.

The safeguards include that prosecutors must be satisfied that entering into the DPA is in the public interest, and the DPA can only be approved where its terms are found to be in the interests of justice, fair, reasonable and proportionate.

Why not DPAs?

The Government made the following comments about the removal of the DPA scheme from the most recent reform Bill:

“One of the key differences between this Bill and the 2017 and 2019 Bills is the absence of a DPA scheme. As noted earlier, ALP Senators recommended that the DPA provisions be removed from the 2019 Bill. In his second reading speech, the Attorney-General noted that it was premature to entertain the introduction of a DPA in Australia, and that such a scheme should only be entertained after the measures in this Bill have been given time to work.

These comments bring to mind the sentiments expressed about ASIC’s use of enforceable undertakings (EUs) to punish corporate wrongdoing without expensive court action.

ASIC’s relatively frequent use of EUs was severely criticised in the Financial Services Royal Commission for being too lenient and having an insufficient deterrent effect.

Why DPAs?

Although the Government has raised some valid concerns, there are also some compelling arguments in favour of the introduction of a DPA scheme, particularly in the context of Australian’s foreign bribery laws.

First, corporate crime, especially bribery and corruption, is often actively concealed or at least difficult to detect. Companies voluntarily self-reporting is therefore a key component of the effective investigation, prosecution, punishment and deterrence of foreign bribery and other corrupt practices.

In the context of criminal sentencing, companies and company officers may be given some credit for cooperating. But without the added certainty provided by a DPA scheme, companies and company officers may perceive that by voluntarily self-reporting, they would be merely throwing themselves on the mercy of the regulatory agency and the court.

By contrast, a suitable DPA scheme incentivises investigation and self-reporting, and provides an opportunity to potentially avoid some of the reputational and financial costs associated with the criminal process.

Though somewhat counterintuitive, this may actually lead to more frequent detection, more robust responses, and greater cooperation with regulatory authorities, in relation to corporate crime.

Secondly, sweeping criminal offences with reverse onus defences, such as the proposed failure to prevent foreign bribery offence, are a significant extension of the criminal law that can have harsh consequences in particular cases.

The offence may be committed without the usual guilty state of mind required for a criminal offence, and consequently, in circumstances where those involved have a lesser degree of blameworthiness.

The potential harshness of such strict and sweeping offences can be mitigated by the availability of alternate prosecution and enforcement options, such as DPAs.

What’s next?

The latest reform Bill was due to be debated in the Senate on Thursday, 7 December 2023. However, the sitting appears to have been adjourned without dealing with the relevant agenda item, potentially leading to a further delay in the introduction of the reforms.

We will continue to monitor the progress of the Bill to determine whether and when the proposed reforms will be introduced, and whether they will include a DPA scheme.

The authors would like to thank Grace Ffrench, Vacation Clerk, for her assistance researching this article.