Regulatory powers and corporate offences - a new dawn?

The Law Reform Commission today published its much anticipated report into Regulatory Powers and Corporate Offences.

Issues considered in the two volume report include:

• Deferred Prosecution Agreements
• a dedicated multi-disciplinary Corporate Crime Agency (modelled on the Criminal Assets Bureau) and a Prosecution Unit for corporate offences
• a core set of regulatory powers for all regulators to include powers to impose administrative sanctions and compliance settlements, and coordination between regulators
•  the expansion of existing fraud offences to include liability for 'subjective recklessness'
• the attribution of criminal liability for corporate crime, including a due diligence defence for  corporate bodies and their senior managers
• whether the fact that a corporate obtained legal or regulatory advice prior to taking action can constitute a defence in criminal proceedings

The Report can be found here. A&L Goodbody's detailed submissions to the Commission can be read here. This article focuses on a key recommendation in the Report – the introduction of Deferred Prosecution Agreements.

Deferred Prosecution Agreements

The Report confirms that:

 "The Commission recommends the introduction of Deferred Prosecution Agreements (DPAs) in Ireland which, to ensure that it is consistent with constitutional requirements, must be (a) on a statutory basis, (b) subject to judicial oversight, (c) subject to guiding principles and (d) contain sufficient procedural safeguards".

A&L Goodbody welcomes this recommendation, which is also likely to be welcomed by both prosecutors and corporate entities. A Deferred Prosecution Agreement (DPA) is an agreement between a prosecutor and a corporate body whereby the prosecutor agrees to dismiss criminal charges if the corporate body agrees to take certain steps. The threat of full prosecution remains if the corporate body fails comply with the agreement.

A DPA results in earlier resolution than would be the case with a criminal prosecution and also leads to certainty for the parties as compared with the uncertainty and delay necessarily involved in criminal investigations and prosecutions. DPAs have been seen in other jurisdictions to encourage higher standards of corporate conduct. DPAs also increase the effectiveness of justice by promoting cooperative relationships between prosecutors and defendants resulting in a timely resolution of proceedings.

DPAs also encourage self-reporting, increasing the detection of corporate crime. They have a deterrent effect, potentially involving substantial fines and remedial actions underscored by the threat of full prosecution for a breach of the DPA. The fact that the agreements are transparent and published adds to the deterrent effect.

The Report notes that DPAs result in a shift in investigation and maintenance costs from the prosecutor to the corporate entity while reducing legal costs for the State. They also allow for a global response to corporate offending by enabling increased cooperation between jurisdictions in the form of "global settlements".

DPAs have been used in other jurisdictions including the US for many years and were introduced in the UK in 2013. The US model is based on the exercise of the prosecutor's discretion while the UK model is based on statute. The Report recommends a statutory model based on the UK system which requires court approval for DPAs which was also the approach recommended in A&L Goodbody's submissions. This is an important safeguard, ensuring that DPAs are used appropriately and serve the public interest.

The Report recommends that DPAs should be operated under the auspices of the DPP, who would bring the terms of any DPA to the High Court for approval. The Court would consider whether the DPA is "in the interests of justice" and whether the terms are "fair, reasonable and proportionate", a test consistent with the UK approach. The decision to invite a corporate body to negotiate a DPA would be entirely at the discretion of the DPP.

The Commission recommends that DPAs would only apply to corporate bodies and other unincorporated undertakings such as partnerships but not to individuals. Furthermore, they would only apply to offences concerning serious economic crime. The Commission has listed offences to which DPAs would apply, including conspiracy to defraud, theft and fraud, bribery and corruption, Companies Act and Competition Act offences, Revenue offences and Market Abuse offences.

The Report notes that certainty and transparency are central to the success of any DPA scheme and recommends that the legislation would require the DPP to produce a Code of Practice setting out the detailed substantive and procedural elements of the DPA scheme including the role of the DPP, the standards the DPP would apply when negotiating and provisionally agreeing a DPA and the relationship between the DPP and any relevant regulator.

It is clear from the Report that many submissions relating to DPAs (including A&L Goodbody's) were concerned that the corporate body's right to assert legal professional privilege would be protected. The Commission agreed, and has recommended that the statutory framework should provide that nothing in the legislation, or any guidance or Code of Practice, should alter or affect the corporate body's rights in relation to asserting legal professional privilege. This clarification is welcome, particularly as there appears to be a suggestion in the UK that cooperation in the context of a DPA might include the waiver of legal professional privilege.

The Commission recommends that the final approval hearing before the High Court should be held in public and the approved DPA published on the DPP's website. Each DPA would have to include:

• a statement of facts outlining the full extent, nature, and circumstances of the corporate body's offending
• the duration of the DPA
• a financial penalty

The Commission has also recommended that the statement of facts in an approved DPA can be relied on by a party to civil proceedings against the corporate body as an express admission of the content of the statement. This means that a corporate body will have to carefully consider the impact of any DPA on potential civil proceedings (as in other jurisdictions in which regulatory authorities publish admitted statements of facts when regulatory investigations are concluded by agreement). 

A&L Goodbody welcomes the Commission's recommendation which is very much aligned with our submission.

For more information please contact a member of A&L Goodbody's Litigation & Dispute Resolution team.

Date published: 23 October 2018