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Corporate Compliance Insights
Home Compliance

Australia Considers Introducing Deferred Prosecution Agreements

by Wendy Wysong
July 1, 2016
in Compliance
Australian government seeks to use DPAs for anti-corruption compliance

with co-author Diana Chang

In March, the Australian government released a public consultation paper on whether Australia should introduce deferred prosecution agreements (DPAs). These agreements, usually between prosecutors and corporate defendants, defer prosecution for alleged offences of economic crime, provided the corporation fulfills agreed-upon conditions.

Overview

Organizations engaging in activity that may involve liability for criminal penalties under Australian laws — including domestic bribery and foreign bribery under the Criminal Code Act 1995 (Cth) — can face investigation and referral to the relevant Director of Public Prosecutions for a decision on whether to criminally prosecute.

There is considerable time, expense and uncertainty associated with investigating and prosecuting complex financial crimes. Key enforcement agencies are often stymied in Australia by an endemic lack of resources.

Criticism has welled in recent years regarding enforcement results in the wake of publicized failings, including those cited in the OECD Phase 3 report in 2012 (and follow-up report in 2015), which found fault with Australia’s commitment to the Anti-Bribery Convention, including its self-reporting and plea bargaining framework.

Public Consultation Paper

The March 2016 paper describes a DPA scheme that gives prosecutors the option to defer prosecution of a company or individual who has engaged in serious corporate crime in return for an agreement to comply with specified conditions. Such conditions typically require cooperation with any investigation, admitting agreed-upon facts, payment of a financial penalty and implementation of a compliance program. The prosecution is discontinued once the terms are fulfilled. However, if there is a breach of the conditions, the prosecution can resume and additional penalties may apply.

The consultation paper states that an Australian DPA regime may improve the ability of agencies to detect and pursue corporate crime, improve compliance and corporate culture, avoid lengthy and costly investigations and prosecutions, minimize the impact of criminal convictions on third parties (employees, etc.) and provide greater certainty for organizations seeking to resolve misconduct.

Overseas Experience

United States

The U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have used DPAs (and non-prosecution agreements (NPA)) since the early 2000s. These authorities have entered into more than 290 such agreements and have accrued financial penalties of more than US$42.5 billion in the period from 2000 to July 2014.

Since 2010, 86 percent of corporate enforcement actions under the U.S. Foreign Corrupt Practices Act 1977 (FCPA) have involved a DPA or NPA. The regime, which has grown organically, rather than by legislation, is characterized by substantial prosecutorial discretion, wide applicability to federal crimes, availability to both companies and individuals and comparatively limited judicial oversight.

Clifford Chance recently secured a significant victory for Fokker Services B.V., a Netherlands-based aerospace services company, in the U.S. Court of Appeals for the District of Columbia Circuit in establishing precedent for a new standard of judicial review of DPAs. The ruling limited the ability of a District Court to second-guess the validity of the DOJ’s charging decisions or the specific terms of a DPA.

United Kingdom

The U.K. introduced a DPA regime in February 2014. In contrast to the U.S. position, DPAs in the U.K. are subject to appreciable judicial oversight, characterized by formal policy and procedure. DPAs are only available for selected crimes and are not available for individuals. The regime has been introduced against the backdrop of considerable discussion about widening the scope of corporate criminal liability.

In November 2015, the U.K. Serious Fraud Office (SFO) entered into the first U.K. DPA with Standard Bank Plc in relation to allegations of failure to prevent bribery contrary to section 7 U.K. Bribery Act 2010. The bank agreed to pay GBP21.7 million and undertake remediation. Notably, the SFO worked with the DOJ and SEC to remove the inherent double jeopardy aspect of the investigation.

In February 2016, Sweett Group plc was convicted under the U.K. law and ordered to pay GBP2.35 million. In this case, the SFO did not consider that there had been sufficient cooperation in order to merit a DPA.

What to Expect

The public consultation period ended on May 2, 2016. Of the 16 responses, 14 were in favor of the introduction of a DPA regime, including the responses from Australian Securities and Investments Commission (ASIC, the agency charged with enforcing the anti-bribery law) and the Australian Taxation Office.

Australia may take cues from overseas agencies as to the appropriate framework and approach for a DPA regime. The SFO asserts its role as primarily a prosecutor, and its expectations for DPA cooperation are high (including waiver of legal privilege). The DOJ requires disclosure of an individual’s conduct to allow it to consider feasible individual prosecution (as endorsed in the DOJ’s “Yates Memorandum”).

For now, drawing on the overseas experience, Australia could expect:

  • Greater enforcement (ASIC and the Australian Federal Police have recently received additional funding)
  • An initial focus on foreign bribery and corruption matters
  • Rising collateral class actions (which may use DPA admissions)
  • Increasing coordination between international agencies
  • Increasing sophistication being needed for internal investigations

With the experience of the U.K.’s DPA regime helping to erase some of the intrinsic hesitation toward DPAs in an Australian setting, there must be a real possibility that a DPA regime will happen in Australia and that it will more closely resemble the U.K. rather than the U.S. model.


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Wendy Wysong

Wendy Wysong

Wendy L. Wysong is a partner at Steptoe & Johnson. She served previously as a litigation partner with Clifford Chance, offering clients advice and representation on compliance and enforcement under the Foreign Corrupt Practices Act, the Arms Export Control Act, International Traffic in Arms Regulations, Export Administration Regulations, and OFAC Economic Sanctions. She was appointed by the State Department as the ITAR Special Compliance Official for Xe Services (formerly Blackwater) in 2010. Wendy combines her experience as a former federal prosecutor with the United States Attorney for the District of Columbia for 16 years with her regulatory background as the former Deputy Assistant Secretary for Export Enforcement at the Bureau of Industry and Security, U.S. Department of Commerce. She managed its enforcement program and was involved in the development and implementation of foreign policy through export controls across the administration, including the Departments of Justice, State, Treasury and Homeland Security, as well as the intelligence community. Wendy received her law degree in 1984 from the University of Virginia School of Law, where she was a member of the University of Virginia Law Review.

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