Deferred prosecution agreements possible for Libor charges

Author: Danielle Myles | Published: 6 Aug 2012
Email a friend

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

UK white collar prosecutors look set to receive a new enforcement tool following the Ministry of Justice’s consultation (the Consultation) on deferred prosecution agreements (DPA), which closes on Thursday.

If the plea negotiation-method has retrospective effect, as proposed by the Consultation, use of DPAs in any charges stemming from UK investigations into manipulation of the London Interbank Offered Rate (Libor) cannot be ruled out.

Following Serious Fraud Office (SFO) director David Green’s announcement last week that Libor offences can be prosecuted under existing UK law, white collar lawyers have told IFLR that DPAs could be an option if the SFO brings Libor charges.

“Depending on when DPAs take effect, and how long the Libor investigations last, then yes it could be an option,” one former SFO lawyer said.

Intended as a swifter way of pursuing serious economic crime, DPAs allow corporates to bypass criminal prosecution if they self-report or own up to offences, pay the relevant fine, and abide by conditions over the term of the DPA.

Paragraph 83 of the Consultation proposes, and asks for feedback on, whether the enforcement mechanism should be available in relation to conduct taking place before DPA legislation takes effect.

Lawyers told IFLR there is no apparent reason why DPA legislation should not have retrospective effect.

The possibility of DPAs used for Libor-offences hasn’t escaped the attention of legal market commentators further afield, either.

Transparent improvements

UK white collar lawyers have welcomed DPAs’ introduction as a way to most effectively use SFO resources, and improve the predictability for companies considering self-reporting unlawful conduct.

But for DPAs to work, the government’s response must give corporates greater reassurance than the Consultation. “It seems to me that it’s all very much worded for the prosecutor. I can’t see the benefit for corporate bodies right now,” said the former SFO lawyer.

“A criticism of SFO agreements in the past has been their lack of transparency, and that’s not really been rectified in the consultation document,” they added.

Transparency improvements are needed in three overriding areas.

First, it must be clearer what information is needed from corporates to secure a DPA. “It is critical that a proper framework is put in place for DPAs, which identifies the factors which should be considered when determining if a DPA is appropriate,” the former SFO lawyer said.

Second, a sentencing matrix must be devised (as in the US) so corporates can adequately assess DPA fines against prosecution penalties before self-reporting.

Finally, to the greatest extent possible, court proceedings in approving the DPA must be private. The degree of judicial oversight proposed by the Consultation is a major distinction between it and the US regime, where court involvement is limited to final approval and widely viewed as a rubber -stamping exercise.

Given DPAs have been used in the US for more than a decade, it’s not surprising the Consultation falls short in comparison.

One area where the UK framework improves on the US’s – even before corporate responses are incorporated – is the process following suspected breach of the DPA.

“A positive sign for transparency and fairness is the way they have sought to protect the competing interests of all involved – the court, the prosecutor and the company – in connection with alleged breaches of the DPA, rather than simply leaving the determination of breach to the discretion of the prosecutor, as is the practice in the US,” said Patrick Doris, a London-based Gibson Dunn & Crutcher partner.

The government will publish a response in the autumn of 2012 summarising the comments that have been received and how they will be incorporated into the proposals, a MoJ spokesperson said.