Crime and Courts Act 2013 (Deferred Prosecution Agreements) (Amendment of Specified Offences) Order 2018
Baroness Vere of Norbiton
That the Grand Committee do consider the Crime and Courts Act 2013 (Deferred Prosecution Agreements) (Amendment of Specified Offences) Order 2018.
Baroness Vere of Norbiton (Con)
My Lords, the order before the Committee today amends Part 2 of Schedule 17 to the Crime and Courts Act 2013. This sets out the range of offences where a deferred prosecution agreement, or DPA, may be considered. The intention of this schedule has always been clear: to allow the Crown Prosecution Service, or CPS, and the Serious Fraud Office, or SFO, to consider using a DPA to tackle serious economic crime committed by corporate entities. The order before the Committee today is simple: it corrects an anomaly with regards to making misleading statements and practices in financial transactions.
The schedule of crimes at Part 2 of Schedule 17 to the Crime and Courts Act 2013 currently includes a reference at paragraph 22(e) to Section 397 of the Financial Services and Markets Act 2000. It deals with misleading statements, practices and impressions in financial transactions. This provision was repealed and updated by the Financial Services Act 2012, which introduced new offences dealing with the same conduct under Section 89, on misleading statements; Section 90, on misleading impressions; and Section 91, on misleading statements regarding relevant benchmarks and misleading impressions as to the value of investments and interest rates that apply to a transaction. The order before the Committee today replaces the previous repealed offences under Section 397 of the Financial Services and Markets Act 2000 with the three current measures to ensure that the SFO and the CPS remain able to consider using a DPA to tackle such behaviour if they wish. At the moment, they cannot do so given the anomaly in the legislation. All of the current protections, including the need for a court to approve the order, will continue to apply in full.
As this is a matter of correcting a technical oversight, I hope it will not detain the Committee too long. But before commending the order for approval, I will set out some further details and provide the background to the deferred prosecution scheme and why the Government are taking this action.
Schedule 17 to the Crime and Courts Act 2013 sets out the scheme for deferred prosecution agreements. A DPA is a court-approved agreement between an organisation—not an individual—and a designated prosecutor who is considering prosecuting the organisation for a specific type of economic crime. These crimes are listed in Part 2 of the schedule. Under the scheme the organisation is charged with the offence, but upon a court declaration that the DPA is in the interest of justice and that its terms are fair, reasonable and proportionate, the indictment will be suspended for the duration of the agreement—usually two or three years. Upon the expiry of the DPA the proceedings are discontinued. The prosecution proceedings can be reinstated only if the DPA is terminated by the court before expiry because of a serious breach of the terms of the agreement.
There are no mandatory terms of a DPA but they are likely to include a financial penalty, disgorging any profits made from the offence, co-operating with investigations into the conduct of individuals, and the implementation and external monitoring of a compliance programme. Importantly, a DPA is not an alternative to individual criminal charges. If individual wrongdoing can be proved—for example, bribery—such charges can be pursued in addition to a DPA with the company.
DPAs are an appropriate and useful tool for addressing corporate economic and financial crime. A DPA is premised upon high levels of co-operation on the part of the offending company, which signals a willingness to address governance failures going forward. It allows companies to make redress for wrongdoing while also taking steps to safeguard against any future misconduct. DPAs are therefore a key means of encouraging the inclusion of economic and financial crime prevention as an integral part of corporate good governance. Where courts judge them appropriate, they are a means of allowing corporate entities to make full redress for crimes committed while avoiding collateral damage—for example, the company going into liquidation and laying off thousands of employees. Four DPAs have been agreed since the measures came into effect in 2014.
To reiterate, this order effects a technical correction of an anomaly required to allow DPAs in respect of offences dealing with misleading statements and impressions in financial transactions—it replaces like with like. Without today’s order, a designated prosecutor cannot enter into, and a court cannot approve, a DPA premised upon offending involving misleading statements and misleading impressions in respect a range of financial products. By introducing today’s order, we are ensuring that the CPS and SFO could consider applying for a DPA in these cases should they so wish. I beg to move.
Lord Thomas of Gresford (LD)
My Lords, this is a perfectly acceptable amendment to the schedule to remove the anomaly that now exists. It is a moment, however, to consider the value and use of deferred prosecution agreements. As the noble Baroness pointed out, only four such agreements have so far been approved by the court, and only three of the judgments in those cases have as yet been published. However, those cases have made it possible to find some clear principles that should be applied. Sir Brian Leveson, President of the Queen’s Bench Division, put it this way: a deferred prosecution agreement,
“is a reward for openness”.
The first essential is co-operation with an investigation. The sooner a company comes in and self-reports, the more it has to be rewarded for. The SFO will look at what work has already been done to investigate, how thoroughly it has been done and how data has been dealt with—in a way that does not tip off potential suspects leading them to delete that data altogether. Secondly, the company must be committed to reform. This may mean removing senior staff responsible for the criminality and instituting changes in procedures. The SFO must be in a position to go before a judge and argue that the default position of a prosecution can be displaced in the specific case and that a deferred prosecution agreement is justified. The judge has to give his approval to this.
In the Rolls-Royce case, which is the largest of the cases so far, the judge commented that his first reaction to what was put before him had been that if the company was not to be prosecuted,
“in the context of such egregious criminality over decades, involving countries around the world, making truly vast corrupt payments and, consequently, even greater profits then it is difficult to see that any company would be prosecuted”.
Rolls-Royce had not self-reported, but it co-operated. It was its co-operation that enabled the SFO to take the matter before the court. What the company did report, when tasked with it, was far more extensive and of a different order to what may have been exposed without the co-operation that it provided. I hope that the committee of this House carrying out post-legislative scrutiny of the Bribery Act, which has just been formed, will give an opportunity to examine DPAs and how they should be used with great care.
Lord Beecham (Lab)
My Lords, four agreements in between four and five years does not strike me as a particularly impressive figure. I appreciate that the Minister may not be able to answer several questions today, but perhaps she can answer them subsequently by letter. How many cases were considered but not proceeded with? On the four cases to which she referred, what financial penalty was imposed on the relevant companies? In addition to such financial penalties, were proceedings taken against individuals, which is clearly a separate matter? On the companies that were subject to the provisions, what changes may have been made within those companies, assuming things have gone wrong not necessarily with the companies’ full understanding at the time? How many cases have been investigated and not proceeded with, and was such a decision made because there was no case to answer or for other reasons—for example, lack of financial capacity in the company to pay any penalty?
What is the present caseload of the relevant department for these arrangements? Are any cases currently under consideration and, if so, roughly how many? How long will it take for such matters to be resolved? In other words, is there likely to be rather more than an average of one a year in future? If not, are the Government satisfied that the regime is proving effective, and what further steps might be taken to make more use of the provision now that it will be brought up to date?
Baroness Vere of Norbiton
I thank both noble Lords for their contributions today and for broadly welcoming the order. I thank the noble Lord, Lord Thomas of Gresford, for his insights into the use of DPAs and the Rolls-Royce case, which was indeed rather large. As he pointed out, there is now an ad hoc committee on the Bribery Act. Obviously, it is not for us to consider its terms of reference, but I am sure that it will look into these things. The Government continue to support the use of DPAs when appropriate.
Turning to the points raised by the noble Lord, Lord Beecham, he will be aware that I cannot say anything about the current caseload or casework going through the system at the moment, but I am very happy to write to him, as I would not want to mislead him. I am fairly sure that we can get the answers to a number of questions, and I will copy the answers to all noble Lords, because it would be good for noble Lords to understand how many DPAs have been used.
We should not necessarily assume that there have been too few or too many DPAs. They obviously have to be used only in appropriate cases. We may be able to draw conclusions from the information we get, but the Government continue to support their use. They can be very good for justice, fairness and jobs.
The order addresses a small but important statutory anomaly which is preventing future use of DPAs for this type of corporate offending. I therefore commend it to the Committee.