Deferred prosecution agreements - Justice delayed or justice denied?

SINGAPORE is considering introducing deferred prosecution agreements (DPAs) as a prosecutorial tool in forthcoming amendments to its Criminal Procedure Code and Evidence Act. The move, announced in mid-January, represents a significant shift in Singapore's approach towards corporate wrongdoing, aligning the country more closely with current global trends.

FEATURES OF DPAS

DPAs are used in various jurisdictions and have the following common features:

DPAs are generally used as a means to resolve allegations of corporate wrongdoing in an attempt to avoid collateral consequences resulting from a company pleading guilty to a crime.

When used in a corporate context, the DPAs do not absolve individuals of liability. Rather, DPAs are often the first step in an enforcement action. Once allegations against the corporate entity have been resolved, the authorities will then prosecute individuals.

DPAs generally require the defendant corporation to agree to certain terms, often including the creation or enhancement of a corporate compliance programme.

In certain cases, regulators will require that there be an independent monitor as part of a DPA. The monitor, who is generally chosen by the regulators and for some defined period of time, will serve as the ears and eyes of the regulators while ensuring that the defendant company is abiding by the DPA terms.

AN EMERGING TREND?

In the US, the use of DPAs in a corporate criminal case is completely within the discretion of federal prosecutors. Most of the process occurs only between the putative defendant and the prosecutors in an extra-judicial way. Although the final agreement requires judicial approval, recent cases indicate that judges have little leeway to deny such approval.

As a result, some commentators have criticised the use of DPAs in the US as largely bypassing the formal legal system, raising a number of constitutional and public policy considerations. In particular, there are also fears that prosecutors hold an undue advantage throughout the process because the emphasis on cooperation and negotiation masks disproportionate prosecutorial leverage.

The increased use of DPAs has also led to a limited judicial review and oversight of the prosecution of certain laws, such as the US Foreign Corrupt Practices Act (FCPA).

Additionally, the facts set forth in a DPA are negotiated by the parties and do not necessarily provide the full extent of the conduct at issue. As a result, key issues, such as the extent of the law's extraterritorial jurisdiction, remain open.

Meanwhile, the UK, in February 2014, introduced a DPA framework in response to perceived deficiencies in the existing prosecution framework involving economic crime, including:

Under a DPA in the UK, a prosecutor charges a company with a criminal offence but proceedings are automatically suspended if the DPA is approved by the judge. Pursuant to the UK Serious Fraud Office's policy, a company would only be invited to enter DPA negotiations if there was full cooperation with the SFO's investigations. Under such agreements, penalties could include: (1) a financial penalty; (2) compensation to aggrieved parties; and (3) continuing cooperation with respect to prosecutions of individuals.

In recent years, we have observed an emerging trend of jurisdictions introducing or considering DPAs, drawing upon the largely positive experience of the US and UK. Such countries include France, Australia, Argentina and Canada.

FORMAL DPA REGIME IN SINGAPORE AND OTHER ISSUES

The move to consider introducing DPAs in Singapore is a positive step and reflects the authorities' awareness of the value of DPAs and the need to formalise the process by which such corporate resolutions are reached.

While there is currently little information publicly available about what Singapore's DPA regime could look like, Law and Home Affairs Minister K Shanmugam has stated that if DPAs were introduced here the terms of each DPA would have to be approved by the Singapore High Court, which would consider the fairness and proportionality of such resolutions. He also added that DPAs must be published once approved, which addresses a significant shortcoming of using "conditional warnings" to enter into such resolutions. In all likelihood, the DPA regime in Singapore if introduced, would be aligned with the US approach, and potentially draw on lessons from the UK.

Thus far, the proposal to introduce DPAs in Singapore has largely been well received. Nevertheless, there have been concerns that DPAs may embolden companies to behave irresponsibly or that prosecutors may in the future shy away from fearlessly prosecuting companies for egregious corporate misconduct. Such criticism, however, is unfounded and largely represents a misunderstanding of DPAs.

Contrary to concerns that DPAs may encourage reckless corporate behaviour, DPAs are likely to encourage companies to put in place sound governance procedures and compliance programmes. To avail itself of a DPA, a company must first show that it is a worthy candidate for the exercise of such prosecutorial discretion. Factors such as self-reporting, the existence of a working compliance programme, commitment to reform are among the many factors to be considered when the authorities consider whether to grant a DPA. Duplicitous conduct, such as acting irresponsibly and appearing contrite when caught, is unlikely to be seen favourably by the authorities.

Furthermore, under DPAs, the benefits of misconduct are often disgorged, providing little incentive for a company to act irresponsibly. As for prosecutors shying away from taking action, experience has shown that Singapore's prosecutors do not avoid taking on "difficult" cases. Finally, it must also be noted that DPAs also benefit the public, in that it provides a company genuinely seeking to rehabilitate with an opportunity to do so, and minimises the potential fallout from the collapse of major public companies caught up in corporate wrongdoing (such as insolvency and layoffs to innocent rank and file employees).

The DPA regime, however, is only one piece of the puzzle if Singapore wants to make good on its commitment to ensure that Singapore companies comply with the laws of Singapore and the laws of the jurisdictions in which they operate. To achieve such aims, Singapore's anti-bribery laws need to keep pace with international developments and business reality. In this regard, a review of Singapore's Prevention of Corruption Act (PCA) has been ongoing since January 2015. Areas of potential reform could include:

Corporate liability - Singapore should update its laws on the attribution of corporate criminal liability, and lower the evidential threshold, so that such liability can be established through the state of mind as well as the conduct of any "director, employee or agent" who was acting within the scope of his or her actual or apparent authority. This should replace the current "identification doctrine" where the prosecution needs to show that the individual who committed the crime can be regarded as the "embodiment of the company".

Increased penalties - there should be a distinction in the PCA in financial penalties that could be imposed on natural persons and companies. Singapore should consider revising corporate penalties so that they are higher than the strict monetary limit of S$100,000 or based on a formula that could take into account factors, such as the amount of bribes paid and benefit received.

Compliance defence - if the threshold for corporate liability is lowered, balance can be restored by introducing a compliance defence. A corporation found liable for bribes paid by its "director, employee or agent" can be absolved of liability if it can show that it took reasonable steps to prevent such corrupt practices from taking place. Such a compliance defence provides a legal impetus for companies to adopt prudent business practices and foster ethical corporate cultures through the implementation of anti-corruption compliance programmes.

Extraterritorial effect - the PCA currently provides for limited extraterritorial effect in respect of the acts of bribery of Singapore citizens abroad. Non-citizens such as Singapore permanent residents and corporations are not subject to the extraterritorial scope of the law. The PCA should be expanded to address this discrepancy.

Whistleblowing protection - the PCA currently provides for the right to anonymity and protects informers' identities. However, given that there is no overarching whistleblower law in Singapore, there is no statutory protection afforded to employees of companies who may lodge complaints and face retaliation as a consequence. Protective measures ought to be legislatively introduced.

Senior personnel liability - while individuals directly involved in corporate misconduct ought to be held liable, there should also be scrutiny on the behaviour of senior personnel, such as the C-suite or board of directors, for neglect or failure to take steps to prevent such misconduct. Senior personnel are responsible for setting the right tone and fostering ethical corporate culture, so they should naturally bear the responsibility for creating toxic cultures that incentivise illegal behaviour.

In short, while the introduction of DPAs is a step in the right direction, other pieces of the puzzle need to fall into place to create a holistic, coherent regime to combat corporate crime. Only then will Singapore's reputation for incorruptibility align with the state of its anti-bribery laws.