(A) DPA in Singapore?
In a 16 January 2018 Business Times article, it was reported that Minister for Home Affairs and Law K Shanmugam announced that there is a possibility of Deferred Prosecution Agreements (“DPAs”) being offered in Singapore to corporations if they abide by specific requirements. Mr Shanmugam said at the Modernising Criminal Justice: New Developments in Criminal Procedure dialogue, which was held on 15 January 2018, that “[i]t’s about time we had DPAs here where corporates can be taken to task and (where) they could pay a much higher sum compared to what the criminal law provides.”
In this proposed framework, corporations set up in Singapore and prosecutors will be the main parties who will be affected. In summary, corporations seeking to enter into a DPA must have the terms of the agreement approved by the High Court. In deciding whether to approve the terms of the DPA, the High Court judge will consider whether these terms are fair, reasonable and proportionate to both parties. After approval by the High Court, the DPA must be published.
In order to improve the criminal justice process in Singapore, on 28 February 2018, the Ministry of Law introduced the Criminal Justice Reform Bill to amend the Criminal Procedure Code (“CPC”). In this Bill, the Ministry of Law proposed adding Part VIIA on Deferred Prosecution Agreements to the CPC. The proposed Part VIIA will include provisions on the overall procedure of DPAs such as entering into, breach, expiry and variation of terms, the effects of DPAs, persons who many enter into DPAs, and the contents of DPAs.
(B) What are DPAs?
DPAs are voluntary agreements entered between the prosecutors and corporations facing potential prosecution for certain corporate offences, where the former agrees to suspend prosecution or dismiss charges if the latter agrees to comply with certain conditions such as payment of fine, admission of facts and participation in programs to ensure future compliance with the law. This legal tool, which applies to corporations only and not individuals, is already in effect in countries such as the UK and the US. The United States Department of Justice (“DOJ”) recently used this legal tool in the bribery case of Keppel O&M Brazil, where Keppel O&M Brazil agreed to pay fines totalling US$422 million and to fully cooperate with the authorities in enforcing compliance with the law in its businesses.
DPAs in USA
There are two main types of settlement agreements in the US. The first type is DPAs while the second type is Non-Prosecution Agreements (“NPAs”). Briefly, the main difference between the two types of settlement agreements is, in the former, criminal charges have been filed against the offender while in the latter, no charges have been filed against the offender and thus, they do not involve review by a court. DPAs were first introduced in the US in 1992 when a settlement agreement was reached between Salomon Brothers and the DOJ to forgo the prosecution of the former for its “unprecedented cooperation”. In the US, DPAs may be entered into with individuals or corporations, unlike in the UK and in the proposed framework in Singapore. While DPAs were introduced as early as in 1992, it was not until the mid-2000s that the use of DPAs by the DOJ started picking up and becoming a regular feature in the US[1].
DPAs in UK
DPAs were introduced in the UK through the Crime and Courts Act 2013[2] in 2013 and the relevant provisions officially came into effect on 24 February 2014. Unlike the US, DPAs in the UK only apply to organisations and not to individuals[3]. Currently, the power to enter into DPAs is made available to the Crown Prosecution Service and the Serious Fraud Office (“SFO”)[4]. DPAs in the UK can be entered into for a range of offences, including both common law offences, such as conspiracy to defraud, and statutory offences, such as fraud, bribery and many other economic offences[5]. Since the introduction of DPAs in 2014, the SFO had entered into 4 DPAs[6].
Concerns of DPAs
Several concerns have been raised with regards to the implementation of DPAs in Singapore[7]. The various concerns are listed below:
- Possibility of corporations buying their way out of criminal liability through the making of DPAs with prosecutors;
- Lack of accountability in bigger corporations, where the guilty individuals are not prosecuted, dismissed or dealt with appropriately;
- DPAs seem to run contrary to upholding and enforcing the rule of law against both individuals and companies/organisations equally;
- Minority shareholders may be at a disadvantage when a company’s fund is being used to pay the fines in the DPAs;
- Companies may behave irresponsibly knowing that DPA is available to prevent any conviction; and
- Prosecution may start taking a “soft” approach by a reluctance to commence prosecution against companies for corporate misconduct.
Nevertheless, these concerns may be addressed with judicial supervision. As explained later in Section (D) of the article, DPAs in Singapore will require the approval from the High Court, which will consider interests of justice and the fairness, reasonableness and proportionality of the terms of the DPAs, before they can be implemented between companies and prosecutors. Moreover, once approved by the High Court, DPAs need to be published. Judicial supervision by the High Court prior to their approval and the subsequent publication of the DPAs will help to ensure that there is transparency and fair outcome in the DPAs.
In addition, the prosecutors will have the discretion in deciding whether to enter into DPAs with organisations or to commence prosecution against them. Companies must demonstrate to the prosecutors that they have a genuine intent to rehabilitate and that they are worthy to be considered for this alternative resolution before prosecutors will even consider entering into one with these companies.
Benefits of DPAs
The most obvious advantage of DPAs in Singapore is the opportunity for a prosecutor to impose the appropriate amount of fine on organisations that are found guilty of corrupt practices. As of now, under the Prevention of Corruption Act (“PCA”) , an organisation or person will only be liable to a fine up to $100,000 and/or an imprisonment term of up to 5 years if found guilty of corruption[8]. As seen in the recent case of Keppel Offshore & Marine, the DPA allowed the prosecutor to impose a fine of US$ 422 million[9], instead of the measly amount of $100,000 under the PCA.
DPAs also give prosecutors the opportunity to impose additional conditions to encourage corporate reform. Prosecutors may include conditions that organisations must comply with such as, but not limited to, enhancement in their internal anti-corruption policies and embedment of strict and effective compliance controls across the businesses to prevent and detect corrupt practices in the terms of the DPAs.
Additionally, DPAs can help to reduce the collateral damage of criminal prosecution. Given the complexity of corporate crimes, the prosecution process can be extremely lengthy and complicated. DPAs can help to avoid this problem, thus saving costs and court’s time. The innocent employees and shareholders of the companies will be also less affected in DPAs than in a lengthy prosecution process.
(C) Who will be affected by the proposed DPA framework?
Corporations who set up in Singapore and prosecutors.
(D) What is the proposed framework for DPAs in Singapore?
The DPA framework was first brought up in a public consultation for proposed amendments in July 2017. The framework is intended to be implemented through making amendments to the Criminal Procedure Code and Evidence Act. The proposed amendments to include DPAs in the relevant statutes are expected to be tabled in Parliament in 2018.
In the proposed DPA framework, certain corporate offences, which have yet to be finalised, will be covered. Corporations facing charges involving these offences may come to an agreement with prosecutors through negotiations and discussions. Once the prosecutors and the corporations have come to an agreement, they are required to seek approval from the High Court before implementing the DPAs. The High Court must be satisfied that the DPAs are made in the interests of justice and that their terms are fair, reasonable and proportionate to both parties before giving its approval. In addition, the DPAs must be published after they are approved by the High Court.
(E) Rationale behind the proposed implementation of DPAs in Singapore
Several reasons were provided for the proposed implementation of the DPA framework in Singapore. First, Mr Shanmugam mentioned that the framework “will allow for corporate reform”. Second, Law Society president, Mr Gregory Vijayendran, opined that the framework will give corporations in Singapore rehabilitative opportunities, allowing them to “be able to carry on business and put a bad episode behind them”. Third, Mr Vijayendran also stated that the framework is forward-looking and it “allows for a practical resolution” of certain corporate offences between prosecutors and defence counsels.
(F) Commentary
If implemented in Singapore, the DPA framework will be an additional legal tool that prosecutors can consider when dealing with corporate offences. The non-adversarial approach of the framework means that prosecutors will have more freedom and control over the punishments that corporations should face in the event they commit corporate offences that are covered by the framework, for example determining the amount of fines, which could possibly go beyond the maximum fines given under the Prevention of Corruption Act, and implementing programs that to ensure corporations’ future compliance with the laws and regulations.
Nevertheless, the nature of the framework also means that there is a possibility that corporations, especially the bigger ones with sufficient resources, may simply buy their way out of their criminal liabilities in such a framework. The law will then be rendered useless in such scenarios. Its implementation may also result in the unintended outcome of a reduction in the effort of the government to enforce the law and policies against corporate crimes.
Ultimately, only time will tell if DPAs will be feasible in Singapore.
[1] See Chart 1 for the number of Corporate NPAs and DPAs since 2000 in the US (https://www.gibsondunn.com/2017-year-end-npa-dpa-update/). In a The New Yorker article, it was reported that the DOJ entered into more than 400 DPAs from 2002 to 2016 (see https://www.newyorker.com/magazine/2017/07/31/why-corrupt-bankers-avoid-jail).
[2] See Section 45 and Schedule 17
[3] Schedule 17, para. 4.
[4] Schedule 17, para. 3.
[5] Schedule 17, Part 2.
[6] https://www.sfo.gov.uk/publications/guidance-policy-and-protocols/deferred-prosecution-agreements/
[7] https://www.todayonline.com/singapore/benefits-deferred-prosecution-agreements-concerns-should-be-addressed-experts
[8] Section 5
[9] http://www.straitstimes.com/politics/keppel-corp-unit-not-let-off-lightly-in-corruption-scandal-indranee-rajah
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This article is written by Renee Xavier from Alpha & Omega.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article