International - Written by on Thursday, August 2, 2012 15:34 - 0 Comments

Order order: UK DPA’s – We disagree with Bill Waite too.

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Bill Waite recently wrote on the FCPABlog (for which he is a contributing editor) about the impending failure of the proposed new DPA regime to deliver.

Bill’s article cites a number of complaints but the central thesis is broadly that the corporates will continue to self report in the US rather than the UK if/when the UK DPA regime is in place. Why? As Bill says:

“Why then, success in the US and my gloomy prediction of failure – or at least very limited success – here?

The answer is reassuringly straightforward: the Department of Justice can offer certainty of outcome, which is what corporations entering negotiations want most of all. Under the new proposals, the SFO cannot.

Why? Because the new scheme envisages a continuing and central role for the judiciary.

In order to get before a Judge though, a corporation will have to make substantive and incriminating disclosures to the SFO. This, I would suggest, is an unattractive proposition which will deter many companies from starting down this route.”

Let’s not beat about the bush. This is not just an unattractive proposition.

It is about as appealing as a cup of cold sick.

But then phoning up Lanny Breur for a fireside chat about your recently uncovered worldwide bribery scheme is hardly top of the list either. Is it?

Ask those who have been through it whether they would repeat it. Ethical to the core? They’ll take a moment before answering…

Howard Sklar recently wrote that the US GC reaction to the suggestion that a corporate self report to the DOJ would likely be “Are you out of your f%&$#ng mind”.

We can only guess what the UK GC’s reaction might be. Let’s not be hasty – time for a cup of tea perhaps?

The only guarantee in either case is probably that what follows will be an expensive and painful process.

The truth is the day you phone the SFO or the DOJ there are no guarantees.

The relationship gets off to a very rocky start on the day the call is made. The outcome will be heavily dependant on the credibility of the self reporter, counsel and the trust built with the enforcement agency over time.

If the SFO or DOJ think a self reporter is playing hide the ball they will play hard ball.

Bill highlights that post a DPA regime there will not even a regulatory arbitrage advantage in doing a deal in the U.K. because following Innospec financial penalties will be at least the same.

To that point it’s worth keeping in mind that there have been a number of bribery case resolutions since Innospec in the UK. We haven’t seen US style fines in the UK yet. Will we?

But to be fair that’s not the point. The point is that at the moment there is regulatory arbitrage in that corporates are incentivised to do a deal in the US (where perversely fines and penalties are telephone numbers in contrast to the UK) because of the certainty on offer in the US and not in the UK. The proposed DPA regime is an attempt to remove regulatory arbitrage. Not create it.

That a company would willingly choose or even consider choosing to sign up to a US deal (where penalties can run into hundreds of millions) in the face of the unknown quantity of a UK penalty (where they don’t) tells its own story.

We do agree with Bill on one thing, the introduction of judicial oversight into the process is a force for good. In the US Judge Rakoff has been doing his best to achieve the same…We might find out later this year if he has been successful in importing more judicial oversight into the US.

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