My Lords, paragraph 5 to Schedule 17 sets out both the mandatory elements that every DPA must include, namely an agreed statement of facts, an expiry date and a non-exhaustive list of potential financial and non-financial terms. Each agreement will be tailored to take into account the
particular type and extent of the alleged wrongdoing, as well as the wider circumstances of the case and the situation.
A financial penalty is one of the terms that an agreement may contain. We expect that a financial penalty is very likely to be a term in the majority of DPAs. Let me make the Government’s intention clear. The Government believe the level of the financial penalty should bear close relation to the fine that would have been imposed following conviction in court after a guilty plea. A DPA is not a soft option for organisations and setting financial penalties at an appropriate level is important in achieving that.
The noble and learned Lord, Lord Goldsmith, asked whether the financial penalty is optional. The Government believe that parties should be able consider all circumstances of the individual case and this may include a large compensation payment, which will take priority over financial penalty. In the drafting of paragraph 5(4) we have provided an approach to setting a financial penalty that will achieve that aim. The key aspects are: an incentive, in the form of a discount of any penalty—I will come onto the issue of a discount in a moment; consistency of approach with sentencing upon conviction; certainty as regards the level of financial penalty; proportionality as the parties and courts will be able to take into account the means of the organisation and the level of other monetary terms, such as compensation, that take priority.
The noble and learned Lord, Lord Goldsmith, and the noble Lord, Lord Beecham, both mentioned incentives. The primary incentive for entering into a DPA is to avoid prosecution and conviction, both of which have the potential to cause huge reputational damage and to give rise to other negative consequences for an organisation. As someone who has spent 20 years working in the corporate world, let me assure noble Lords that reputation for a corporate body is of immense importance, and a DPA provides a route where that can be protected.
Our scheme provides a further incentive: any financial penalty under a DPA would be discounted to reflect the position a defendant would be in after pleading guilty in a timely way. In other words, the organisation could benefit, as again the noble and learned Lord mentioned, from a discount of up to one-third. A total of 94% of the respondents to our consultation supported our proposals for a discount although, as has been pointed out already, there was no consensus on whether there should be a maximum reduction and what that might be. Indeed, the figure cited of 57% of respondents did not support having a maximum discount of one-third as we proposed. However, the important point is that there was no consensus as to what the alternative should be.
Furthermore, we know from our consultation and engagement that it is essential that there is consistency of approach and some certainty as to the potential level of financial penalties. Organisations made it clear to us during the consultation that they would not enter into a DPA if there was a real risk that the penalty negotiated and agreed with the prosecutor would be out of line with what a judge thought appropriate.
Through paragraph 5(4) we have, therefore, provided that where a financial penalty term is to be included in the agreement, the sum payable should be broadly comparable to the fine that would have been imposed for the alleged offence on conviction following a guilty plea. This will allow parties to have regard to the guidelines on both sentencing for particular offences and principles including discounts for early guilty pleas. We believe this provision provides an essential benchmark on setting a penalty, not only to the parties but also to the judge, who will decide whether the amount that the organisation and prosecutor have agreed is fair, reasonable and proportionate. Both parties and the judge have some comfort that they will be starting from a clear, common position. The organisation can therefore expect some certainty as to what it faces if it decides to enter into a DPA.
In determining a penalty that is “broadly comparable” to a fine a court would have imposed following a guilty plea, the parties will have regard to relevant sentencing guidelines produced by the Sentencing Council, including the guideline on an early guilty plea, which currently provides for a discount of up to a third. I will come on to the points regarding the Sentencing Council in a moment. But they will also have regard to other law and practice a sentencing court would follow so as to take account of matters such as the means of the defendant and how compensation should be prioritised over the other financial elements of a sentence. Without such a benchmark, we consider it likely that the two parties to the DPA could have such widely divergent opinions as to what the level of the penalty should be that discussions would be unworkable, making negotiations protracted and difficult. This is exactly what we are seeking to avoid by providing for DPAs. We therefore consider that paragraph 5(4) will enable the parties, and ultimately the courts, to ensure that the financial elements of a DPA, taken as a whole, reflect a proportionate and balanced approach. To be clear, this is essential to ensure that a DPA does not look like a soft-option; anything less, in our view, would risk giving that impression.
Amendment 116A would remove paragraph 5(4), thereby providing no guidance at all for the parties or court as to how to approach setting a penalty under a DPA. This would be undesirable for a number of reasons, not least that the parties would be denied guidance on an appropriate penalty. In the event that paragraph 5(4) was to remain part of Schedule 17, Amendment 116B would provide that the financial penalty term should not exceed the fine that a court would have imposed. Again, this would deny the parties and the court the appropriate level of guidance they desire, and suggests that the parties might agree a fine well below what a sentencing court would have imposed upon a guilty plea. For the reasons I set out earlier, this would in our view be unworkable. It also gives the impression that DPAs are a soft option. We do not agree therefore that it is necessary to set a bar as proposed, but with no lower limit. Paragraph 5(4) sets out the clearest and in our view most workable solution to determining a financial penalty.
The noble Lord, Lord Beecham, has tabled Amendment 116BA, which is a variation of an
amendment considered in Committee in relation to parliamentary scrutiny of guidance on setting financial penalties. The amendment would require the Sentencing Council to lay before Parliament its proposals for setting a financial penalty. Although not explicit from the terms of the amendment, we understand this to mean any proposal prepared by the Sentencing Council in relation to financial penalty payable under a term of a DPA.
The Sentencing Council has informed us that it is committed to producing sentencing guidelines for many of the economic and financial offences listed within Part 3 of the schedule, which will be in place in time for the implementation of our proposals, to which the noble Lord, Lord Beecham, referred. These guidelines will also cover corporate offending. As a result, a separate DPA guideline is no longer necessary. We will instead be riding on the coattails of guidelines which are produced for a different purpose: namely, sentencing a defendant after a conviction. Those guidelines are already subject to appropriate consultation and scrutiny. Under the Coroners and Justice Act 2009 the Sentencing Council has an obligation to consult a number of interested parties on any sentencing guidelines it proposes. In particular, it has a statutory obligation to consult the Justice Select Committee of the House of Commons. This provides an appropriate opportunity for parliamentary input into these guidelines.
We do not consider that scrutiny beyond that described is necessary or appropriate. The fact that the Sentencing Council’s guidelines will be referred to by the parties and judges in the process is secondary to the primary purpose for which they are developed and used: that is, determining sentence on conviction, and for which there is a robust and comprehensive development and review process.
Amendments 116C and 116D relate to a provision we have made enabling the parties to negotiate a term specifying the consequences of non-compliance with an agreement. We included this provision as a way for the parties to deal with some forms of non-compliance with a DPA capable of being objectively determined such as the late payment of money under a DPA. The aim is for the parties to be able to remedy such non-compliance without recourse to the court: for example, by way of punitive interest in relation to a late payment. Such a term would be negotiated alongside all other terms of an agreement and approved by the judge. We do not envisage that such a term would be appropriate in all cases. Whether or not an agreement includes such a term, paragraph 9 of Schedule 17 provides the formal procedure for dealing with non-compliance of a DPA, which will be the most appropriate way for addressing most instances of non-compliance.
10.45 pm
The suggested amendments would require that every agreement include a term on the possible consequences of non-compliance. We do not think this is necessary, not least since such a term is designed to address a narrow range of non-compliance, which may not be appropriate in every DPA. I know the hour is late, but I trust that this rather lengthy explanation that I have provided to your Lordships’ House has addressed the concerns raised by the noble and learned Lord, Lord
Goldsmith, the noble Lord, Lord Beecham, and my noble friend Lord Marks. In the light of this explanation, I invite the noble and learned Lord to withdraw his amendment.