Are Singapore’s safeguards for deferred prosecution agreements adequate?

In December, Keppel Offshore & Marine entered into a DPA with the US DOJ in relation to a charge of conspiring to violate the anti-bribery provisions of the Foreign Corrupt Practices Act. According to documents made available by the DOJ, based on the appropriate “offence level” and “culpability score”, the fine would have ranged from just under US$563 million to more than US$1.1 billion. The fine of more than US$422 million that Keppel paid was a 25% discount off the bottom of the fine range because of its substantial co-operation with the investigation and for taking extensive remedial measures, according to the DOJ. If Keppel had been prosecuted under Singapore’s criminal laws, it would have been liable for a fine of up to only $100,000.

Even so, the whole idea of corporates having an avenue to escape prosecution does not sit well with many people. DPAs actually came about a century ago in the US to give juvenile offenders a second chance. In a 2014 piece for The Guardian, columnist David Dayen writes: “Only in the last 20 years have DPAs migrated to the field of [corporations], treating them like kids who’ve just gone down a bad path in life.” Notably, in the wake of the 2008 financial meltdown, there was an absence of prosecution of the big US banks — some of which entered into DPAs. Wall Street law firm Sullivan and Cromwell said in a 2008 memo to its clients that the shift to DPAs is “an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors”.

So, it is perhaps not surprising that Singapore’s DPA framework drew questions related to the oversight and transparency of these deals from both ruling party and opposition members of parliament (MPs). Now, some legal experts are suggesting additional or alternative safeguards to ensure that DPAs are used in the appropriate manner.

While Singapore’s DPA framework was enacted on the heels of Keppel’s deal with the US DOJ, it is actually more aligned with the UK system. The key difference between the US and UK DPA frameworks is the presence of court oversight. “[The] extent of the court’s review is left unclear in the US legislation, unlike the UK legislation which prescribes a test of being in the ‘interests of justice’ and requirements for the terms of the DPA to be ‘fair, reasonable and proportionate’,” says SMU’s Chua. “The chief benefit of having court approval for the DPA is that it provides an independent and substantial check on prosecutors.”

Shashi Nathan, partner at Withers KhattarWong, characterises the judicial oversight as essentially having the courts act as a “third pair of eyes”. “The court doesn’t just sanction the prosecutor; it also sanctions what the defence lawyers want,” he says. “Ultimately, the court’s role is to make sure the DPA is fair.”

Judicial oversight could also allay fears of prosecutors relying excessively on DPAs in going after errant companies, adds Philip Fong, managing partner of Eversheds Harry Elias. “Criminal prosecutions against companies compared with DPAs can prove to be difficult and more exhaustive in terms of resources and time, so there may be a natural tendency for prosecution to prefer DPAs over criminal prosecution, out of convenience or expediency. Having a judge scrutinise and approve each DPA on its merits will help to ensure that each DPA is still in the interests of justice and an appropriate alternative to criminal prosecution.”

Yet, judicial oversight as a safeguard on the use of DPAs by prosecutors has a downside. “[The] very nature of having the judiciary check prosecutors presents problems to the constitutional separation of powers between the judiciary and the executive. It was because of this concern that Australia is considering a DPA framework where approval for DPAs is obtained from a retired judge,” says Chua of SMU.

Seeing justice done

Another contentious issue is whether it should be mandatory for the court to provide grounds for approving the DPA. In the UK, DPA hearings may be private, but if the Crown Court decides to approve the DPA, the decision and reasons must be provided in open court. In Singapore, meanwhile, the proceedings for court approval of DPAs will be held in camera, and the High Court is not required to provide reasons for approval of the DPA. But if the court does provide reasons for approving a DPA, the prosecutor must then give public notice of those reasons along with the DPA.

In the parliamentary debate on the DPA framework, at least three MPs raised questions on this aspect alone. Among them was Opposition MP Sylvia Lim, who argued that disclosure of the reasons is critical: “This option of entering into a DPA is not available to all offenders but is selectively applied and not applicable to individual offenders. How corporations are chosen, the considerations for imposing certain conditions on the corporations and the approved methods of monitoring the corporations for compliance will be of public interest. In my view, making it mandatory for the High Court to publicly justify why it approved a DPA can only help to instil confidence in the system.”

Indranee Rajah, senior minister of state for finance and law, countered that a DPA is not a judgment. Hence, it does not have a binding effect, and does not set a precedent for other DPAs. “Every situation will be highly fact-specific,” she added. “Under these rules, the court is not prevented from giving grounds. In other words, the system that we have is actually consistent with the current system that we have for any other type of judgment, whether it be criminal or civil, meaning that our courts are not under a compulsory obligation to publish grounds, certainly at first instance.”

Fong of Eversheds Harry Elias says he would prefer having the grounds for approval of DPAs be made known. “If a judge has reviewed and approved a DPA, there should be no reason why the decision is kept from the public,” he says. Paraphrasing the late British Lord Chief Justice Gordon Hewart’s famous dictum, Fong says, “Justice must be done, but it must also be seen to be done.”

Remy Choo, director at law firm Peter Low & Choo, highlights that the UK strikes a middle ground by mandating the disclosure of reasons but allowing the redaction of parties’ names where sensitive. The second DPA published in the UK, for instance, titled Serious Fraud Office v. XYZ, redacts the company’s name due to ongoing proceedings. “The balance between giving judicial reasons for issuing DPAs and not issuing grounds at all is not a zero-sum game,” Choo says. “The reasoned judgments arising from the UK DPAs are instructive on the standards of corporate governance expected of companies involved in corruption breaches, and publication of these judgments helps shape future corporate conduct.”

In the end, Singapore judges might provide reasons even if they are not required to do so, according to Chua of SMU. “Although there is no requirement for the judge to give written reasons in relation to approving DPAs in Singapore, we can expect that judges will generally do so in practice, consistent with what they have been doing for all other High Court and Court of Appeal matters. This is despite the approval hearing being a private one.”

Echoing Choo’s reasoning, she adds: “In the publishing of reasons where the DPA is not approved, the concern of prejudice could be mitigated by redaction so that the company in question is not identified and prejudiced, but the principles that the court considered can still be made known and be allowed to play a role in guiding corporate behaviour.”

Keeping prosecutors in line

Another question raised in Parliament on the DPA framework, by ruling party MP Patrick Tay, had to do with whether Singapore would publish a code of practice for prosecutors in implementing DPAs — as the UK has done. Indranee, however, said that such a practice is not the norm here: “The publication of the code of practice in the UK is consistent with their general position that prosecutorial guidelines are published. In Singapore, the general position on such publication is different. This is to ensure that prosecutorial guidelines do not become a tool for criminals to refer to in manipulating the criminal justice system to escape punishment.”

Eugene Tan, associate professor of law at Singapore Management University, feels that the presence of court oversight is sufficient to keep prosecutors in line. “A downside [of not publishing the code] is that an unscrupulous prosecutor may seek to abuse its discretionary power and provide an overly harsh DPA for the company. However, as there is judicial oversight, prejudice to the company is likely to be kept to a minimum, although our courts generally do not interfere with the prosecutor’s discretion, save for situations where bad faith and arbitrariness are established,” he says.

Thio Shen Yi, joint managing partner of TSMP Law Corp, thinks it is still too early for a code of practice. “We’ve only just initiated this. The DPA mechanism and regime need time and space to develop, so it may be wiser to take an incremental approach. Perhaps, after a few years of application, it may become appropriate to consider a code of practice for prosecutors. The challenge is avoiding [overly] prescriptive rules while not making the code so general that it becomes almost meaningless,” he says.

However, Choo feels that having a code now will help companies be more co-operative. “Prosecutorial guidelines setting out the factors prosecutors will take into consideration when deciding whether or not to enter into a DPA are helpful in shaping positive corporate conduct,” he says. “For instance, the UK DPA Code of Practice cites proactive co-operation with the authorities by the target company’s management team as a consideration for entering into a DPA. Companies... will know, in no uncertain terms, that it is in their best interests to weed out offending conduct quickly and co-operate with the authorities.”

SMU’s Chua also doubts that disclosing prosecutorial guidelines would enable corporates to game the system. “Although I can see how this may operate in relation to individual criminal offences, I question whether this holds true for corporate criminal offences. A corporation acts through its officers, and I think it is unlikely that these individuals will, in considering whether to pursue acts that may eventually result in corporate criminal liability, think about how to manipulate the system so that the company can escape punishment. I should think that these individuals would be more concerned about themselves than the company,” she says.

“The upsides to publishing a code are manifold and include greater transparency on the considerations of the prosecutor before DPAs are proposed. This would help promote accountability and also serve as an educational tool so that corporations and the public can understand the relevant factors going towards DPAs. The code would also be important to assist the judge in assessing whether to approve the DPA,” she adds.

Avoiding overuse of DPAs

Legal safeguards aside, avoiding overuse of DPAs to the detriment of public trust could be another challenge. Lawrence Loh, director of the Centre for Governance, Institutions and Organisations at the National University of Singapore, says DPAs should not be the immediate weapon of choice in bringing errant companies to book. “It should not be seen or used as a first-line option. The starting point should not be a DPA, it should almost be used as a last recourse. But we should also not throw away the DPA [as an option], because it enlarges the spectrum of tools we can use.”

Corporate governance expert Mak Yuen Teen says it is important to ensure that DPAs do not detract from emphasis on corporate officers acting with integrity. “DPAs are useful for increasing corporate accountability, but I would like to see boards and senior management being held to more accountability if they fail to take steps to prevent bribery, not only if they are directly involved or facilitate the bribes. Boards and senior management are often able to put in structures for a ‘plausible deniability’ defence, and we need to make sure that they don’t easily get away with that,” he says.

This is especially important in Singapore, where many leading companies are ultimately government-linked entities, Mak adds. “Holding individuals accountable will remain important because ultimate penalties on companies are borne by shareholders.”