In recent years, the US Department of Justice (DOJ) has, with increasing frequency, been resolving alleged violations of the Foreign Corrupt Practices Act (FCPA) with formal declinations (that is, a statement that the DOJ will not prosecute the corporation). Indeed, the possibility of resolution through declination is a centerpiece of the DOJ’s new Corporate Enforcement Policy (CEP). Under the new policy, the DOJ will presumptively grant a declination to a corporation implicated in potential FCPA violations, so long as the corporation voluntarily reports the possible FCPA violations to the government, agrees to implement internal remediation measures, and disgorges any ill-gotten gains. (When that last condition applies, the resolution is a “declination with disgorgement.”)

But what exactly is a “declination”? One would think that the answer would be straightforward, but it turns out to not to be so easy. Typically, declinations have been thought of in the negative, meaning what they are not: prosecutions. Generally, U.S. prosecutors have the discretion to decide whether to bring an enforcement action against a party that may have violated the law. If the DOJ decides that it is not in the interest of justice or otherwise worthwhile to pursue a given case, then the DOJ has “declined” to prosecute. However, in the FCPA context (and possibly other contexts as well), a formal “declination” should be thought of as something more than simply a decision not to prosecute. And that distinction turns out to have practical consequences for the types of penalties a formal “declination” can legally support.

The “declination” is not simply a choice not to bring charges. Rather, the “declination” resolution that the DOJ employs in FCPA and other corporate criminal matters is in fact a distinct animal. Indeed, the DOJ itself appears to treat a declination as a special kind of resolution, distinct from an ordinary decision not to pursue a case. The DOJ’s published guidance on its CEP specifically states “if a case would have been declined in the absence of such circumstances, it is not a declination pursuant to this Policy.” Beyond that, there are two substantive ways in which a formal declination differs from a typical decision not to prosecute.

• First, declinations pursuant to the CEP are to be made public in formal “declination letters” that lay out the evidence that the company is agreeing to, and the factors and conditions that led to the decision to issue the declination. In contrast, a simple decision not to prosecute is kept confidential within the DOJ. (That said, in contrast to a deferred prosecution agreement (DPA) or non-prosecution agreement (NPA), in a declination the company isn’t required to admit to any facts or agree to any stipulations, which means the corporation doesn’t admit any wrongdoing that would open itself up to later civil suits.)
• Second, and perhaps even more importantly, a formal declination—in contrast to a simple decision not to prosecute—involves terms and conditions that DOJ negotiates with the company. The DOJ does not merely take past conduct into account when deciding whether it is in the interests of justice to prosecute, but also imposes conditions on, and requires concessions from the company. These include the adoption of remedial measures and, often, disgorgement of alleged proceeds of illegal conduct. This starts to make so-called “declinations” feel a bit more like NPAs, in which the DOJ does not file charges, but reserves the right to restart the case and use the company’s admissions in a subsequent case if the corporation breaches the NPA. Some commentators have therefore characterized these declinations as more like “declinations plus” or “NPAs lite.”

Defining a declination matters because if they are mere failures to enforce, as Professor Karen Woody argues, disgorgements aren’t an appropriate remedy to use with them. According to Professor Woody, “if disgorgement is ‘ill-gotten gains,’ a declination, despite prosecutorial discretion, likely is not appropriate because illegal activity must have occurred in order for the company to have received ‘illegal’ profits.” On the other hand, she says, “if the company rightly deserves prosecutorial discretion in the form of a declination, perhaps because the government would be flat out unable to prove its case in a court of law, then ‘disgorgement’ is inappropriate and instead becomes government extortion.”

Yet Professor Woody focuses too much on the traditional definition of a declination as a failure to prosecute, instead of viewing it as the resolution of an enforcement action. She claims that the DOJ is not able to extract any quid pro quo in exchange for a criminal declination, since it is one-sided and does not have any strings attached. However, if we viewed declinations as enforcement actions, they can be used to extract concessions in the same manner in which NPAs operate—as a contractual agreement between the government and the corporation. The manner in which declinations are publicly announced in letters that are signed by both the government and the corporation underscores that they should be seen as agreements, not as unilateral actions by the government.

Overall, commentators and industry participants should view declinations in the FCPA context as a new type of resolution vehicle that differs significantly from a typical decision not to prosecute. Formal declinations give prosecutors to have another tool in their arsenal through which they can negotiate with the company, and allow for even lighter consequences without completely walking away from the prosecution. Since they are enforcement actions in the mold of NPAs and DPAs, prosecutors can similarly use them in conjunction with remedies like disgorgement, as the CEP does.