Although South African law allows corporations to be held criminally liable for the misconduct of their directors and officers, in practice holding companies liable for corruption and other crimes can be a protracted process due to backlogs, delays, and an under-resourced prosecutorial agency. In recognition of this problem, as well as the prominent role corporations have had in facilitating corruption and state capture, South Africa’s Judicial Commission of Inquiry into State Capture has recommended, among other things, reforming South Africa’s corporate criminal liability laws to allow prosecutors to negotiate deferred prosecution agreements (DPAs) to resolve corporate criminal cases. (Currently, South African prosecutors may negotiate and conclude plea and sentencing agreements with corporations, but this prosecutorial authority does not extend to DPAs.) The South African Law Reform Commission (SALRC) has been tasked to consider the introduction of DPAs as part of its review of South Africa’s criminal justice system; the SALRC’s report and recommendations are expected to be finalized by 2024.
This issue has garnered considerable discussion among South African commentators. While many welcome the introduction of DPAs as a much-needed reform, a number of commentators have raised concerns, most prominently the concern that introducing DPAs in South Africa will enable prosecutors and corporations to strike secret deals and fail to hold corporations accountable (see here, and here, and here). Fortunately, there are a number of ways to mitigate this potential problem, which the SALRC can and should include in its report and recommendations.
- First, the SALRC should identify the provisions which ought to be included in a DPA, and should recommend that all DPAs be made publicly available, unless prohibited by law or specified exceptions.
- Second, the SALRC should require standardized sentencing provisions for determining the restitution, penalty, and disgorgement payable by a corporation according to the criminal offense in question and by considering mitigating and aggravating factors. The SALRC may be able to draw on foreign models such as the U.S. Sentencing Commission’s Primer on Fines for Organizations and the U.S. Department of Justice’s policy on prosecution of business organizations which prescribe the guidelines and formula for calculating the fine payable by a corporation. Additionally, the SALRC should recommend the payment instrument into which the DPA fine ought to be paid (which may include direct payment to the national treasury, payments into the criminal asset recovery account, and restitution to affected state-owned entities) as well as propose how those funds ought to be managed in order to mitigate the risk of misappropriation and corruption.
- Third, the SALRC should follow the State Capture Commission’s recommendation that DPAs be subject to judicial review (by a tribunal) before they are executed. The rationale for such judicial oversight of DPAs (which exists in several countries, including Kenya and the U.K., though not in the U.S.) is that the initial stages of a DPA process—the investigations and negotiations—all take place in private, making it more important that the final stage of the process should be given the “maximum publicity” through judicial oversight. Notably, in exercising its discretion to approve or reject a DPA, the courts in the U.K. (and to a similar extent in Kenya) assess whether the DPA is “in the interests of justice and that its proposed terms are fair, reasonable, and proportionate.” The court is then required to provide reasons for its decision. The SALRC could recommend application of a similar standard. In addition, the tribunal should be required to not only scrutinize the provisions of the DPA but also all the underlying information to ensure that the DPA is not legally objectionable on substantive or procedural grounds.
- Fourth, the SALRC’s should outline the specific consequences a corporation could face should it breach the terms of the DPA, which may include prosecuting the corporation (which, upon conviction, may lead to debarment) or imposing additional fines.
These suggestions are not a complete list, but address some of the most important topics that the SALRC should consider in its recommendations on whether and how to introduce DPAs in South Africa.
But it is also important to keep in mind that the efficacy of a South African DPA legislative framework depends on the capabilities of South Africa’s National Prosecuting Authority (NPA). Unfortunately, the NPA currently lacks adequate capacity to investigate complex corporate crimes and to also negotiate and conclude DPAs. Although the South African government has recently committed funds to increase the NPA’s capacity, this funding will only phase in gradually, and may not be sufficient. So, in addition to the SALRC’s important work in developing a set of recommendations for creating a legal framework for negotiating DPAs, it is also essential that the additional funding is allocated towards providing the NPA with the technical support it will need in order to make this legal reform effective.
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