28 August 2015

Application of the double jeopardy prohibition to a deferred prosecution agreement in the Oil for Food case

On 18 June 2015, the Paris criminal tribunal rendered its judgment in one of the two cases that have reached French courts in relation to allegation of bribery in the context of the Oil For Food (OFF) program. In an important legal development, the Paris tribunal applied for the first time the principle that the double jeopardy guarantee would prohibit a second prosecution for the same fact where a Deferred Prosecution Agreement (DPA) had already been reached with a competent authority (in this case, the US Department of Justice). The precedent is extraordinary not only because it applies for the first the double jeopardy or ne bis in idem principle to a deferred prosecution agreement (rather than a final Judgment on the merit of the case) but also because it recognises a res judicata effect to the decision of a foreign authority.

The Oil for Food scandal

The OFF programme was instituted by the United Nations (UN) with the stated purpose of relieving the suffering of civilians resulting from UN sanctions on Iraq following Iraq’s invasion of Kuwait in 1990.

The gist of the OFF programme was to allow for the sale of Iraqi oil by the Iraqi Government in exchange for food and commodities. Companies that wished to buy oil or sell products in Iraqi were under the obligation to make payment into a UN escrow account rather than directly to the Iraqi government.

In 2000, a number of Iraqi officials sought to circumvent the OFF programme by overcharging contracts by up to 10% and asking companies to revert the overcharged amount to discrete bank accounts. The money was then transferred to the Iraqi Central Bank.
 

Oil for Food criminal proceedings

Following the publication of a report by a UN Independent Inquiry Committee, several countries initiated criminal investigations against companies identified as having paid kick-backs outside the remit of the OFF programme.

The US Department of Justice (DoJ) was particularly active in that regard. It entered into numerous guilty pleas and deferred prosecution deals with US and foreign companies in exchange for their admitting to having made illicit payments to the Iraqi state.

In France, criminal investigation was initiated against a number of French individuals and French companies in relation to similar payments.
 

Double jeopardy and deferred prosecution agreements

The issue arising in the French OFF cases is that a number of companies prosecuted in France had already entered into a plea bargaining agreement or a DPA with the US DoJ in relation to wrongdoings committed during the OFF programme.

Although foreign criminal judgments may have a res judicata effect in France under certain conditions, the ne bis in idem principle is generally understood to only become operative when a defendant is acquitted or convicted by a court or tribunal. In the first OFF criminal case, however, the Paris criminal court ruled that the double jeopardy rule applied to a US plea bargaining agreement insofar as the plea agreement resulted in a conviction entered by a US court (Paris First instance tribunal – criminal division, 8 July 2013).

The ‘decision by a court’ requirement may have proved more problematic with DPAs, which consist in defendants agreeing to pay fines and to implement corporate reforms without a finding of guilt by a court. The fulfilment of the specified requirements of the DPA results in the formal dismissal of charges.

Despite these differences, we argued in the second OFF case that DPAs should prevent prosecutions for the same facts in France given that, under US law, the fulfilment by a company of all the specified conditions set out in the DPA, would bar the DoJ from initiating proceedings again for same fact (“dismissal with prejudice”). This, we argued, amounts to a form of res judicata which should be recognized by foreign courts as triggering the application of the ne bis in idem. We further argued that failing to apply the double jeopardy principle to DPAs would amount to a violation of the presumption of innocence and of the right to fair trial insofar defendants who entered into a DPA are prohibited from contesting the facts described in the DPA in the course of foreign criminal proceedings relating to the same matter.

The Paris criminal tribunal accepted our arguments and ruled in our favour. It found that a DPA bars further prosecution before French Courts. The tribunal specifically noted that:

  • The defendant was being prosecuted for the same facts as those described in the DPA;
  • the DPA - which has a res judicata effect under US law – was concluded within the context of independent, impartial and efficient proceedings which did not aim at enabling the defendant to evade criminal liability in other foreign jurisdictions;
  • The defendant complied with its obligations and paid the criminal fine imposed by the DoJ;
  • The facts did not violate essential French national interests.

The tribunal further noted that the DPA prevented the defendant from effectively defending himself during French criminal proceedings as a result of the obligation not to contradict its acceptance of responsibility set forth in the DPA, which would amount to a breach of the terms of the DPA. According to the tribunal, this situation amounted to a violation of the presumption of innocence and the right to fair trial of the defendant.

For all of these reasons, the tribunal decided to apply the double jeopardy rule to a DPA, which is unprecedented in France.

Impact of the decision

Given the lack of coordination among anti-corruption enforcement authorities, the issue of double jeopardy and prosecution deals has become a growing concern amongst companies that are often facing investigations in multiple jurisdictions.

This decision shows that French courts have become increasingly aware of the unfair burden born by companies that are prosecuted in several jurisdictions and have no choice but to pay significant fines.

One can expect that, should the Court of Appeal affirm this decision, it will create an incentive on the part of anti-corruption enforcement agencies to enhance coordination and to develop prosecutorial guidelines to implement the ne bis in idem principle in transnational corruption cases. It might also result in those agencies seeking to accelerate domestic prosecutions with a view to avoid being prevented to proceed due to a foreign plea agreement or DPA.

Aurélien Hamelle +33 1 40 06 55 29
Partner, Paris aurelien.hamelle@allenovery.com
Ophélia Claude +33 1 40 06 55 29
Associate, Paris ophelia.claude@allenovery.com

This ePublication is for general guidance only and does not constitute definitive advice.

© Allen & Overy 2018