A defendant to civil proceedings who is also facing actual or potential criminal action may seek to confidentially settle those proceedings at an early stage for several reasons, including:
- "keeping a low profile"
- reducing the burden of defending multiple actions and freeing-up resources for the criminal case, and
- avoiding the obligation to serve a Defence or give disclosure before the full extent of the criminal case is known.
Whilst these factors may be compelling, there are a number of pitfalls in settling claims that overlap with allegations of criminality and parties are advised to proceed with caution.
An attempt by a claimant to improve its civil settlement terms by leveraging its knowledge of a defendant’s criminal impropriety could be regarded as in excess of what is “permissible in settlement of hard fought commercial litigation” and therefore “unambiguously improper” (Boreh v Republic of Djibouti). Statements made to that effect cannot be protected by without prejudice privilege and may therefore be deployed in evidence against their maker, including in an action for abuse of process. They may even be regarded as blackmail (Ferster v Ferster). For further commentary, see our article.
Further, a settlement agreement may be deemed against public policy or illegal if its object is to stifle a prosecution. A Court may refuse to uphold the confidentiality of a settlement entered into on the basis of an agreement by the Claimant not to disclose suspected criminal conduct to the authorities (Att-Gen v Guardian Newspapers Ltd (No.2)). In addition, if the claimant receives a payment under the agreement that exceeds reasonable compensation for a loss suffered, they could be found guilty of concealing an offence pursuant to section 5(1) of the Criminal Law Act 1967.
It is not possible to "settle" criminal proceedings, though a corporate defendant can procure their early conclusion by entering into a DPA or pleading guilty. There are benefits available to defendants who choose either of those routes, including the prospect of a substantially reduced penalty and reputational and market stability.
However, concluding criminal proceedings in this way could have a significant negative impact on the prospects of any related civil or regulatory proceedings. As explained in Addressing related decisions: Criminal convictions / resolutions, admissions made in the Statement of Facts published with a DPA can have a significant impact and a conviction (including following a guilty plea) may give rise to an evidential presumption of guilt, which may or may not be determinative of the issues in civil or regulatory proceedings.
In addition, though the early termination of proceedings may mean that documents ordinarily prepared or disclosed in the course of criminal proceedings (such as defence case statements, witness statements and used material) will not be produced, there will often be a significant repository of evidence gathered by the prosecutor during its investigation which a party to related proceedings may seek to obtain. See, for example, the case of Omers Administration Corporation and Others v Tesco PLC in which the Court ordered disclosure in civil proceedings of criminal investigation material which had been provided to Tesco by the SFO during the course of DPA negotiations.
In contrast to civil and criminal cases, a regulatory settlement is unlikely to have a significant impact on any related proceedings. A decision to reach a settlement with a regulator will therefore generally be made on the basis of largely independent factors.
Though a defendant will be expected to provide a response to the regulator and disclose documents and other information, in most cases this will be a confidential process and will not result in significant amounts of information entering the public domain, triggering the interest of other parties. Therefore, in contrast to civil proceedings, this is unlikely to be a key driver to settle (note though that such information could find its way into the hands of interested criminal authorities via one of the established routes for sharing information explained in Managing multiple stakeholders: Enforcement authorities.
If a settlement is reached, in most cases a decision will be published by the regulator setting out the scope of any wrongdoing accepted by the defendant. As explained in Addressing related decisions: Regulatory decisions this may alert prospective civil claimants to a breach and could be relied on as hearsay evidence in subsequent civil proceedings. However, in many cases the issues of interest to the regulator will be more narrowly confined than those pursued by a civil claimant, which will limit its impact. In any event, the regulatory decision will not have a determinative effect on a related civil action and it is unlikely to have any impact on a parallel criminal case.