Amid a surge in banking scandals, the addition of Westpac to the corporate regulator’s rate-rigging prosecution, and demands for a royal commission into the financial sector, the Turnbull government is considering a new law that would enable corrupt corporations to buy their way out of charges.

In March, Justice Minister Michael Keenan launched a discussion paper by the Attorney-General’s Department — the agency responsible for draconian mass surveillance and anti-terrorism laws — on deferred prosecution agreements (DPAs).

DPAs were originally developed in the US in the 1990s, picking up an idea that emerged from the juvenile justice system in the 1930s: corporations agree to pay a fine and commit to putting in place internal systems that prevent a recurrence of misconduct in exchange for not being prosecuted. DPAs have recently been introduced in the UK, although there has been little use of them so far. This is how AGD describes them:

“… where a company has engaged in a serious corporate crime, prosecutors would have the option to invite the company to negotiate an agreement, in return for which the prosecution would be deferred. The terms of the DPA would typically require the company to cooperate with any investigation, pay a financial penalty and implement a program to improve future compliance.”

Keenan has said that “an effective deferred prosecution agreement scheme could help encourage companies to self-report criminal behaviour and provide enforcement and prosecut­orial agencies with a new tool to identify and bring corporate offenders to justice”. In its section on the positives of DPAs, AGD adds “DPAs may help mitigate the potential consequences of prosecuting companies, such as job losses, losses to investors and damage to 10 related businesses and markets”.

The US experience, however, is that DPAs have no effect and might even encourage corporate wrongdoing. The use of DPAs in the US has surged since 2006, but a recent book that studied the use of DPAs by US authorities found that, by and large, such agreements were ineffective, partly because the agreements were so poorly enforced. Many large companies, such as the scandal-ridden banks at the heart of the Panama Papers, have entered into multiple DPAs (or their close relative, non-prosecution agreements, which are even better for companies) on multiple occasions. In one extraordinary case, pharmaceutical company Pfizer was given not one, not two, not three, but four PDAs for the same crime of illegal marketing activity over a decade, with no one ever prosecuted. While one problem is lack of follow-up and enforcement, another is that prosecutorial bureaucrats don’t understand companies and industries well enough and get duped by companies into agreeing to soft-touch “reforms” that have no actual impact.

One US expert, who opposes DPAs from a pro-corporate position, argues they encourage criminality because there is now virtually no chance an individual will be prosecuted in relation to corporate crime, whereas it used to be the norm that individuals would be prosecuted. This means that lawbreaking merely becomes a question of cost to the business, because no executive faces the risk of going to jail even if they are prosecuted.

Unsurprisingly, none of this is covered off the very brief mention of the flaws in DPAs in the AGD paper. AGD is the department that serially seeks to violate some of the most basic rights of Australians through its terrorism legislation, but appears a lot more positively disposed toward corporations.

There’s also a question of basic competence. The use of the similar mechanism of enforceable undertakings in Australia by our corporate regulator/Keystone Cop, the Australian Securities and Investments Commission, offers no comfort that DPAs would be properly enforced — recall that even when the Commonwealth Bank self-reported a breach of its own undertaking about how it regulated its financial planners, ASIC lost the letter and did nothing about it.

Most of all, there’s a basic issue of equivalence: if an individual engages in large-scale theft or fraud, they don’t get the chance to pay a fine and offer to put in place internal reforms to prevent themselves from doing it again — they go to jail. But under the system proposed by the government, individuals within companies that wreck the lives of thousands of people and gouge millions from customers, shareholders or other businesses would be able to pay a fine from company funds, promise to do better next time (the sordid history of the Commonwealth Bank’s recent scandals is replete with earnest commitments from bank executives that the bad days are all in the past) and carry on.

DPAs would thus represent a substantial weakening of corporate law, not an improvement, providing an incentive for individuals within corporations to break the law knowing they face little risk of going to jail. It would be another win for the big end of town, and particularly the big banks, from a government that thinks a prime ministerial talking-to is a substitute for a proper judicial inquiry into systemic problems in an industry that is crucial to the lives of Australians and the functioning of our economy.