Are Deferred Prosecution Agreements Company Friends or Foe?


A Deferred Prosecution Agreement (DPA) is an agreement reached between a SFO or CPS prosecutor and an organisation which could be prosecuted in the UK, under the supervision of a judge. The agreement allows a prosecution to be suspended for a defined period provided the organisation meets certain specified conditions. A DPA does not apply to individuals.

DPAs were introduced on 24 February 2014, under the provisions of Schedule 17 of the Crime and Courts Act 2013.

The best source of guidance for their practical and procedural application is the Deferred Prosecution Agreements Code of Practice [Crime Courts Act 2013] for Prosecutors published jointly by the SFO and CPS on 14 February 2014.

The Code makes it clear that a DPA is a discretionary tool open to the Prosecution. In order to enter a DPA the prosecutor must apply a two stage test: evidential and public interest.

Under a DPA, a prosecutor charges a company with a criminal offence but proceedings are automatically suspended if the DPA is approved by the judge.

According to the SFO the attraction and key features of a DPA are:

  • They enable a corporate body to make full reparation for criminal behaviour without the collateral damage of a conviction (for example sanctions or reputational damage that could put the company out of business and destroy the jobs and investments of innocent people).
  • They can have no effect unless they are concluded under the supervision of a judge, who must be convinced that the DPA is ‘in the interests of justice’ and that the terms are ‘fair, reasonable and proportionate’ pursuant to paragraph 8(1) Schedule 17 Crime and Courts Act 2013.
  • They avoid lengthy and costly trials
  • They are transparent, public events. A DPA is not a private plea “deal” or “bargain” between the prosecutor and the company.

Consideration of the practical application of DPAs to date reveals that Prosecutors at the SFO have made it clear that a company will only be invited to enter DPA negotiations if there is “full cooperation with our investigations”. Self reports are not prima facie accepted and “pseudo cooperation” will  not suffice. The SFO’s position is that “We will only invite a company into DPA negotiations if our Director is persuaded that they have offered genuine cooperation”. The SFO are adamant they will need to separately establish the extent of the criminality.

In the event that negotiations proceed, the company has to agree to a number of terms, such as paying a financial penalty, paying compensation and cooperating with future prosecutions of individuals. If the company does not honour the conditions, the prosecution may resume. Arrangements for monitoring compliance with the conditions must be set out in the terms of the DPA.

Lord Justice Leveson, when approving the UK’s first DPA on 30 November 2015 (Standard Bank) on a section 7 Bribery Act charge, identified the relevant features in deciding whether it is likely to be in the interests of justice to resolve a case by way of DPA:

  • the seriousness of the conduct, the way in which the organisation behaved once it became aware of it, any history of previous similar conduct: and
  • the extent to which the current corporate entity has changed from the one at the relevant time. It seems to me that the second of these – the way in which the organisation behaved once it became aware of the conduct – is particularly worth noting at a conference on managing risk, for this reason: it is something that even after the problem has occurred and the harm is done, it is still possible to influence in a positive way.

The SFO advocate DPAs as a method of managing risk litigation. Director David Green CB QC stated,“The interests of justice are served in circumstances where the company accused of criminality has limited financial means with which to fulfill the terms of a DPA but demonstrates exemplary co-operation.

Lord Justice Leveson is of the view that a DPA clearly enhances a company’s reputation: “For my part, I have no doubt that [the bank] has far better served its shareholders, its customers and its employees (as well as all those with whom it deals) by demonstrating its recognition of its serious failings and its determination in the future to adhere to the highest standards of banking. Such an approach can itself go a long way to repairing and, ultimately, enhancing its reputation and, in consequence, its business.”  He encourages DPAs as “the value of self-report and co-operation along with the introduction of appropriate compliance mechanisms, all of which can only improve corporate attitudes to bribery and corruption.”

The DPA regime provides a structure for those wanting to resolve their criminal liability at speed, efficiently, with a degree of control and absent from traditional investigation and prosecution, which is often painful and damaging to the company’s reputation, employees, shareholders and customers.

From a Company’s perspective is a DPA to be welcomed?

A DPA involves criminal proceedings commencing against the organisation but being immediately suspended pending compliance with the terms of the agreement. Those terms are monitored by the Judge and can be stringent: a fine, compensation, remedial measures, and in some cases a monitor or other possible terms.

In accordance to Alan Milford (General Counsel SFO) the financial penalty will be “broadly comparable with the fine a court would have imposed if the company had pleaded guilty on a full prosecution, disgorgement of profits, payment of compensation and the SFO’s costs, enforceable undertakings of co-operation and schemes for ensuring future compliance”.

 Realising that the only advantage companies obtained from a DPA was the avoidance of a criminal conviction the SFO sought to redress the balance in XYZ Ltd DPA;

  • The fine was calculated using the 250% multiplier and a discount of 50% was applied rather than 33% in recognition of the fact that further discount should be given when a defendant not only pleads guilty, but brought the matter to the attention of the authorities in the first place.
  • The financial status of the company and the impact that the fine would have on its future ability to trade was fully considered, and the fine was accordingly reduced to prevent the company being forced into insolvency.
  • The indictment against the company has been suspended for a minimum of two and a half years and a maximum of five years, dependent upon when the financial penalty is paid in full. At the end of this period, subject to compliance with the terms of the DPA, the SFO will discontinue the proceedings.

Many companies are of the view that the terms imposed on Standard Bank were disappointingly severe. The financial penalty will have to be further reduced to make a DPA advantageous.

Lord Justice Leveson stated “it was entirely open to those negotiating DPA’s with the SFO to argue that their client(s) are entitled to much more than a 1/3 discount and that it could properly be argued to affect the financial quantum of any penalty”.

This concern was crystallised for many in February 2016 when the Sweett Group plc were sentenced for a guilty plea for failing to prevent bribery contrary to section 7 of the Bribery Act. The company ended up with a criminal conviction, but they benefitted from the following key advantages:

  • their financial penalty was proportionately lower since it was calculated using a 250% multiplier along with the 33% discount; and
  • the proceedings against them were concluded at the sentencing hearing, and they are not subject to any on-going conditions such as the monitoring of their compliance programmed or cooperation with on-going proceedings.

A DPA can be extremely stringent as the court can impose enforceable undertakings which could not apply if convicted following trial. So companies who accept a DPA may be subject to more security of their corporate governance than those who do not cooperate.

The most serious concern for any company entering a DPA is the SFO’s attitude, namely if you don’t tell us, or you do and don’t engage with us properly, prosecution is a likely outcome”. A DPA is no guarantee that a prosecution will not proceed if the terms of the DPA are not complied with.

A major problem arises if the terms of the DPA are not met and a prosecution proceeds. As a DPA can only be offered if the company has agreed to waive privilege as part of its cooperation, in the event of a prosecution Code 4.5 for Prosecutors states there is no limitation on use which other information obtained by a prosecutor during the DPA negotiation process may be subsequently be put during criminal proceedings.

Until these matters are addressed a DPA may still remain an unattractive foe for many companies.

Narita Bahra