Newsletters Business Crime & Financial Services 28th Mar 2017

Deferred Prosecution Agreements – A Review

It is now three years since the Crime and Courts Act 2013 introduced deferred prosecution agreements (‘DPAs’) to the UK. Although much ink has already been spilt on the topic, given the importance of the area it is worth taking stock of what we have learned to date.

Standard Bank

 The first DPA concerned Standard Bank’s failure to prevent bribery contrary to section 7 of the Bribery Act 2010. Standard jointly pitched with their sister company, Stanbic Bank Tanzania, to act as lead managers for the Government of Tanzania’s sovereign note issuance. Of the 2.6% fee charges, 1% had been arranged to be paid to EGMA, who had a chairman and another substantial shareholder who were members of the Tanzanian government. Upon payment of this fee, for which EGMA appear to have done very if little, it was quickly withdrawn in cash. Standard relied upon Stanbic to undertake due diligence checks on EGMA, which were well below the requisite standard given the involvement of politically exposed persons and a number of high risk flags.

Upon withdrawal of the cash Standard became aware of what had happened. They immediately appointed lawyers to investigate the matter, and within three weeks self-reported to the SFO and SOCA.

As part of the DPA Standard paid compensation to the Tanzanian government of $6 million, disgorgement of profits of $8.4 million, a financial penalty of $16.8 million, and the SFO’s costs. Standard also agreed to cooperate fully with the investigation, and to commission and independent internal review of its anti-bribery and corruption procedures.


 Between June 2004 and June 2012 XYZ, a UK SME that has not been named yet, engaged in the systematic offer or payment of bribes to secure contracts in foreign jurisdictions through the use of intermediary agents.

ABC, the US parent company of XYZ, implemented its global compliance programme at XYZ in late 2011. It was through that process that in August 2012 concerns about the way in which contracts had been secured came to light. XYS immediately appointed a law firm to undertake an internal investigation. On 2 October 2012, the law firm informed the SFO that an anonymous client might be making a self report. The law firm and the SFO met on 13 November 2012, and agreed that XYZ would make a written self report by 31 January 2013. The report was provided on that date.

XYS paid £6,201,085 disgorgement of profits, a £352,000 financial penalty, and agreed to past and future cooperation with the SFO, and review and maintenance of the organisation’s existing compliance programme.

Rolls Royce

 At the beginning of this year the court approved by far the most significant DPA to date, between Rolls Royce and the SFO. The DPA covers extensive systemic bribery and corruption committed between 1989 and 2013, across multiple jurisdictions and divisions of Rolls Royce. It involved bribery of foreign officials, commercial bribery, and false accounting of payments to intermediaries. The value of the contracts obtained through bribery and corruption exceeded £250 million. The conduct involved very senior Rolls Royce employees.

The SFO were first alerted to the conduct by public postings on the internet. They made enquiries of Rolls Royce, who then conducted their own investigation. The product of that investigation, together with previous written reports that had identified some of the conduct as far back as 2010, was provided to the SFO. Rolls Royce spent £123 million on internal investigations, and £15 million on reforming its corporate compliance.

Rolls Royce agreed to pay £258.17 million disgorgement of profits, a £239.08 million financial penalty, and the SFO’s costs in the sum of just under £13 million. It agreed to past and future cooperation with the investigation, and to complete a compliance programme at its own expense.

 Lessons learned

 There are a number of themes that can be deduced from the judgments to date:

(i) Seriousness of criminality

The three decisions to date undoubtedly exhibit a progressively increasing willingness on the part of the court to approve DPAs for very serious corporate crime. The Standard Bank case was carefully selected as an uncontroversial DPA for failures to prevent bribery rather than active engagement in it. XYZ involved active bribery through intermediaries approved by lower level employees. The conduct in the Rolls Royce case could hardly have been more serious and high level, and the approval of a DPA was therefore much less straightforward.

(ii) Multiple jurisdictions

All of the DPAs to date cover criminal conduct committed outside of the UK. Both Standard Bank and Rolls Royce had to subject themselves to similar agreements with authorities in other countries. The cases therefore constitute an important reminder for companies to be aware of the enforcement regimes across all jurisdictions in which they operate, and for anyone operating in the UK to be aware of the extra-territorial nature of many corruption and bribery offences.

(iii) Self reporting

The importance of prompt self reporting was emphasised in Standard Bank and XYZ, where it has been reassuring to see that neither company was criticised for undertaking internal investigations before going to the SFO. Given the seriousness of the criminality identified above, it is another surprising aspect of the Rolls Royce case that there was no self reporting in that case, and in fact the company had been aware of much of its activity at a senior level in the past.

(iv) Cooperation

The reason Rolls Royce were allowed to enter into a DPA despite the lack of self reporting was their “extraordinary” level of cooperation with the SFO’s investigation. Similar points were made in relation to Standard Bank and XYZ. Interestingly, XYZ did withhold material subject to privilege, but were not criticised for doing so, whereas it was explicitly noted that Rolls Royce provided some material despite considering it to be privileged, with a limited waiver. This may reflect the fact that a greater level of cooperation will be required to offset a greater level of criminality. The court in Rolls Royce also identified that the value of cooperation and self reporting will increase with the seriousness of the criminality- it is easier to own up to lower level offending. Given that serious criminality is a factor that militates against the approval of a DPA, this sets up an interesting balancing exercise to be undertaken by the court.

(v) Corporate identity

Another factor emphasised in Rolls Royce and XYZ was that the corporate identity of the company had changed since the offences were committed. Both had taken substantial steps to improve their corporate due diligence procedures, in both cases led by changes in senior management. In Rolls Royce, the court specifically made enquiries to satisfy itself that Rolls Royce had undergone fundamental changes at the board level.

(vi) Fine discounts

Standard Bank were given a full third discount from their fine to reflect a guilty plea at the first opportunity. However, the court was more generous with XYZ and Rolls Royce, giving a 50% discount to reflect the high level of cooperation at the earliest possible stage. This approach may be the result of concerns that DPAs were not offering a significant enough incentive for self reporting.

(vii) Judicial scrutiny

Despite the success of the applications for a DPA before it, the court has been at pains to emphasise that it is applying full scrutiny to the agreements, and this is far from a rubber stamp exercise. This is perhaps borne out by the fact that an adjournment was granted in XYZ at the initial hearing because the court wanted more information. Judicial scrutiny of a DPA is a key part of the legislative regime, and the court has emphasised the importance of this in remarks that constitute a thinly veiled criticism of the US system.


All of the decisions to date, given the importance given to cooperation, and the high financial penalties, make the consultation of legal advice at the earliest possible stage highly advisable. In particular, the consultation of legal advice when formulating policies, before any problem has been identified, is more likely to avoid the very serious consequences of getting it wrong.

Lewis MacDonald

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