Have Deferred Prosecution Agreements come of age?
21 Feb 2017

Aba Edwards-Idun and Neill Blundell of International law firm Eversheds Sutherland LLP consider the merits of the Deferred Prosecution Agreement, an increasingly popular option for prosecutors in the UK.

On 17 January 2017, at Southwark Crown Court, Lord Justice Leveson approved a deferred prosecution agreement (“DPA”) between the Serious Fraud Office (“SFO”), and Rolls-Royce Plc and Rolls-Royce Energy System Inc (“Rolls-Royce”).[1] This, the third DPA agreed by the SFO, has led some to wonder whether DPAs have finally come of age as a weapon the SFO’s enforcement arsenal.

DPAs have been a mainstay of the United States Department of Justice (“DoJ”) since 1992. It agreed nine in 2016 alone. Notable subjects of the DoJ’s DPAs include Deutsche Bank, BP America and UBS.

By contrast, DPAs were introduced in the UK only in February 2014, under the Crime and Courts Act 2013. The Act gives both the SFO and the Crown Prosecution Service the power to agree a DPA. Under a DPA, proceedings brought against a company charged with criminal conduct are suspended. Instead, the company and the prosecuting authority will agree a number of alternative outcomes, including payment of financial penalties and prosecutor’s costs, disgorgement of profits, appointment of a monitor and implementation of a remedial programme. Once a DPA expires, the prosecutor may bring fresh proceedings if it feels the terms of the DPA have not been fulfilled. DPAs are completely voluntary and in contrast to the American system, must be approved by the court.

When launched, DPAs were seen as a defining moment in the corporate crime arena. Touted as an option for companies that self-report, they allow companies to be held accountable for criminal conduct while removing the need for lengthy and costly trials. However since 2014, the SFO has agreed only three DPAs: first with Standard Bank in November 2015, then with unnamed company XYZ Limited in July 2016, and most recently with Rolls Royce in January 2017. Further, the DPA with Rolls-Royce was not the culmination of a decision to self-report, but rather Rolls-Royce’s decision to co-operate once the SFO approached the company after becoming concerned about its civil business in China and Indonesia.

The SFO investigation into Rolls-Royce–the largest conducted by the SFO–began in 2012. It took over four years to conclude, involved the review of 30 million documents and cost £13 million. The indictment covered 12 counts of conspiracy to corrupt, false accounting and failure to prevent bribery; conduct which took place in China and Indonesia, as well as Malaysia, Nigeria, Russia and Thailand.

Leveson LJ agreed that a DPA was preferable in this case, because Rolls-Royce had undergone root-and-branch change since the investigation began: a new board and executive team had been put in place; new policies and procedures drafted, and a new culture cultivated. It was “in the interests of justice that the matter be resolved through the mechanism of a DPA[2] rather than a prosecution that would have considerable impact on a now changed business.

Under the DPA, Rolls-Royce is liable to pay over the next five years a fine of approximately £239 million (discounted by 50% for “extraordinary cooperation[3]) and a disgorgement of around £258 million, bringing the total financial penalty to approximately £497.25 million. Rolls-Royce must also pay the SFO’s costs. In addition, the company must implement a compliance programme and continue to review its internal controls, policies and procedures.[4]

Having previously stated that “the DPA process is not there for a company who leaves it to us to find them[5], the Rolls Royce DPA marks a slight departure for the SFO, suggesting its motivation to ensure that perpetrators of corporate crime are held to account, whatever the circumstance. The size of the fine also marks a departure, being more in line with those imposed by the DoJ. This is the third DPA agreed in as many years. When contrasted with the SFO’s previous lack of success in cases of corporate bribery, this recent run of successes and the level of the Rolls-Royce fine should quash any doubts as to the SFO’s future; it may even lead to an increased appetite to pursue cases. While there is some way to go until the DPA is as entrenched in the corporate crime world as in the United States, it is certainly on its way.

 

[1]             Serious Fraud Office v Rolls-Royce PLC and Rolls-Royce Energy Systems Inc, Case No. U20170036

[2]             Serious Fraud Office v Rolls-Royce PLC and Rolls-Royce Energy Systems Inc, Case No. U20170036, para 64

[3]             Serious Fraud Office v Rolls-Royce PLC and Rolls-Royce Energy Systems Inc, Case No. U20170036, para 122

[4]             The Deferred Prosecution Agreement, Serious Fraud Office website: file:///C:/Users/edwardab/Downloads/DPA%20-%20Rolls%20Royce%20-%20170117.pdf , accessed 07 February 2017

[5]             Speech on the SFO’s priorities and its direction, at the TRACE Global Anti-Bribery In-House Network Conference by Hannah von Dadelszen, Joint Head of Fraud, 27 October 2016: https://www.sfo.gov.uk/2016/10/27/gain-2016-serious-fraud-offices-current-direction-enforcement-priorities/

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