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Deferred prosecution agreements

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management


Will companies and prosecutors achieve greater corporate accountability in future through strategic use of DPAs?

With reports of fraud, corruption, money-laundering and bribery appearing more regularly in the financial press, there is a growing focus by companies on resolving issues without a corporate prosecution through the increased use of deferred prosecution agreements (“DPAs”) in the U.K. and the U.S.

Historically, in the U.K. there have been few successful prosecutions of companies for economic crime. Under common law principles which date back to 1915, in order to hold a company to account for a crime, the prosecutor must be able to attribute the offence to the ‘controlling mind’ of the company. This means that a company can only be convicted for the criminality of those who speak and act for it. However, the reality of one controlling mind is illusory. In the modern corporate world, multi-jurisdictional companies tend not to have one single controlling mind (i.e., the C-Suite), and there is often a significant distance between the controlling mind and those employees that carry out the will or “ill will” of the company. As stated by the Law Commission in 2010, this can make it “impossibly difficult for prosecutors to find companies guilty of some serious crimes, especially large companies with devolved business structures”. 

Due to the increased need for greater corporate accountability, and the difficulties inherent in the current U.K. corporate criminal liability regime, DPAs were introduced into the U.K. on 24 February 2014, under Schedule 17 of the Crime and Courts Act 2013, to assist prosecutors in holding companies accountable for their crimes and to enable authorities to extract financial penalties without proving criminal intent. DPAs can be brought for fraud, bribery and other economic crime, as listed in Schedule 17 of the Crime and Courts Act 2013. Successful DPAs have already been instigated in the U.K. with Standard Bank PLC, for failure to prevent bribery contrary to s7 of the Bribery Act 2010, and against XYZ Ltd for conspiracy to corrupt, contrary to s1 of the Criminal Law Act 1977, conspiracy to bribe, and failure to prevent bribery.

Criminal prosecutions of corporate entities in the U.S. are often resolved through the use of DPAs coupled with an agreed upon fine and other remedial measures.  DPAs for corporate defendants offer as middle ground between a declination and a trial which will likely lead to a criminal conviction with its collateral consequences.  A DPA in the U.S. does not prevent unwanted negative publicity, as it involves the public filing of criminal information detailing the criminal activity, as well as agreed remediation and fine.  The fine is determined in large measure by the U.S. Sentencing Guidelines. There may be an opportunity for a “discount” if there is 1) self-disclosure of wrongdoing, i.e. before the Government contacts the Company and 2) cooperation by the Company. The advantage of the U.S. DPA is that it avoids collateral consequences to criminal convictions including government debarments or regulatory or industry suspensions from doing business.

As in the U.S., use of DPAs in the U.K. provide a mechanism whereby a company is charged with a criminal offence, but, subject to the approval of a court, prosecution is suspended for a defined period, further to the company entering into an agreement, on negotiated terms, with a prosecutor. Under the terms of this negotiated DPA, the company is obligated to fulfil certain conditions, including (i) making amends to victims, (ii) paying substantial financial penalties, and (iii) reforming practices to prevent such conduct happening again, or the suspended prosecution will restart.

By contrast, in the U.S., the reverse is true and it is often the corporate entity which seeks a DPA. The difficulty for corporate entities facing possible criminal prosecution is the doctrine of respondeat superior, where the company is responsible for an employee’s or an agent’s wrongful acts.

In a May 2004 Release, the U.S. Sentencing Commission addressed both the import and impact of respondeat superior when considering corporate exposure and for all intents and purposes imposed a strict liability standard: “Criminal liability can attach to an organization whenever an employee of the organization commits an act within the apparent scope of his or her employment, even if the employee acted directly contrary to company policy and instructions. An entire organization, despite its best efforts to prevent wrongdoing in its ranks, can still be held criminally liable for any of its employees’ illegal actions.”

Given that many multi-jurisdictional companies are subject to criminal exposure in the U.K. and the U.S. for the same activities, for examples, violations of the 2010 Bribery Act as well as the U.S. Foreign Corrupt Practices Act (1977) (“FCPA”), the U.K. authorities are able to leverage the U.S. lower standards of proof to exact substantial penalties and corporate remediation in the U.K. from businesses which seek global peace.

One recent DPA case of note is the Rolls Royce DPA, approved on 17 January 2017. The Rolls Royce PLC matter is of particular importance in discussions of corporate accountability, as it would not naturally fit within the U.K. DPA regime. The behaviours subject to the DPA (12 counts) occurred between 1989 and 2013, the majority of which were prior to the coming into force of both (i) the 2010 Bribery Act, and its lower threshold of “failure to prevent”, and (ii) the deferred prosecution regime, and yet, Rolls Royce elected to conclude matters via the DPA process in the U.K.

The U.S. Department of Justice (“DOJ”) Criminal Division, Fraud Section filed under seal a criminal information against Rolls Royce PLC for conspiring to violate the FCPA of 1977 and simultaneously entered into a DPA while extracting a $169 million fine.  The complained of behaviour dated back to 2000.  Rolls Royce received a 25% discount off of the lower range of the U.S. Sentencing Guidelines for full cooperation but no credit for self-reporting as the matter began with media reports in the U.S. and the SFO inquiry. While Rolls Royce may have been successful in defeating a criminal prosecution in the U.K., its prospects in the U.S. would have been substantially worse.

DPA cases highlight the importance of early, active assistance, cooperation between the company and the SFO, and the need for increased transparency. By way of contrast between the U.K. and U.S., this behaviour was commented on in the U.K. Rolls Royce DPA, where the company was highly praised by the U.K. judge for its proactive approach, and the conduct of the internal investigation. Nevertheless, in the U.S., the company’s failure to self-report resulted in only a 25% reduction in the sanctions whereas a 50% reduction would have been available if the company had done so.

It could be that the Rolls Royce disposition, as well as others such as Tesco Stores Limited*, indicate the beginning of a new trend in economic crimes. Ben Morgan, the Joint Head of Bribery and Corruption at the SFO has said that “our view at the moment [October 2016] is that a DPA could be fitting for almost any case, just as we are willing and able to prosecute any case”. Through a DPA, companies could potentially reach an early resolution, and avoid prosecution, if their leadership acts decisively and ethically. Greater corporate accountability through DPAs may be the future, provided that DPAs result in a cultural shift towards openness and self-reporting. Therefore, if companies are to instigate DPAs successfully, a change in approach in the sector as a whole may be required. A traditional adversarial approach, winning by defeating an opponent, will not work in a DPA process, which is all together more symbiotic, with both parties aiming to secure the court’s approval of the proposed agreement terms.


*Any DPA (a) concerns only the potential criminal liability of Tesco Stores Limited; and (b) does not address whether liability of any sort attaches to Tesco PLC or any employee or agent of Tesco PLC or Tesco Stores Ltd