Power of ten: Serious Fraud Office concludes tenth UK deferred prosecution agreement

• United Kingdom

• Fraud and financial crime
• Litigation and dispute management

14-07-2021

The UK Serious Fraud Office (“SFO”) has marked the tenth anniversary of the Bribery Act coming into force with its tenth deferred prosecution agreement (“DPA”).

The DPA

Amec Foster Wheeler Energy Limited (“AFWEL”) has agreed to pay a total of £103 million over the next three years under the terms of the UK DPA. This forms part of a coordinated global settlement also involving the US Department of Justice and Securities and Exchange Commission and the Brazilian Ministério Publico Federal, Comptroller General's Office and Solicitor General.

The facts

The DPA relates to the use by a legacy business (Foster Wheeler Energy Limited) of third party agents in connection with oil and gas deals in Brazil, India, Malaysia, Nigeria and Saudi Arabia between 1996 and 2014.

Since the conduct upon which the DPA is based took place, the entity concerned has changed hands twice (in 2014 and 2017). Some of the wrongdoing now covered by the DPA was discovered by lawyers instructed by the then owners in reports produced between 2007 and 2009. Its current owners brought matters to the attention of the SFO and have agreed to pay the penalties and other costs associated with concluding the SFO's and other authorities' investigations.

Analysis: Key questions

This DPA, read together with the nine which preceded it, provides some useful indicators of the SFO's and the Courts' approach to key issues facing corporate organisations considering whether a negotiated settlement may be possible or appropriate in connection with historical misconduct.

In our separate briefing, “10 ways to get a DPA”, we have set out practical points emerging from settlements to date. The DPA now approved in respect of AFWEL provides the latest illustration of the importance of the themes we outline, particularly sustained cooperation and demonstrable commitments to future compliant conduct.

In the paragraphs below, we set out some of the more specific questions and answers emerging from this DPA.

1. What does this DPA tell us about the SFO's expectations on self-reporting?

The DPA reinforces the oft repeated message that corporate organisations should not take it for granted that a DPA will always follow self-reporting to the SFO. Approving the DPA, Lord Justice Edis made clear that he would not have done so if the entity concerned had remained in the same hands since the time at which the wrongdoing was discovered.

It underlines that the prospects of a negotiated settlement are significantly enhanced by promptly bringing matters to the attention of the SFO and then providing proactive ongoing cooperation. It is clear though that all is not lost if the SFO has already started investigating matters. In this and several other DPAs negotiated to date, the SFO and the Court were prepared to entertain a settlement even though the approach by the current owners of AFWEL came after the SFO had commenced its investigation into some aspects.

2. What must corporate organisations do in order to be sufficiently co-operative to qualify for a DPA?

The case is a further illustration that the timing of notification to the SFO is not necessarily determinative of whether a DPA will follow, but the fulsomeness of cooperation that follows definitely is.

The judgment accompanying the DPA records the Judge's assessment (in a note sent to representatives of the SFO and AFWEL demonstrating the close scrutiny to which he subjected the proposed DPA) that “This is not a case where the investigation was started by self-reporting, but it is a case where self-reporting was essential to it once it had started”.

AFWEL and its current owners co-operated with the SFO over the four-year period between self-reporting and eventual approval of the DPA. This co-operation included provision of documents leading to the broadening of the scope of the SFO's and other authorities' investigations to cover additional jurisdictions and longer time periods, and the parties received credit for this. The judgment is not explicit about whether legal professional privilege was waived in this case (although it appears likely that information was provided on at least a limited waiver basis).

Clearly other factors were also crucial to securing prosecutorial and judicial approval. These included the fact that individuals involved in wrongdoing are no longer associated with the corporate organisation seeking a DPA and the undertaking by AFWEL's current owners to guarantee its financial liabilities under the DPA (although these factors were identified separately to co-operation justifying the DPA). The judgment also calls out the implementation of new corporate governance systems as an important factor.

3. How is the SFO's approach to the calculation of the financial penalty elements of DPAs changing? What do the Courts think of these changes?

There is no hard and fast rule about how the financial penalty to be imposed as part of a DPA is to be calculated. The only requirement set out in legislation is that the fine should be “broadly comparable” to that which would be imposed if the corporate organisation concerned had been convicted following a guilty plea. This allows latitude to the SFO and cooperating corporates when making assessments of the relative importance to be attached to particular factors for the purposes of calculating financial penalties.

The SFO and representatives of AFWEL made use of this latitude in this case. When assessing the appropriate multiplier to be used to calculate the headline figure of the financial penalty, they attached specific percentage discounts to specific factors. This was a departure from the practice adopted in other DPAs to date. Not all of these factors are ones which would ordinarily be applied by a sentencing judge. Others would be likely to be considered at other stages of the penalty calculation process (i.e. after the multiplier has provided a headline figure), as has been the case in other DPAs.

This approach may have produced a financial figure at the lower end of what may be expected from a sentencing exercise following a guilty plea (or perhaps a DPA). This perhaps reflects the need to incentivise corporate cooperation and the limit to discounts which may be applied for “extraordinary cooperation” (the basis used in other DPAs to reduce the post-multiplier figure).

The Judge in the AFWEL case made some observations about the “mechanistic” method used. He was at pains to point out that it was not how the Court would necessarily have approached the exercise. Nonetheless, he was content that the penalty passed the “broadly comparable” test, and emphasised that it is not the Court's role to impose the penalty, but rather to scrutinise and, if satisfied, approve the approach taken by the SFO. Future cases will provide a guide to the limits of judicial tolerance of alternative methods of penalty calculation.

4. In which circumstances will external monitors be appointed?

The DPA now concluded with AFWEL does not require the appointment of an external independent monitor, recognising steps already taken by the companies which acquired the business unit within which bribery occurred to identify and remediate compliance issues. The AFWEL DPA instead prescribes relatively onerous requirements regularly to report to the SFO and other authorities on compliance related issues.

Guidance issued by the SFO in January 2020 had prompted speculation that the SFO would more routinely require the appointment of an external independent monitor as a feature of UK DPAs.

However, subsequent DPAs, including the latest one, suggest that in fact indications set out in the DPA Code of Practice that monitors will not be required in every case hold good. What is appropriate will vary considerably between cases.

However, corporate organisations, which will typically have already incurred considerable expenses in instructing third parties to assess and fix compliance problems as part of the self-reporting and investigation stages, will draw some comfort from indications that they not necessarily be required to appoint a monitor as part of a UK DPA.

5. What about individuals?

The judgment accompanying the DPA contains very clear reminders that proceedings against individuals may follow (and states that charging decisions will be taken within three months).

The Judge was careful to emphasise that the fact of a DPA with AFWEL is not determinative of the guilt of any of those individuals and records the fact that the Court, before deciding the application in respect of this DPA, heard submissions on behalf of some affected individuals.

Perhaps acknowledging well-publicised difficulties in pursuing proceedings against former executives of corporate organisations with which DPAs have been negotiated in previous cases, particular care appears to have been taken to safeguard the interests of individuals in these proceedings.

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