Chapter 7: Deferred prosecution agreements
The Crime and Courts Act 2013
233.Until the enactment of the Crime and Courts Act 2013 the Deferred Prosecution Agreement (DPA) was a creature unknown to English law, though familiar for some time in the United States and other countries, some of which (including the United States) also have Non-Prosecution Agreements (NPAs). In essence, a DPA is most commonly used in the area of economic crime, and is a bargain under which the prosecutor undertakes not to proceed with the prosecution of a corporation for a fixed time in return for the defendant mending its ways and paying a financial penalty for the privilege.
234.The relevant provisions of the Crime and Courts Bill were first considered by the House of Lords on 30 October 2012; the Report stage for these provisions was on 12 December 2012.296 Fortuitously, the previous day it had been announced that HSBC had concluded a 5-year DPA with the US federal prosecutors relating to its failure to prevent the money laundering of “at least $881 million in drug trafficking proceeds.”297 The many conditions of the DPA included the payment of $1.9 billion,298 and the agreement included the statement that “If this matter were to proceed to trial, the Department [of Justice] would prove beyond reasonable doubt, by admissible evidence, the facts alleged below …”.299 But without that agreement, conviction of HSBC might have resulted in its having to cease banking operations in the United States.300
235.The House therefore had before it a striking example of the benefits which a DPA could confer on both the prosecutors and the bank, and it is perhaps not surprising that the relevant provisions of the Bill were passed without amendment in both Houses, and enacted as section 45 of and Schedule 17 to the Crime and Courts Act 2013. The Act received Royal Assent in April 2013, but delay in issuing the Code of Practice for Prosecutors resulted in Schedule 17 not coming into force until 24 February 2014.301
236.DPAs apply to many economic crimes other than bribery.302 The provisions relating to DPAs extend only to England and Wales,303 and the procedure cannot therefore be used where the conduct which constitutes the offence is confined to Scotland or Northern Ireland. We comment on the implications for Scotland in Chapter 9.
Development of DPAs
237.In written evidence Lord Garnier QC explained to us how the English DPA had developed.304 When, as an MP, he was shadow Attorney General from 2009–10, and then Solicitor General from 2010–12, he sought a more effective way of dealing with corporate crime, particularly economic and financial crime, and consulted widely on how the US-style DPA might be adapted to this jurisdiction. The result is that there are significant differences between DPAs in the two jurisdictions, in particular:
- American DPAs emerged through practice and are not, as here, underpinned by statute;
- English DPAs must be approved by the court whereas in the USA the judiciary has very little, if any, say in their formulation or conclusion;
- In England DPAs are not available to individual defendants;
- In the USA there are civil settlements, Non-Prosecution Agreements (NPAs) and DPAs whereas in England we do not have NPAs.
238.Lord Garnier wrote:
“There are roughly 50–60 DPAs and NPAs every year in the United States and whereas at the outset they were primarily concerned with banking offences, money laundering, overseas corruption under the Foreign Corrupt Practices Act and other financial crimes committed by corporates in New York and other large financial or economic centres on the east coast of the United States, their remit has been extended, for example, into price fixing in the pharmaceutical industry and health and safety cases and to corporates in other parts of the United States. I had intended that in this jurisdiction, scaling things down to our smaller economy, we would see about 8 to 10 DPAs each year but even though the number of DPAs approved so far is very low I am hopeful we will see the pace increase as we become more used to this novel way of doing justice.”305
DPA procedure
239.In the case of DPAs only the Director of Public Prosecutions (DPP) and the Director of the SFO (DSFO) are “designated prosecutors” who can authorise a DPA, and they must “exercise personally the power to enter into a DPA”.306 In Chapter 3 we have criticised the statutory requirement that only the DPP and DSFO can authorise the prosecution of offences under the Bribery Act. In the case of DPAs we believe this requirement is appropriate. It will not put an excessive burden on the Directors, and the policy implications will often need consideration at the highest level.
240.As stated in the DPA Code of Practice, a DPA is a discretionary tool and the decision on whether or not to enter into one must be based on an assessment of the evidence and the public interest and must, in addition to the DPA Code of Practice, have regard to other codes of practice and guidance such as the Code for Crown Prosecutors, the Joint Prosecution Guidance on Corporate Prosecutions and, for bribery offences, the Bribery Act Joint Prosecution Guidance.307 It is only if, after this assessment, the relevant prosecutor determines that a DPA is an appropriate way to proceed that they can invite the company to enter into negotiations.
241.As we have said, in the United States the judiciary plays little if any part in the agreement of a DPA. The role played by the courts in England is “critical”, in the words of Sir Brian Leveson who, as President of the Queen’s Bench Division, has given the approval of the Crown Court to all four of the DPAs which have so far been agreed.308 Following the conclusion of negotiations but before the terms of the DPA are agreed, the prosecutor must apply to the court at a “preliminary” hearing held in private for a declaration that entering into a DPA is “likely” to be in the interests of justice and that its proposed terms are fair, reasonable and proportionate. The court must give reasons for its decision and, if a declaration is declined, a further application is permitted.309 In that way, the court retains control of the ultimate outcome and, if the agreement is not approved, the possibility of prosecution is not jeopardised as a consequence of any publicity that would follow if these proceedings had not been held in private.
242.If the first declaration has been granted and the DPA is finalised on the terms previously identified, the prosecutor must apply to the Crown Court at a “final” hearing for a second declaration that the DPA is not just “likely” to be, but is in fact, in the interests of justice, and that the terms of the DPA are indeed fair, reasonable and proportionate. Again the court must give reasons for its decision. The hearing may be held in private, but if the court decides to approve the DPA it must give its reasons in open court. The prosecutor must then publish the DPA, the declaration of the court and the court’s reasons, unless the court orders postponement of publication to avoid prejudicing proceedings.310 The entire process thus becomes open to public scrutiny, consistent with the principles of open justice.
243.The Act gives the judge no discretion to combine the two hearings and to give a single judgment. There must be some doubt as to whether it is always necessary within a short space of time to hold one hearing in private for the judge to decide whether the proposed DPA is “likely” to be in the interests of justice and that its proposed terms are fair, reasonable and proportionate, and then a short time later to hold a further hearing at which the judge can declare that the DPA “is” in the interests of justice and that its terms are fair, reasonable and proportionate. As Sir Brian Leveson told us, he would be unlikely to change his mind unless there was a change of circumstances. He added: “I have now come to the view that there is no reason why one judgment is not sufficient.”311
244.In the Rolls-Royce case the circumstances were such that Sir Brian delivered only one judgment. The preliminary hearing was concluded late on 16 January 2017 and the final hearing was held, and concluded, the following day. This was “linked to the change in administration in the United States.” Two months later, in the Tesco case, Sir Brian held the preliminary hearing on 27 March 2017, granted the declaration sought, but reserved judgment. When on 10 April 2017 he held the final hearing, his judgment gave his reasons for granting both the preliminary and the final declarations.
245.After the reporting restrictions in the Tesco case were lifted, Sir Brian sent us supplementary written evidence reiterating what he had said in his oral evidence and adding:
“In practice the procedure envisaged in the Act is somewhat rigid; it is, of course, a matter for Parliament but, as a matter of practice, my experience suggests that it would help if the court was given greater discretion as to the management of the hearings. I understand the need for separate hearings under paragraphs 7 and 8: only if provisional approval is expressed will the parties be prepared to enter into a DPA which is, after all, a binding agreement with enforceable terms: the precise approach to the resolution of the two stage process, however, could be a matter left to the court.”312
246.We agree, and we believe that the Act should be amended to give the judge a discretion to manage the hearings in whatever way seems most appropriate to the individual case. What is essential is that a declaration approving a DPA, with the reasons for it, must be made in open court.
247.Schedule 17 to the Crime and Courts Act 2013 should be amended to give the court greater discretion to manage the preliminary and final hearings in whatever way seems most appropriate. However a declaration approving a DPA and giving the reasons for it must be made in open court.
248.While the DPA procedure can be lengthy, complex and expensive, preparing for and defending a prosecution is likely be more so in every way, and not least in consumption of management time. The prosecutor’s costs of the DPA will have to be paid, but they will be less than if the case goes to trial. And while the company will have to disgorge the proceeds of its unlawful enrichment, its financial penalties may be only a fraction of the fine which would follow a conviction. Perhaps most importantly, many countries have laws which debar a convicted company from public procurement contracts, and still more countries have laws allowing discretionary debarment. In the Rolls-Royce case313 the judge was informed that 15% of the order book fell into the first category and a further 15% into the second.314
The four DPAs to date
249.At the date of this report there have been four DPAs. Two have involved companies which are household names: Rolls-Royce and Tesco. Standard Bank (now ICBC Standard Bank plc) is a financial markets and commodities bank. The fourth is a small company known only as XYZ because it is still subject to reporting restrictions. All except Tesco have involved offences under the Bribery Act; Tesco is a false accounting case.
Standard Bank plc
250.Standard Bank was the first to have a DPA agreed, on 30 November 2015. It set the pattern for subsequent cases, and we therefore explain the circumstances in some detail. The Government of Tanzania wished to raise funds, and a subsidiary of Standard Bank sought instructions to raise the funds, but negotiations did not progress until the subsidiary agreed to pay 1% of the funds raised to a company, EGMA, two of whose directors were the Commissioner of the Tanzanian Revenue Authority and the former CEO of the Tanzanian Capital Markets and Securities Authority. EGMA provided no services in return for its fee of US $6m, and that fee was shortly withdrawn in cash. Standard Bank was alerted, the matter was investigated, and within three weeks the SFO were informed. Standard Bank was charged with a failure to prevent associated persons from committing bribery, contrary to section 7(1) of the Act. There was no suggestion that Standard Bank itself, or any of its employees, knew of or participated in the offence, but Standard Bank could not rely on the “adequate procedures” defence because it did not supply sufficient guidance or training to prevent associated persons from engaging in such conduct.315
251.The requirements which the DPA imposed on Standard Bank, which the court judged to be in the interests of justice and “fair, reasonable and proportionate”,316 were as follows:
(i)Payment of compensation of US $6 million plus interest;
(ii)Disgorgement of profit on the transaction of US $8.4 million;
(iii)Payment of a financial penalty of US $16.8 million;
(iv)Past and future co-operation with the relevant authorities in all matters relating to the conduct arising out of the circumstances of the draft Indictment;
(v)Commissioning and submitting to an independent review of its existing internal anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws; and
(vi)Payment of the costs incurred by the SFO.
252.The DPA lasted for three years. On 30 November 2018 Lisa Osofsky, the Director of the SFO, issued a statement welcoming the successful conclusion of the UK’s first DPA, and explaining that all the terms imposed by the DPA on Standard Bank had been complied with.
253.The judge acknowledged that “the most difficult assessment was as to the appropriate financial penalty”;317 we discuss this in paragraphs 284 to 310 below.
XYZ Ltd
254.XYZ Ltd was an SME with 25 employees which generated the majority of its revenue from exports to the Asian market. In 2000 it was acquired by a US corporation, ABC. Between June 2004 and June 2012 XYZ was involved, through a small but important group of its employees and agents, in the systematic offer and/or payment of bribes to secure contracts in foreign jurisdictions. There was evidence that 28 contracts were procured as a result of the bribes, and that these contracts earned XYZ £17.24m. Prior to 2012, on its own admission XYZ did not have any adequate compliance provisions in place. In late 2011 ABC sought to extend its global compliance programme within XYZ, and in August 2012 concerns were raised about the way in which contracts had been secured. The law firm which investigated self-reported the matter to the SFO on behalf of XYZ, and continued to supply information from its investigation to the SFO.318
255.The judge was at pains to emphasise that although ABC had received about £6m in dividends from XYZ over this period, it had been wholly unaware of these corrupt activities and there was no reason that it should have been aware; there was no suggestion of a parent company knowingly making a profit from its subsidiary’s criminality, and “absolutely no suggestion that XYZ was deliberately operated as an impecunious vehicle through which corrupt payments might be made.”319 However the fact that XYZ was “impecunious” was an important factor in the calculation of the appropriate penalty.320
Rolls-Royce
256.This was the third and by far the largest application for approval by the court of a DPA reached between the SFO and two entities now ultimately owned by Rolls-Royce Holdings plc, namely Rolls-Royce plc and its Delaware incorporated subsidiary, Rolls-Royce Energy Systems Inc (“RRESI”). It covered the conduct of Rolls-Royce and RRESI in Nigeria, Indonesia and Russia along with the conduct of Rolls-Royce alone in Thailand, India, China and Malaysia. It involved agreements to make corrupt payments in many jurisdictions going back over many years, and failure to prevent bribery by employees or intermediaries in Nigeria, Indonesia, China and Malaysia between the commencement of the Bribery Act and the end of 2013.
257.Rolls-Royce and its subsidiaries employ some 50,000 people, in more than 50 countries. The case concerned the conduct of its civil aerospace business, which manufactured engines for commercial large aircraft and corporate jet markets and generated approximately 50% of its revenue, and the conduct of its defence aerospace business, which manufactured engines for the military transport market and was the second largest provider of defence aero engine products and services in the world (generating approximately 20% of its revenue). The judge, again Sir Brian Leveson, said:
“It can properly be described as devastating and of the very greatest gravity that the conduct of this institution should fall to be examined within the context of a criminal investigation and that the investigation … should reveal the most serious breaches of the criminal law in the areas of bribery and corruption (some of which implicated senior management and, on the face of it, controlling minds of the company).”321
258.The important factor distinguishing the Rolls-Royce DPA from the others is that it is the only one which did not begin with the company self-reporting. The initiative did not come from Rolls-Royce contacting the SFO, but from the SFO seeking information from Rolls-Royce about online reports which had come to the SFO’s attention early in 2012. Rolls-Royce then began an investigation which at the date of the judgment was still ongoing; it supplied regular reports to the SFO, supplied information to the SFO for the SFO’s own investigation, waived legal professional privilege, and acted throughout with what Lord Garnier (then Sir Edward Garnier) QC, Counsel for the SFO, described as “extraordinary co-operation”.322
259.Hannah von Dadelszen, the Head of Fraud at the SFO, bore this out:
“I think that the company handed over to our office in excess of 250 witness interviews that it had conducted, as well as 40 million documents,323 and it met with us regularly. Our requests were onerous and highly annoying, and it met them. You do not see that sort of conduct every day. It did not self-report initially, but since then it has disclosed a lot of material that we would not have uncovered in a perhaps more adversarial forum, and those factors led us to the DPA outcome.”324
260.The importance of self-reporting generally, and the implications of the failure of Rolls-Royce to self-report, are questions we consider in paragraphs 271–275 below. We deal with the decision not to prosecute any individuals in paragraphs 318–319 below.
Tesco
261.The Tesco case is the only DPA to date not involving a bribery charge. It arose from the acceptance by Tesco Stores Ltd of responsibility for false accounting practices. The DPA was approved by Sir Brian Leveson on 10 April 2017, but the texts of the DPA and of the judgment approving it were made subject to reporting restrictions because prosecutions had been brought against three individuals for fraud by abuse of position and false accounting. The three stood trial in September 2017 but following one of the defendants falling ill the jury was discharged on 6 February 2018. The retrial of two of the defendants began on 1 October 2018, and on 26 November the judge ruled that there was no case to answer, a ruling upheld by the Court of Appeal on 5 December 2018. On 23 January 2019 the SFO announced that they did not intend to proceed against the third individual, the reporting restrictions were lifted, and the DPA and the judgment of Sir Brian Leveson were published.325
Our scrutiny of DPAs
262.As we have stressed, DPAs apply to many economic crimes of which bribery is only one. However, of the four DPAs so far concluded, three relate to offences under the Bribery Act, and it is plain that DPAs are having and will continue to have a major influence on the handling of cases involving corporate bribery. This is why the Liaison Committee expressly mandated us to include them in our scrutiny of the Bribery Act.
263.There is another reason. Lord McNally, then Minister of State at the Ministry of Justice, stated during the passage of the Crime and Courts Bill: “It is important that there is a common understanding of how this new procedure will operate. Once implemented, the Government will keep this area of the law under review and formal post-legislative scrutiny will also take place in April 2018.”326 To the best of our knowledge, no such formal post-legislative scrutiny has taken place or is planned. The Government’s Memorandum to this Committee in June 2018 included a passage on DPAs,327 but no assessment of how they are operating. We hope that our assessment of how they are operating in the field of bribery may be of assistance.
264.We have considered in particular the following matters:
- The DPA Code of Practice
- The importance of judicial oversight
- The role of self-reporting
- Consistency between large and small companies
- Financial penalties
- Prosecution of individuals
- Whether this country should also consider non-prosecution agreements.
The DPA Code of Practice
265.Paragraph 6(1) of Schedule 17 to the Crime and Courts Act 2013 provides:
“The Director of Public Prosecutions and the Director of the Serious Fraud Office must jointly issue a Code for prosecutors giving guidance on—
(a) the general principles to be applied in determining whether a DPA is likely to be appropriate in a given case, and
(b) the disclosure of information by a prosecutor to P in the course of negotiations for a DPA and after a DPA has been agreed.”
Paragraph 6(2) lists other matters on which the Code of Practice may give guidance; they include the use of information obtained by a prosecutor in the course of negotiations for a DPA.
266.The DPA Code of Practice came into effect on 24 February 2014.328 It sets out the factors of which the prosecutor should be satisfied before initiating DPA negotiations; the factors the prosecutor should take into account when deciding to enter into a DPA; the process for inviting a company to enter into DPA negotiations; the conduct of the negotiations; and the terms which should be included in the agreement, including the financial terms. Baker McKenzie suggested that “it would be helpful if the SFO could provide more guidance on what is expected from organisations. General statements such as “not doing anything that could prejudice any investigation that the prosecuting authority may wish to carry out” are well understood. However, often there can be real uncertainty as to: (i) whether taking a particular step could prejudice an investigation; and (ii) if so, whether the perceived benefits of the step outweigh any possible prejudice to an investigation, such as conducting witness interviews with witnesses or suspects (particularly where they are external to the company).”329
267.The Code is written in general terms, but we believe this is inevitable given that no two cases will be alike. The fact that DPA negotiations are taking place at all pre-supposes close co-operation between the prosecutor and the company, and we think this is the forum for such uncertainty to be resolved in any particular case.
The importance of judicial oversight
268.Asked what importance he attached to the fact that DPAs could not be agreed without judicial approval, Sir Brian Leveson replied:
“I think it is absolutely critical, because we do not do plea bargains in this country, as others do. This has to be conducted in public, so that, in other words, everybody can see what is being done in their name. Therefore, there is no private deal between a prosecutor and a company that nobody ever hears anything about … The disinfectant of transparency in this area is absolutely critical.”330
269.We entirely agree.331 It is inevitable that the investigation, the negotiations, and the first stage at which the court is asked to rule on whether what is proposed is likely to be in the interests of justice, must all take place in private. This makes it all the more important that the final stage should be given the maximum publicity, as is required by the statute.332 If at any of the earlier stages it appears that agreement cannot or should not be reached, the prosecutor will have to decide whether to proceed with a prosecution.
270.When Sir Brian said that we do not do plea bargains “in this country”, he was referring to England and Wales. Scotland does not have DPAs, and does not have judicial oversight of civil settlements. Sir Brian was understandably unwilling to comment on the Scottish system, but went so far as to say: “I do not resile from the word [critical], with great respect to my Scottish colleagues.”333 We, unlike Sir Brian, believe it is part of our duty to comment on the Scottish system, and do so in Chapter 9.
The role of self-reporting
271.Two significant factors in determining whether a DPA will be offered are whether the company has self-reported the conduct and whether it has co-operated with the criminal investigation.334 In their written evidence Corruption Watch emphasised the importance of self-reporting.335 Their Policy Director, Susan Hawley, told us in oral evidence:
“It [self-reporting] should be a very key factor [in whether to grant a DPA] but, from talking to some of the people in enforcement agencies, you can get a bad selfreport and not much cooperation, or you can get no selfreport and very good cooperation. It is about how you balance that out … But you need to incentivise companies to selfreport, because one of the primary policy objectives was to increase detection and get companies to come forward. As we say in our [written] evidence, that is why you should have, as the DOJ does in the US, differential reductions in fine for where you selfreport and cooperate and where you just cooperate. Otherwise, you get a lot of commentary, as there was after RollsRoyce, saying, “Well, why do we not just hold out until we are caught and then cooperate?” Then you are not increasing the chances of greater detection of economic crime.”336
272.If there are indeed circumstances where “you can get a bad selfreport and not much cooperation”, then a DPA should not be contemplated. Self-reporting should only be a first step in further co-operation between the company and the prosecutor. A company which self-reports has no right to a DPA, or even a right to be invited to negotiate a DPA. The Code of Practice emphasises that “an invitation to negotiate a DPA is a matter for the prosecutor’s discretion.”337 If the company’s full co-operation is not subsequently forthcoming, the prosecutor should not be considering inviting the company to enter into a DPA. We believe this is clear. The Fraud Advisory Panel told us that “in two cases, Sweett338 and Barclays,339 DPAs were declined by the SFO due to a lack of apparent co-operation by the companies.”340
273.However, as Ms Hawley said, “you can get no selfreport and very good cooperation”; Rolls-Royce is the prime example. In his judgment in that case Sir Brian Leveson said:
“The fact that an investigation was not triggered by a self-report would usually be highly relevant in the balance but the nature and extent of the co-operation provided by Rolls-Royce in this case has persuaded the SFO not only to use the word “extraordinary” to describe it but also to advance the argument that, in the particular circumstances of this case, I should not distinguish between its assistance and that of those who have self-reported from the outset. Given that what has been reported has clearly been far more extensive (and of a different order) than may have been exposed without the co-operation provided, I am prepared to accede to that submission.”341
274.The question which arises is whether the role of self-reporting should be formalised. Pinsent Masons, an international law firm, told us:
“There should be a clear written process that, if a company does not self-report, it could (with co-operation and remediation) still potentially qualify for DPA. On the other hand, if a company does self-report, the clear written process should contain a presumption that the company will get a DPA, unless a number of exceptions apply such as the self-report not being full and frank or if the company subsequently offered no co-operation following its initial self-report or disclosure.”342
Stewarts Law wrote:
“DPAs are, in our view, being very tightly restricted as to their availability and unnecessarily so. By that we mean that the SFO is failing to offer DPAs as a result of the application of unnecessarily stringent entry requirements. As seen with Rolls Royce, such stringency is capable of relaxation; the requirements should be adjusted with greater frequency.”343
275.We do not know whether the views of these firms are perhaps coloured by experiences they have had with companies which had not self-reported and were not offered a DPA. It seems to us too simplistic to suggest that there should be a presumption, whether statutory or in the Guidance, that a company which self-reports should be offered a DPA, and a company which does not, should not. Such a presumption would have too many exceptions. We agree with Ms Hawley that self-reporting is a “key factor”, but the degree of co-operation between the company and the prosecuting authority is at least as important. Each case must be judged on its facts.
Consistency between large and small companies
276.We have referred in paragraph 254 above to the fact that the second DPA to be agreed was with a company with 25 employees. Nevertheless there was a perception among some of our witnesses that a DPA was likely to be more readily available to a large company than to a small one. Amanda Pinto QC thought there was “a feeling, whether or not it is borne out evidentially, that [DPAs] are more likely to be used with bigger rather than smaller corporates, despite what is said about XYZ”.344 Susan Hawley, Policy Director at Corruption Watch, told us:
“There are genuine public confidence issues around DPAs and one of them is that, yes, the big companies can negotiate them. The small companies are much easier to prosecute, including for the substantive offences, which makes the offending more serious. Therefore, the public interest in offering them a DPA is lower, because the offending appears more serious.”345
277.To some extent this view derives from the fact there was no DPA in the case of Skansen Interiors Ltd (SIL).346 UK Finance told us that there had been “extensive commentary on the conviction of a micro-enterprise [SIL] that self-reported but was not offered a DPA and failed to uphold its ‘adequate procedures’ defence at trial”.347 Baker McKenzie wrote that “… concern was expressed over the difference in the approach taken to self-reporting in the Rolls Royce and Skansen Interiors cases.” They suggested that “steps should be taken to ensure that DPAs are seen as available for SMEs as well as large ‘too big to fail’ corporates. It would be unfair and unjustified if DPAs only came to be associated with larger companies.”
278.Certainly those associated with Skansen, from its self-reporting through its negotiations with the City of London Police to the proceedings in court, thought that SIL should have been offered a DPA, and were led to believe that they would be offered one. Ian Pigden Bennett, the former CEO of the Skansen Group, wrote that “Despite verbal CPS agreement via their Barrister in Southwark Crown Court to enter into a Deferred Prosecution Agreement this was reneged on by the CPS as they believed it was in the Public Interest to prosecute the company.” 348
279.This was confirmed by Iskander Fernandez, who at the time was working as an associate at Cameron McKenna in SIL’s legal team:
“I was at court on that day when discussions were had between the defence and the prosecution counsel about a DPA and how that could work. Following a very short conversation with a reviewing lawyer at the CPS, prosecution counsel approached us and said, in the presence of Mr Pigden-Bennett, that the company would be invited to enter into discussions on whether a DPA could be entered into. That was mentioned in court, and in fact a plea was not taken from the company on that date for that precise reason. It was mentioned to Her Honour Judge Deborah Taylor on the day that it would be best for the proceedings to be adjourned to allow those discussions to take place.”349
280.Commenting on this evidence Max Hill QC, the Director of Public Prosecutions, wrote to explain that this was not the way the DPA procedure works.350
“The current Code and Criminal Procedure Rules anticipate that all discussions with the corporate will be precharge. Therefore, if the corporate wishes the prosecution to consider issuing an invitation to commence formal negotiations in relation to a DPA, there will have to be preliminary discussions between the two to explore whether it would be a possibility. If, following these discussions, it appears a DPA may be an option then a letter of invitation will be issued as required by paragraphs 3.1–3.5 and 3.11 of the DPA Code. If, during these formal discussions, it appears the corporate has not brought itself within the eligible criteria then the prosecution will proceed. … The CPS did not issue a letter of invitation under paragraphs 3.1–3.5 and 3.11 of the DPA Code to Skansen, therefore that case did not reach the stage of formal negotiations.”
While we are grateful for this explanation, we believe it is unfortunate that Counsel for the prosecution was understood to be giving a different impression.
281.Most of our witnesses did not believe that small companies were unfairly treated. Hannah von Dadelszen was clear that the size, structure or assets of a company would be relevant to calculation of the financial penalty, but would not on their own affect whether or not a DPA would be offered: “It is not about the money; it is about doing justice to the situation.”351 Michelle Crotty, the Director and Deputy Head of Office, Attorney General’s Office, told us: “A self-referral in itself is not sufficient to get a deferred prosecution agreement. I do not believe [in the case of Skansen] it was related to the size of the organisation; it was more about the conduct once the referral had been made.”352 In the end, whatever other arguments there might have been in favour of offering a DPA to SIL, this would not have been possible simply because the company was dormant and had no assets. This was agreed by Iskander Fernandez.353
282.In oral evidence Mr Argar noted that there have now been 45 prosecutions of large companies, which he termed “a significant number”, and only “a very small number” of DPAs, with one being “a small to medium-sized company”. Consequently, Mr Argar said, “There is no aversion to prosecuting large companies … I do not think the evidence thus far on prosecutions and DPAs bears out the suggestion that this is weighted against smaller companies.”354
283.We believe it is too early in the life of the DPA regime to tell whether there is in fact a bias in favour of large companies being offered DPAs. We would be concerned if it transpired that this was the case, and we hope the CPS and SFO will ensure that smaller companies with fewer resources will be treated fairly and will be offered DPAs in appropriate cases.
Financial penalties
284.The first requirement that a DPA may impose on the company is “to pay to the prosecutor a financial penalty”.355 The judge, in approving the DPA, will need to be satisfied that the amount of the proposed penalty is appropriate, and will need to take into account paragraph 5(4) of Schedule 17 to the Crime and Courts Act 2013 which states:
“The amount of any financial penalty agreed between the prosecutor and P must be broadly comparable to the fine that a court would have imposed on P on conviction for the alleged offence following a guilty plea.”
285.Section 125(1) of the Coroners and Justice Act 2009 provides that when sentencing for offences committed after 6 April 2010:
“Every court—
(a) must, in sentencing an offender, follow any sentencing guidelines which are relevant to the offender’s case, and
(b) must, in exercising any other function relating to the sentencing of offenders, follow any sentencing guidelines which are relevant to the exercise of the function,
unless the court is satisfied that it would be contrary to the interests of justice to do so.”356
286.The Sentencing Council Guidelines on Reduction in Sentence for a Guilty Plea (the Guilty Plea Guidelines)357 state: “The maximum level of reduction in sentence for a guilty plea is one-third.” This maximum discount is to be granted only where the guilty plea is entered on the first day of the proceedings at the outset. A guilty plea entered subsequently attracts a maximum discount of one quarter, going down to “a maximum of one-tenth on the first day of trial having regard to the time when the guilty plea is first indicated to the court relative to the progress of the case and the trial date …. The reduction should normally be decreased further, even to zero, if the guilty plea is entered during the course of the trial.”
287.There are however other guidelines specifically developed to deal with bribery cases: the Sentencing Guidelines for Fraud, Bribery and Money Laundering (the Bribery Guidelines).358 These have a section dealing specifically with offences by corporate offenders, including offences under sections 1, 2, 6 and 7 of the Bribery Act. Co-operation is referred to at Step Four as one of the “factors reducing seriousness or reflecting mitigation” which are to be considered by the court when determining whether any adjustment is required to the multiplier used for calculating the fine. For a corporate offender co-operation is described as follows: “corporation co-operated with investigation, made early admissions and/or voluntarily reported offending”. In addition, the court is required, at Step Six, to “consider any factors which would indicate a reduction, such as assistance to the prosecution”. Finally Step Seven, headed “Reduction for guilty pleas”, states that “The court should take into account any potential reduction for a guilty plea in accordance with section 144 of the Criminal Justice Act 2003 and the Guilty Plea Guideline[s].”
288.Thus, while the Guilty Plea Guidelines appear to set a one-third discount as the maximum, in the Bribery Guidelines this is only the final step after any discounts for co-operation, self-reporting and assistance to the prosecution have already been made. This is clear from the DPA Code of Practice, which states that:
“The extent of the discretion available when considering a financial penalty is broad. The discount for a guilty plea is applied by the sentencing court after it has taken into account all relevant considerations, including any assistance given by P [the company being considered for a DPA]. The level of the discount to reflect P’s assistance would depend on the circumstances and the level of assistance given, and the parties should be guided by sentencing practice, statute and pre-existing case law on this matter.”359
289.It is not the judge who initially decides the amount of any financial penalty and the discount, if any, which should apply. These will have been provisionally agreed between the prosecutor and the company during their negotiations on the terms of a DPA, and the judge will first become aware of them at the application for a preliminary declaration under paragraph 7 of Schedule 17. At that stage the court is considering whether entering into a DPA is “likely” to be in the interests of justice and that the proposed terms are fair, reasonable and proportionate. If at that stage the judge considers that the proposed financial penalty, or the proposed discount, is too low or too high, he has the opportunity to say so, to decline to make the declaration, and to suggest to the parties that they should make a further application with different terms.
290.Sir Brian Leveson told us that in one of the four cases to date he had not approved the application on the first occasion: “I made a number of points to the SFO and to the company concerned. In effect, I told them to go away and think again … They did think again. Then the parties came back and I was prepared to be satisfied.”360 Since the hearing was in private, we do not know the reason why Sir Brian did not approve the application on the first occasion, and whether this was in any way concerned with the financial penalty; but this would be the judge’s opportunity to make sure that the proposed penalty and discount were appropriate.
291.In the first case, Standard Bank, Sir Brian Leveson concluded in his preliminary judgment that:
“a court must take into account the stage in the proceedings the offender indicated his intention to plead guilty and the circumstances in which the indication was given. In the present case, Standard Bank promptly reported its own conduct and co-operated with the SFO’s subsequent investigation: a full reduction of one third is therefore entirely justified and appropriate.”361
“A full reduction of one third” is what is provided by the Guilty Plea Guidelines alone. It does not seem that Sir Brian was invited to consider whether a discount greater than one-third would be appropriate for any of the reasons given in steps Four or Six of the Bribery Guidelines.
292.In the next DPA case, XYZ was a small company, and in his preliminary judgment Sir Brian Leveson identified the nub of the matter as:
“At what level of criminality is it necessary simply to allow the SME to become insolvent and to what extent is it appropriate to mitigate the financial penalty, knowing that the SME is only able to make any substantial payment with the support of the substantial company of which the SME is a wholly owned subsidiary?”362
Later in that judgment he stated:
“In addition, given that the admissions are far in advance of the first reasonable opportunity having been charged and brought before the court, that discount can be increased as representing additional mitigation. In the circumstances, a discount of 50% could be appropriate not least to encourage others how to conduct themselves when confronting criminality as XYZ has.”363
In his final judgment he accepted that, whatever the size of the discount, the sum calculated as the financial penalty would have been wholly unrealistic for XYZ, but he repeated that “discounting that sum for a guilty plea, a discount of 50% was appropriate.”364
293.We have explained above how in the case of Rolls-Royce, the third and, at the date of this report, still the latest Bribery Act case resolved by way of a DPA, the company did not self-report. In the passage of his judgment dealing with the appropriate discount, Sir Brian Leveson began by stating: “It is argued that, taking into account the agreement by Rolls-Royce to resolve by way of DPA the broad range of conduct in the proposed draft indictment, a full reduction of one third of the proposed penalty is appropriate.”365 He then quoted the passage from his preliminary judgment in the XYZ case which we have quoted above, suggesting that a 50% discount would have been appropriate in that case. He went on to summarise the factors which demonstrated the “extraordinary co-operation” which the company had given, a view fully supported by the SFO,366 and he concluded: “In order to take account of this extraordinary co-operation, I repeat the views which I expressed above and confirm that a further discount of 16.7% is justified taking the total discount of the penalty to 50%.”367
294.Thus in the space of 14 months we moved from a full one-third discount being “entirely justified and appropriate” in a case of self-reporting (Standard Bank, November 2015), to a 50% discount being appropriate in a case of self-reporting “not least to encourage others how to conduct themselves when confronting criminality” (XYZ, June 2016), to a 50% discount being appropriate where the company, though it did not self-report, demonstrated “extraordinary co-operation” (Rolls-Royce, January 2017).
295.As we have explained,368 Tesco was not a case of bribery but of false accounting contrary to section 17 of the Theft Act 1968. At the time we were taking evidence the DPA, and the judgment of Sir Brian Leveson approving it, were still subject to reporting restrictions which were lifted only on 23 January 2019. We can now see that Tesco self-reported and displayed what the SFO described as an “exemplary standard of co-operation”. Sir Brian Leveson quoted from his judgment in the XYZ case, as he had in the Rolls-Royce case, and concluded that a total discount of 50% was justified.369
296. When the statutory provisions governing DPAs were receiving what was in effect their second reading, Lord Beecham, speaking for the Labour Opposition, said: “I confess to an initial reluctance to embrace a situation in which, in the area of economic crime … one class of defendants should have the opportunity of buying off a prosecution for a one-third discount or, to be more precise, an up to one-third discount, of the fine they might otherwise have to pay.”370 We think Lord Beecham’s reluctance would have been greater, and widely shared, had he known that a one-third discount, far from being a maximum, might come to be treated as a starting point from which greater discounts might be calculated.
297.In relation to the Bribery Act cases Sir Brian Leveson told us:
“Here [in the judgment] you can see in one place, or several places, how I have gone about the job, and you are entitled to say, “Actually, we don’t think you’ve done this very well and therefore we will consider the legislation or provide a report that says this ought to be thought about differently”.371
298.The discretion given to the judge is extremely broad. In each individual case Sir Brian had the advantage of considering all the details, with submissions from Counsel, before reaching his conclusion. We are therefore far from saying that he did not in each case reach the right conclusion. But, given the volume of evidence we have received on this issue, it is right that, as Sir Brian says, we should consider whether “this ought to be thought about differently”; whether amendments are needed to the statute, or whether the Bribery Guidelines, which apply specifically to offences under the Act but not expressly to DPAs, should be changed.372
299.The evidence we have received points in both directions. A number of firms of solicitors suggested in their written evidence that a 50% discount should be the starting point, and might even be too low. Stewarts commented that:
“The latest move to increase the discount to one of 50% as a maximum available, from the 33% recommended by the Sentencing Council in the relevant Guideline, is insufficient. In the USA the comparable figure of 50% is used as a discount, but that is applied to the lowest range of financial penalty available. In the UK, that is not the case. The result is that the distinction in the UK is not sufficient and may well therefore deter initial self-reporting. No doubt this was not the intention but it requires urgent adjustment.”373
300.Peters and Peters thought that “… the difference between a fine and confiscation post-conviction, and a financial penalty and disgorgement as part of a DPA is not sufficiently wide. Downward adjustment to the financial consequences which flow from a DPA may further encourage self-reporting.”374 Greenberg Traurig’s view was similar: “… it remains the case that the marginal extra discount for going through a DPA process versus pleading guilty is 17%. We do not consider a 17% discount enough to encourage Self Reports to a material extent.”375 Pinsent Masons welcomed “the introduction of higher discounts as a means of making DPAs more attractive to companies and thus useful to prosecutors, particularly in light of the other substantial financial obligations imposed on companies under DPAs by way of compliance costs amongst others.”376
301.We are not persuaded by these views. We do not agree that limiting the additional discount to 17%, over and above 33%, would discourage or deter self-reporting. These comments take insufficient account of the chief incentive towards self-reporting which a DPA brings: the avoidance of a criminal conviction. The total cost to Rolls-Royce of the DPA, leaving aside the cost to them of the investigation, and the compliance costs, but including disgorgement of profit, financial penalty with a 50% discount, and the costs of the SFO, amounted to over £500 million. If Rolls-Royce had received no discount at all their financial penalty, and so the total cost to them, would have increased by some £239 million, no mean sum even for a company of that size. But a criminal conviction would have made them ineligible for public procurement contracts amounting to up to 30% of their order book,377 the cost of which would, we believe, have taken this into a different league.
302.Amanda Pinto QC suggested that “whether you are interested in public procurement contracts … is the only reason you would potentially go down a DPA route rather than take your chances in court”.378 There are other reasons. Standard Bank, with a conviction rather than a DPA, might have had to cease trading altogether in some jurisdictions. The DPA of HSBC cost that bank $1.9 billion in the United States, but a conviction might have forced the bank to cease trading there, and possibly in other jurisdictions. A further reason for a company to seek a DPA is that the court might not be inclined to offer the full discount, or any discount, to a company which, rather than self-reporting, waited for the conclusion of an investigation to see whether it would be charged, and only pleaded guilty at that stage.
303.Transparency International UK thought there was a danger that a discounted DPA settlement would, perversely, encourage corrupt acts if companies came to see the fines as a calculable cost of doing business that could be factored into a risk-reward analysis. They added: “We are concerned by the fact that the DPA discounting threshold has been unilaterally reduced from 30% to 50%379 without any clear rationale and have further concerns that there will be ever-increasing discounting.”380 We too would be concerned if there was indeed “ever increasing-discounting”, but we believe judicial supervision will ensure that this does not occur.
304.Corruption Watch were not in principle opposed to discounts even as high as 50% if this was needed to encourage self-reporting, but they had doubts as to the way the policy was being developed:
“… if the ultimate policy aim of DPAs is to increase the detection of economic crime, it would be strongly advisable to offer higher discount rates (for instance 50%) in fine levels to companies that self-report, co-operate and implement corporate change, and significant but lesser discount rates (for instance 30%) to fine levels of companies that do not self-report but otherwise behave in an exemplary fashion. This policy should however be developed formally and through consultation. Corruption Watch is concerned that the decision by Sir Brian Leveson, the sole judge currently presiding over DPA hearings so far, to allow a 50% discount in fine level for companies being given DPAs, despite the fact that the Crime and Courts Act specifies only a 30% [sic] discount, raises serious questions about how DPA policy is being developed beyond the original scope intended by Parliament.”381
305.The Crime and Courts Act 2003 does not itself specify any particular level of discount, but states that the amount of any financial penalty must be broadly comparable to the fine that a court would have imposed following a guilty plea. If the Guilty Plea Guidelines stood alone, it would certainly be arguable that any discount of more than one-third would be “beyond the original scope intended by Parliament”. But, as we have said, under the Bribery Guidelines the discount for a guilty plea is only the last step in the calculation of the overall discount which should be applied to the financial penalty.
306.We conclude that the legislation and the two sets of Guidelines, read together, provide adequate guidance, first to the prosecutors and then to the courts, on how to exercise their undoubtedly very broad discretion governing the level of financial penalty and the discount which should apply in any particular case.
307.When the Sentencing Guidelines for Fraud, Bribery and Money Laundering are next amended, they should make clear that they apply not just to sentences for those crimes, but also to the calculation of financial penalties in the case of deferred prosecution agreements, whether for offences under the Bribery Act or for other offences for which DPAs are permissible.
308.Neither the Crime and Courts Act 2013, nor any of the other relevant legislation, nor the current Guidelines, suggest that there should be any distinction between a case which is self-reported and one which is not, when calculating the discount. We share the view of Corruption Watch that, if self-reporting is to be encouraged, it should attract a higher discount than cases which are not self-reported. We therefore believe that the highest level of discount should be available only to a company which has self-reported and given full co-operation. In other cases, even where there has been “extraordinary co-operation”, a company which has not self-reported should normally receive a lesser discount than a company which has done so. And, as we have said, we believe that a company which has not co-operated fully with the prosecutor falls entirely outside the scope of the DPA regime and, if sufficient evidence is available, should be prosecuted for the alleged offence.
309.If self-reporting is to be encouraged, a distinction should be drawn between the discount granted to a company which has self-reported and one which has not.
310.Although, strictly speaking, our recommendations are confined to offences under the Bribery Act, it would be invidious to have different provisions for other offences which can be the subject of DPAs.
Prosecution of individuals
311.Susan Hawley, the Policy Director at Corruption Watch, told us: “Individuals being prosecuted where there is a DPA is crucial for public confidence. This issue of public confidence is universal wherever these instruments have been introduced. You have seen a lot of criticism in the US: why are senior executives getting off when these companies are just paying fines?”382 This no doubt is why, as Roger Burlingame, a partner in Dechert LLP, explained to us, in the US co-operation to obtain a DPA “now entails providing human beings for the Government to prosecute”.383
312.Self-reporting, and the negotiation of a DPA, inevitably involve the company in providing law enforcement agencies with evidence, information and analysis that it would otherwise be impossible or impractical for them to obtain. As Eversheds Sutherland pointed out, “That evidence, information and analysis may be leveraged to inform or assist the prosecution of culpable individuals.”384 Baker McKenzie made the same point: “The co-operation necessitated by the use of DPAs grants the SFO access to information which increases the likelihood of individual prosecutions and, in fact, forces companies to provide information and co-operate with the prosecutor in relation to the prosecution of individuals.”385 Paragraph 13 of Schedule 17 to the Crime and Courts Act 2013 sets out how that material may be used in subsequent proceedings.
313.Transparency International UK were concerned “that DPAs will be used as an almost automatic way of getting cases resolved off the books, which will lead to a fine for the company but will not result in individual prosecutions. …. It is clear that if corruption has occurred, individuals must be involved, both actively and complicity. Punishing senior individuals is the best possible deterrent to others.”386 Commenting on this Sir Brian Leveson said:
“I will challenge the premise because I do not agree with it. Critical to my approach to DPAs over the four that I have done has been that those who are responsible for the criminality face prosecution. First, they are no longer in the company. What is not permissible for me is that the company self-reports but does not root out the cause of the problem, because, as I said at the very beginning, a company is just a structure, just the scaffolding. It is the people who are operating it. So I am afraid that I cannot contemplate agreeing a DPA if the people who were responsible for the corrupt payments or other criminality remained in the company. It would just demonstrate the fear that Transparency International identifies … It is absolutely critical that the individuals in these circumstances are prosecuted, however senior or junior in the company they are.”387
314.Our only witness who showed any doubt about the relationship between DPAs and individual prosecutions was Pinsent Masons, who wrote:
“The lack of a formal leniency policy or process for individuals, directors and business owners can act as major disincentive to self-report. Building in some degree of leniency process … to support individuals who are party to the decision to self-report would significantly increase corporate self-reporting.”388
We do not know if this view is based on facts or is only speculation, but we believe that before any changes are considered there would need to be clear evidence to substantiate the view that self-reporting is being hindered by the involvement in the process of culpable individuals. If those individuals were still employed by the company it is unlikely that the company would qualify for a DPA at all, whether or not it had self-reported.
315.We share the strongly held views of our witnesses that the DPA process, far from being an alternative to the prosecution of individuals, makes it all the more important that culpable individuals should be prosecuted.
316.The material discovered by prosecutors during the DPA negotiations should assist this. We believe this view is shared by the prosecutors, who will bear in mind their Code of Practice: “It must be remembered that when [the company] self-reports it will have been incriminated by the actions of individuals. It will ordinarily be appropriate that those individuals be investigated and where appropriate prosecuted.”389
317.In negotiations for a DPA, the co-operation expected of a company must include provision of all available evidence which might implicate any individuals, however senior, who are suspected of being involved in the bribery being considered.
318.Although there is no disagreement about the importance of a DPA being followed by the prosecution of the individuals involved, matters are not always so straightforward. In both the Tesco and the Rolls-Royce cases the company has been clear that its own criminal conduct was the result of criminal offences by named senior individuals, and this has also been the view of the SFO. In the Tesco case Sir Brian Leveson said:
“Even more serious is that the investigation of Tesco Stores has revealed clear evidence of what amounts to a serious breach of the criminal law and, without reaching any conclusion (which, in the light of criminal prosecutions that are presently being pursued, at the time of this judgment is still to be determined), implicates senior management.”390
Yet two of the supposedly culpable individuals were held to have no case to answer, and no evidence was offered against the third. In the Rolls-Royce case Sir Brian Leveson emphasised that “the investigation into the conduct of individuals continues and nothing in this agreement in any way affects the prospects of criminal prosecutions being initiated if the full code test for prosecution is met.”391 But on 22 February 2019 the SFO announced that “following a detailed review of the available evidence and an assessment of the public interest there will be no prosecution in this case”.392
319.It is not for us to speculate on why in the Tesco case the evidence, much of it supplied by the company, was not strong enough for prosecutions of the individuals to succeed, or why in the Rolls-Royce case prosecution of the individuals was not even initiated.
Non-prosecution agreements (NPAs)
320.One of the questions in our call for written evidence asked what lessons might be learned from other countries. To this, Stewarts Law replied:
“It is in our view essential that the ‘NPA’ addition in the USA be added to the resolutions available to companies. In the USA, where a self-report is accompanied by full co-operation throughout, it is to be presumed, absent identified features, that an NPA will follow. This additional disposal, added to that of the DPA, is clearly necessary as … there would be an accompanying rebuttable presumption that, in defined circumstances, an NPA would follow.”393
321.Roger Burlingame gave us evidence on international comparisons and explained that in the US the DPA was essentially a confession of misconduct, while the non-prosecution agreement (NPA) followed the same mechanism but did not involve a statement admitting wrongdoing:
“When you have reached resolution with either the non-pros or the DPA you go to court and present the agreement and the court blesses it. There is some discussion among judges about whether they should be rubberstamps in this process. As a practical matter, judges do not play a role. They do not rewrite the agreement, dictate the terms or say whether they are fair.”394
322.Mr Burlingame thought that UK corporate enforcement was “in its adolescence compared to a more mature system in the US.” In his view two differences made the US Department of Justice more effective:
“First, the regime offers more certainty. It does that at a certain cost, which is taking power away from judges and giving it to prosecutors. What companies want in resolving these issues is certainty. When you are dealing with DOJ prosecutors, they can give you the deal and that will be the deal.”395
323.Plea bargaining has never been part of our criminal law. If the maturity and effectiveness of the US system does indeed come at a cost of taking power from judges and giving it to prosecutors, this is a cost we are not prepared to pay.
324.We do not believe that the adoption of non-prosecution agreements along the lines of the United States model would add anything of value to the current law on DPAs.
Conclusions
325.In our call for written evidence we asked for views on whether the introduction of DPAs had been a positive development in relation to offences under the Bribery Act. From all sides of the spectrum, the answer has been a resounding ‘yes’. Sir Brian Leveson explained to us in detail why “having started from the position when I read the Bill that I was dead against them [DPAs], I am now in quite the other camp.”396
326.The SFO told us in their written evidence:
“The SFO view is that DPAs represent an outcome which ensures that justice can be done, whilst protecting the interests of innocent employees and shareholders as far as possible. A DPA is not a soft option and the penalties involved in a DPA are carefully balanced to punish the company involved appropriately without discouraging them from entering into a DPA.”397
In oral evidence the Director, Lisa Osofsky, and Hannah van Dadelszen, the Head of Fraud, supported this.398 Michelle Crotty, the Director/Deputy Head of Office at the Attorney General’s Office, thought DPAs had brought in a new relationship between the SFO and business in encouraging early self-referrals from business when they uncover behaviour that is not acceptable. She added: “Apart from the prosecution side of things, there is also some emerging evidence that they are encouraging business to proactively put in their own compliance regimes and so achieve the aim of the Act.”399
327.From the other side of the spectrum, PwC wrote:
“The introduction of DPAs has certainly been a positive development. Key benefits include: the powerful incentive on companies to self-report; the resulting potential increase in prosecutions of corporates and individuals, as the authorities are made aware of additional instances of offending; and potential for quicker and less costly resolution of criminal cases (albeit that this point must not be over-exaggerated since in complex cases conclusion of a DPA can still require significant time and resource, particularly as the authorities seek confirmation that no further wrongdoing is likely to be uncovered).”400
City solicitors who saw DPAs as a positive development included Baker McKenzie, Clifford Chance, Greenberg Traurig and Pinsent Masons.401
328.We believe that in the short time they have been in operation deferred prosecution agreements have proved to be an excellent way of handling corporate bribery, providing an incentive for self-reporting and for co-operating with the authorities.
296 The Bill followed an unusual procedure. It was introduced in the House of Lords on 10 May 2012 and completed its Committee stage in July 2012. But the Government wished to include in it further major provisions, including the Schedule on DPAs, and on 30 October 2012 there was an extra day in Committee when the new provisions were introduced. This was treated as the Second Reading of those provisions, and the second extra day on 13 November 2012 was in effect the Committee stage for those provisions. The Report stage for those provisions was on 12 December 2012.
297 Statement of Facts by the United States Department of Justice, 11 December 2012, para 9: https://www.justice.gov/sites/default/files/opa/legacy/2012/12/11/dpa-attachment-a.pdf [accessed 4 March 2019]
298 Then approximately £1.2 billion.
299 Statement of Facts by the United States Department of Justice, 11 December 2012, para 2. HSBC kept to all the requirements of the agreement, which expired on 11 December 2017.
300 “The OCC [Office of the Comptroller of the Currency] indicated that a guilty plea (or conviction) would require a determination by the Comptroller on whether to hold a hearing to consider revoking the bank’s US charter.” US Treasury documents quoted in the Congressional Committee Report “Too Big to Jail”. ‘Too Big to Jail Congressional Report’, The New York Times (15 July 2016), para 15: https://www.nytimes.com/interactive/2016/07/15/business/document-Too-Big-to-Jail-Congressional-Report.html [accessed 21 January 2019]
301 Crime and Courts Act 2013 (Commencement No. 8) Order 2014, (SI 2014/258)
302 The offences are listed in Part 2 of Schedule 17. They include the common law offences of conspiracy to defraud and cheating the public revenue, and offences under named provisions of a large number of statutes. In addition to the Bribery Act 2010 these include the Theft Act 1968, the Forgery and Counterfeiting Act 1981, the Financial Services and Markets Act 2000, the Proceeds of Crime Act 2002, and the Fraud Act 2006. Other statutes subsequently added include the Criminal Finances Act 2017.
303 Crime and Courts Act 2013, section 61(13)(g)
306 Crime and Courts Act 2013, Schedule 17, paragraph 3.
307 SFO, Deferred Prosecution Agreements Code of Practice, February 2014, paras 2.2–2.3: https://www.cps.gov.uk/sites/default/files/documents/publications/dpa_cop.pdf [accessed 4 March 2019]
309 Crime and Courts Act 2013, Schedule 17, paragraph 7
310 Crime and Courts Act 2013, Schedule 17, paragraph 8
313 See paras 256–260 below.
314 Judgment of Sir Brian Leveson P in Serious Fraud Office v Rolls-Royce plc and Rolls-Royce Energy Systems Inc, 17 January 2017, para 53: https://www.judiciary.uk/wp-content/uploads/2017/01/sfo-v-rolls-royce.pdf [accessed 21 January 2019]
315 Facts taken from the final judgment of Sir Brian Leveson P in Serious Fraud Office v Standard Bank plc, 30 November 2015, paras 6–8: https://www.judiciary.uk/wp-content/uploads/2015/11/sfo-v-standard-bank_Final_1.pdf [accessed 21 January 2019]
316 Final judgment of Sir Brian Leveson P in Serious Fraud Office v Standard Bank plc, 30 November 2015, para 13
318 Facts taken from the final judgment of Sir Brian Leveson P in Serious Fraud Office v XYZ Limited, 8 July 2016, paras 1–7. The published version of the judgment (including the names of the companies) was redacted because there were, and still are, ongoing criminal proceedings. In paras 16–17 of his preliminary judgment in that case Sir Brian explained that 24 of the 28 implicated contracts pre-dated the coming into force of the Bribery Act, and four post-dated it. The draft indictment therefore included counts of conspiracy to corrupt, contrary to section 1 of the Prevention of Corruption Act 1906, as well as conspiracy to bribe, contrary to section 1 of the Bribery Act 2010, and failure to prevent bribery, contrary to section 7 of the Bribery Act 2010. SFO, News releases, SFO secures second DPA (July 2016): https://www.sfo.gov.uk/2016/07/08/sfo-secures-second-dpa/ [accessed 21 January 2019]
319 Ibid., final judgment, para 17
320 See para 292 below.
321 Serious Fraud Office v Rolls-Royce plc and Rolls-Royce Energy Systems Inc., judgment of 17 January 2017, para 4: https://www.judiciary.uk/wp-content/uploads/2017/01/sfo-v-rolls-royce.pdf [accessed 21 January 2019]
322 Serious Fraud Office v Rolls-Royce plc and Rolls-Royce Energy Systems Inc., judgment of 17 January 2017: https://www.judiciary.uk/wp-content/uploads/2017/01/sfo-v-rolls-royce.pdf [accessed 4 February 2019]
323 The figure given by Lisa Osofsky, the Director of the SFO, was 30 million, see Q 157 (Lisa Osofsky).
325 Serious Fraud Office v Tesco Stores Ltd, judgment of 10 April 2017: https://www.judiciary.uk/wp-content/uploads/2019/01/sfo-v-tesco-stores-ltd-2017-approved-final.pdf [accessed 25 February 2019]
326 HL Deb, 30 October 2012, cols 570–571 (Lords Chamber on re-commitment)
327 Ministry of Justice, Bribery Act 2010: Post Legislative Scrutiny Memorandum, Cm 9631, June 2018, paras 114–123: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/713452/bribery-act-2010-post-legislative-scrutiny-memorandum.pdf [accessed 4 March 2019]
328 SFO, Deferred Prosecution Agreements Code of Practice, February 2014: https://www.cps.gov.uk/sites/default/files/documents/publications/dpa_cop.pdf [accessed 4 March 2019]
331 The Australian Crimes Legislation Amendment (Combatting Corporate Crime) Bill sets up a DPA regime which closely follows the system in the Crime and Courts Act 2013. However approval of the DPA is not a matter for the courts, but for an “approving officer” who is appointed by the minister and is a “former judicial officer” with “the knowledge or experience necessary to properly exercise the powers of an approving officer” (Schedule 2, new section 17G inserted in the Director of Public Prosecutions Act 1983).
332 Crime and Courts Act 2013, Schedule 17, paragraph 8(7)
334 SFO, Deferred Prosecution Agreements Code of Practice, February 2014, paras 2.8.2.i and 2.9.1–2.9.3: https://www.cps.gov.uk/sites/default/files/documents/publications/dpa_cop.pdf [accessed 4 March 2019]
337 SFO, Deferred Prosecution Agreements Code of Practice, February 2014, para 2.1: https://www.cps.gov.uk/sites/default/files/documents/publications/dpa_cop.pdf [accessed 4 March 2019]
338 The SFO opened a criminal investigation into Sweett Group plc in July 2014 in relation to its activities in the United Arab Emirates. The company was charged with an offence under section 7 of the Bribery Act to which it pleaded guilty on 18 December 2015. On 19 February 2016 it was ordered to pay £2.25 million in fine and confiscation.
339 The SFO opened a criminal investigation into Barclays plc and Barclays Bank plc (Barclays) in August 2012. The charges were not however under the Bribery Act but under the Companies Act 1985. The charges against Barclays were dismissed by the Crown Court on 21 May 2018. On 23 July 2018 the SFO applied to the High Court to re-instate the charges, but on 26 October 2018 the High Court ruled against the SFO. Proceedings against the individuals allegedly involved are ongoing, and reporting restrictions are in place.
341 Serious Fraud Office v Rolls-Royce plc and Rolls-Royce Energy Systems Inc., judgment of 17 January 2017, para 22: https://www.judiciary.uk/wp-content/uploads/2017/01/sfo-v-rolls-royce.pdf [accessed 4 March 2019] And see the evidence of Hannah von Dadelszen, Head of Fraud at the SFO, quoted in para 259 above.
346 We have set out the details of that case in the previous chapter (paras 218–226).
355 Crime and Courts Act 2013, Schedule 17, paragraph 5(1)(a)
356 Coroners and Justice Act 2009, section 125(1)
357 Sentencing Council, Reduction in Sentence for a Guilty plea Definitive Guideline (June 2017): https://www.sentencingcouncil.org.uk/wp-content/uploads/Reduction-in-Sentence-for-Guilty-plea-Definitive-Guide_FINAL_WEB.pdf [accessed 13 February 2019]
358 Sentencing Council, Fraud, Bribery and Money Laundering Offences: Definitive Guideline (October 2014): https://www.sentencingcouncil.org.uk/wp-content/uploads/Fraud_bribery_and_money_laundering_offences_-_Definitive_guideline.pdf [accessed 13 February 2019]
359 SFO, Deferred Prosecution Agreements Code of Practice, February 2014, para 8.4: https://www.cps.gov.uk/sites/default/files/documents/publications/dpa_cop.pdf [accessed 4 March 2019]
361 Preliminary judgment of Sir Brian Leveson P in Serious Fraud Office v Standard Bank plc, 4 November 2015, para 57.
362 Preliminary judgment of Sir Brian Leveson P in Serious Fraud Office v XYZ Limited, 24 June 2016, para 3, quoted in his final judgment in that case of 8 July 2016, para 4
363 Preliminary judgment of Sir Brian Leveson P in Serious Fraud Office v XYZ Limited, 24 June 2016, para 57, quoted in his judgment of 17 January 2017 in Serious Fraud Office v Rolls-Royce plc and Rolls-Royce Energy Systems Inc., para 120
364 Final judgment of Sir Brian Leveson P in Serious Fraud Office v XYZ Limited, 8 July 2016, paras 23–24
365 Judgment of Sir Brian Leveson P in Serious Fraud Office v Rolls-Royce plc and Rolls-Royce Energy Systems Inc., 17 January 2017, para 119
366 Paras 258–259 above
367 SFO v Rolls Royce PLS (2017), para 123: https://www.judiciary.uk/wp-content/uploads/2017/01/sfo-v-rolls-royce.pdf [accessed 4 March 2019]
368 Para 261 above
369 Final judgment of Sir Brian Leveson P in SFO v Tesco Stores Ltd, 10 April 2017, paras 93–95: https://www.judiciary.uk/wp-content/uploads/2019/01/sfo-v-tesco-stores-ltd-2017-approved-final.pdf [accessed 24 January 2019]
370 HL Deb, 30 October 2012, cols 571–572 (Lords Chamber on re-commitment)
372 Schedule 17 to the Crime and Courts Act 2013 came into force on 24 February 2014. The Bribery Guidelines were effective from 1 October 2014, but make no mention of DPAs.
377 Judgment of Sir Brian Leveson P in Serious Fraud Office v Rolls-Royce plc and Rolls-Royce Energy Systems Inc., 17 January 2017, para 53
379 Sic. The reduction of the financial penalty is the result of the increase in the discount.
389 SFO, Deferred Prosecution Agreements Code of Practice, February 2014, para 2.9.1: https://www.cps.gov.uk/sites/default/files/documents/publications/dpa_cop.pdf [accessed 4 March 2019]
390 Serious Fraud Office v Tesco Stores Ltd, judgment of 10 April 2017, para 16: https://www.judiciary.uk/wp-content/uploads/2019/01/sfo-v-tesco-stores-ltd-2017-approved-final.pdf [accessed 25 February 2019]
391 Serious Fraud Office v Rolls-Royce plc and Rolls-Royce Energy Systems Inc., judgment of 17 January 2017, para 24.
392 SFO, Statements, ‘SFO closes GlaxoSmithKline investigation and investigation into Rolls-Royce individuals’ (February 2019): https://www.sfo.gov.uk/2019/02/22/sfo-closes-glaxosmithkline-investigation-and-investigation-into-rolls-royce-individuals/ [accessed 25 February 2019]