It was just over a decade ago that a strange new beast entered the UK’s legal scene. Introduced in the Crime and Courts Act 2013 (CCA), Deferred Prosecution Agreements (DPAs) were an innovation designed to adopt a pragmatic approach to economic crimes, including
those of corruption and bribery (and in relation to criminal conduct that occurred prior to 2013-2014).
DPAs were to be applied in those cases which were serious (but not too serious) and where their complexity might tie up resources on both sides – the prosecutors and the accused – to no great benefit to either. DPAs would offer, depending on your
perspective, a shortcut to justice or a practical business outcome. What’s not to like?
It was not until 2017, however, that the full impact of DPAs was felt, when one of the oldest and most prestigious corporate names in the British economy – Rolls Royce - secured for itself a DPA. If it works for Rolls Royce, one might think, then it should
be good enough for the rest of us – a point borne out just a few months later when high street giant Tesco also entered into a DPA agreement with the Serious Fraud Office (SFO) resulting in Tesco Limited paying a £129 million financial penalty and the SFO’s
costs.
DPAs had gone mainstream leaving just a mild bruise on the corporate reputation and a shallow dent in the bank account. The legal costs and management time which are necessarily incurred during criminal proceedings are avoided (subtracted against cost of
compliance procedures). Moreover, DPAs enabled companies to demonstrate transparent remorse for admitted wrongdoing to the market without putting the company’s future operations in jeopardy. The reputational risk was moderate - did any shoppers boycott Tesco
because of its DPA? Unlikely. And on top of that DPAs had also enabled the prosecutors to chalk up some much-needed positive results.
All too good to be true? Maybe.
A selective option
The key point about DPAs, it became evident over time, was that they would be available on a very selective basis. Despite being now in use for ten years the SFO has entered into just 12 DPAs over that period for instances ranging through bribery, fraud
and false accounting. The rule is that the more serious the offence the more likely that the usual prosecution procedures will be followed. And by seriousness it is not just a matter of the value of any gain or loss, but also the risk of harm to the public
and other specific groups including shareholders, employees and creditors as well as to the stability and integrity of financial markets and international trade. The international impact of the crime will also be taken into account.
So, in effect, the field of opportunity for accessing DPAs is relatively narrow and on balance the advantages probably accrue most to the prosecutors. It means that they can avoid the risks, delay and expense inherent in jury trials that often revolves around
complex evidence which twelve members of the general public, fresh off the street and with no preparation, might find difficult to understand. It also means that under-funded investigation and enforcement agencies are relieved of the burden of highly demanding
preparation for court cases. Additionally, they now have a carrot to offer business to incentivise cooperation and self-reporting. And for the SFO in particular the opportunity of success in concluding DPAs represents a big advance on its more modest performance
in the normal trial and conviction of individual wrongdoers.
Individuals still at risk
What might also give pause for thought, however, is that the acceptance of a DPA does not shield culpable individuals within the organisation who are under suspicion. With the exception of strict liability offences and conduct under section 7 Bribery Act
2010 (relating to a corporation’s failure to prevent bribery offences), corporate offences are dependent on criminal culpability borne by a “directing mind.” This falls largely, though not exclusively, on senior directors and executives. The extensive evidence-gathering
as part of the DPA process might well place prosecutors in a stronger position when pursuing individuals within that organisation.
So, it is important to be clear that for senior management DPAs do not offer the chance of a quick scot-free get-away.
In the Tesco case for example, four senior managers were dismissed and three of these faced subsequent prosecutions for offences identical to those covered by the DPA. On the other hand, the track record for prosecutors in these individual cases has been
almost consistent failure. The SFA only secured its first individual conviction in March 2023 connected to a 2021 DPA with Bluu Solutions paying a fine of £2.5 million for bribery. The other accused individuals were acquitted following trial in January 2023.
Previous instances of high-profile failures to secure convictions include acquittals (viz. Sarclad), a discontinuation of the prosecution (viz. G4S and Serco), and a lack of charges against individuals (viz. Rolls-Royce). Meanwhile even the three Tesco managers
were acquitted of those charges in January 2019.
Conclusions
The availability of DPAs offers a mixed picture. They are undoubtedly a useful tool for law enforcement agencies and companies; for both parties, the avoidance of a complex, lengthy and expensive trial fraught with significant risk is attractive. But they
cannot be seen as a ‘Get out of jail’ card or a way of cleansing past conduct without wider, non-pecuniary ramifications for the individuals responsible.
For corporations, given that the core element of the DPA is a financial penalty, they might be treated as a heavy cost of doing business, especially for those corporations at risk of foreign bribery charges. Add in that the SFO has finally secured a conviction
(despite the series of previous failures) should serve as a warning to senior individuals. Even if a trial were to collapse, those in the regulated sector may then be pursued by the FCA under its Senior Managers and Certification Regime.
The moral therefore is clear. Yes, DPAs exist, and they do offer some advantages. But far better is to put compliance measures in place so that you never need to rely on them.