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Deferred prosecution agreements

On 10 April 2017, a deferred prosecution agreement (DPA) agreed between the UK Serious Fraud Office (SFO) (the body responsible for the investigation and prosecution of complex fraud and corruption in the UK) and Tesco Stores Limited was approved by the Court. This is the fourth DPA to be entered into since their introduction in February 2014, the third (and largest one to date) being agreed with Rolls-Royce on 17 January 2017.

DPAs originate from the US and are public, judge-approved agreements which involve an organisation admitting wrongdoing and typically agreeing to pay a fine and compensation as well as adhere to terms enhancing compliance procedures and ongoing co-operation. In return, prosecutors agree to suspend (and subsequently discontinue, if the terms of the DPA are complied with) criminal charges against the organisation. They are available to bodies corporate, partnerships and unincorporated associations but not to individuals. A judge must approve a DPA; they must be satisfied that it would be in the interests of justice and that its terms are fair, reasonable and proportionate in all the circumstances, including the seriousness of the offending.

This article takes a look at the DPAs agreed to date and any messages that can be taken home from them.

The wrongdoing

The four DPAs reached to date involve the following wrongdoing:

Tesco: the SFO launched a criminal investigation into accounting practices at Tesco in October 2014 after the company admitted it had overstated profits by £263m by incorrectly booking payments from suppliers over a four-month period. It later revised this overstatement to £326m.

Rolls-Royce: following the SFO investigation, it faced 12 counts of bribery, corruption and fraud, including the making of corrupt payments in India and Russia and failing to prevent bribery in Nigeria and Indonesia, taken collectively, over 24 years.

The second DPA agreement involved conspiracy to corrupt and bribe, as well as failure to prevent bribery in foreign jurisdictions, taken collectively, over a nine-year period.

ICBC Standard Bank: a single, nine-month long fundraising exercise for the government of Tanzania which amounted to failure to prevent bribery.

Self-reporting & co-operation

The first two DPAs involved corporations identifying a corruption issue and self-reporting to the SFO. This led to the theory that a company must self-report to have any chance of obtaining a DPA. However, with Rolls-Royce, the SFO actually uncovered its corruption after former employees posted allegations on social media, proving that self-reporting is not a prerequisite. Having said this, an important factor in this case was that Rolls-Royce co-operated fully with the SFO’s investigation, with Sir Edward, for the SFO, recognising “the extraordinary cooperation of Rolls-Royce”. Such co-operation entailed voluntary disclosure of internal investigations, with limited waiver of privilege over internal investigation memoranda; providing un-reviewed digital material to the SFO and co-operating with independent counsel in the resolution of privilege claims; agreeing to the use of digital methods to identify privilege issues; co-operating with the SFO’s requests in respect of the conduct of the internal investigation, to include timing of and recording of interviews and reporting of findings on a rolling basis; providing all financial data sought and fully co-operating with the assessments which had to be undertaken. In fact, the judge approving the DPA noted “the company could not have done more to expose its own misconduct, limited neither by time, jurisdiction or area of business”.   

The message: full co-operation with the SFO from an early stage will significantly improve the outcome for companies (even without a self-report) but self-reporting is still a key feature of the profile of a case suitable for resolution by DPA.

Multi-agency outcomes

The SFO liaised with the Department of Justice in the US and the Brazilian Ministério Público Federal to ensure a co-ordinated global resolution of the criminal conduct in the Rolls-Royce matter. It liaised with the FCA on the Tesco matter with the FCA choosing not to impose any financial penalty on Tesco for the civil offence of market abuse in respect of their false accounting and instead requiring Tesco to establish a compensation scheme to compensate certain net purchasers of Tesco plc ordinary shares and listed bonds during a set time period.

The message: these co-ordinated responses between national and international enforcement agencies show the SFO are willing to join up with other agencies and agree joint resolutions (where possible). This is of commercial value to an organisation under investigation as it will ensure they are not effectively punished twice for the same conduct and can provide comfort that an agreement reached in the UK will not lead to further investigations in other jurisdictions but it should also serve as a warning that the SFO is willing to share intelligence and evidence to uncover criminality and hold organisations to account.

Investigation into Individuals

Whilst the DPA suspends criminal proceedings against an organisation, it does not curtail prosecution by the SFO of the individuals responsible for the bribery, fraud or corruption in question. In fact, the SFO are said to still be investigating and considering prosecution of individuals in respect of three of the four DPAs agreed to date, with three former Tesco executives accused of fraud in relation to the accounting scandal to go on trial in September. 

Change of culture

Another key consideration in the judge’s decision to approve the DPA in the Rolls-Royce matter was that it is now a “dramatically changed organisation” as the senior management were no longer at the company. The changes at Board and management level were very important with the judge suggesting that the outcome might have been different if any of the current senior management had been implicated or been in a position where they should have been aware of the offending culture and practices. Further, the first two DPAs reached, agreed to implement anti-bribery and corruption compliance programmes showing they were committed to instigating changes and being compliant.

The message: change the Board and implement a new compliance regime to ensure similar issues do not occur again.   


A company should expect a fine, compensation, the costs of any investigation, and the costs of having to put in place monitoring procedures. This has ranged from £129 million in the case of Tesco and £497.25 million plus interest and the SFO’s costs of £13m in the Rolls-Royce case.   

These are significant financial penalties but represent a large discount on the penalty the organisations could have been awarded if they had gone to trail and been sentenced.  The DPA guidelines provide for a discount of one third, but a further discount of 16.7% was approved by Sir Leveson in the Rolls-Royce matter making a DPA an attractive option, especially given the SFO’s Joint Head of Bribery and Corruption words that “it is only right that those who do not cooperate receive the most punitive sanction available under the Sentencing Council’s Guidelines if they are convicted after trial”.

The future of DPAs

Whilst DPAs should not be regarded as the default response to allegations of corporate criminal wrongdoing, the SFO’s Joint Head of Bribery and Corruption described the disposal of corporate criminal risk through DPAs as “the new normal” which will become “increasingly common”. We will have to wait and see.