Since their introduction legislatively in the Crime and Courts Act 2013 (the CCA), and practically on 24 February 2014, deferred prosecution agreements (DPAs) have been sought by designated prosecutors to conclude commercial organisations’ criminal liability instead of facing prosecution. Although Schedule 17 to the CCA lists the offences for which a DPA is available in full, they are effectively applicable to economic crimes, including those of corruption and bribery, and can be utilised in relation to criminal conduct that occurred prior to 2013-2014.

Why DPAs?

DPAs offer several enticing advantages to prosecutorial bodies. First, a DPA allows the court and the prosecutor to penalise businesses for unlawful actions without the need to present a case to the jury to determine guilt. Prosecutors can avoid the risks, delay and expense inherent in jury trials that often revolves around complex accounting evidence, which 12 members of the general public sometimes find difficult to grasp. Particularly for the SFO, the success of concluding DPAs stands in sharp contrast to its weak record regarding the trial and conviction of individual wrongdoers. Second, DPAs are designed to incentivise cooperation and self-reporting, thus reducing the burden on under-funded investigation and enforcement agencies to pursue wrongdoing.

Meanwhile, DPAs are favourable for corporates, as they have the advantage of often being resolved earlier than a criminal prosecution, especially following extensive cooperation by the relevant company. As such, the legal costs and management time which are necessarily incurred during criminal proceedings are avoided (subtracted against cost of compliance procedures). They enable companies to transparently demonstrate remorse for admitted wrongdoing to the market without putting the company’s future operations in jeopardy. This control helps to manage reputational risk.

However, the acceptance of a DPA does not shield culpable individuals within that organisation; extensive evidence-gathering should, nominally, place prosecutors in a stronger position when pursuing individuals within that organisation. 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”, which tends to fall, though not exclusively, on senior directors and executives.

DPAs – a byword for guaranteed individual prosecutorial success?

The SFO has entered into 12 DPAs for various instances of bribery, fraud and false accounting. The DPA entered into with Tesco in relation to false accounting in 2017 was particularly prominent. Although the fourth DPA concluded at the time, it was the first for an offence other than bribery. The headline financial penalty of £128m and costs of £3m with no tax reductions reverberated around the City, after the company admitted overstating its profits by £326m. The DPA also included ongoing cooperation by Tesco (and its subsidiary) with the SFO and other law enforcement and regulatory agencies in all matters arising from the conduct.

Although four senior managers were dismissed and three of these faced subsequent prosecutions for offences identical to those covered by the DPA as a result of Tesco’s self-reporting, these individuals were acquitted of those charges in January 2019. This fits into a pattern unfortunately established by the SFO, wherein the agency only secured its first individual conviction in March 2023 connected to a 2021 DPA with Bluu Solutions paying a fine of £2.5m for bribery. Notably, other 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).

Conclusion

The DPA is 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 free card or a way of cleansing past conduct without wider, non-pecuniary ramifications for the individuals responsible. For the SFO, DPAs can reduce the spotlight on its otherwise inadequate litigation record (notwithstanding that the CPS recently secured its first ever DPA).

For corporations, given that the core element of the DPA is a financial penalty, there is a genuine possibility that they are treated as a heavy cost of doing business, especially for those corporations at risk of foreign bribery charges. Nonetheless, the very fact that the SFO has finally secured a conviction under these circumstances should serve as a warning to senior individuals. Even if a trial of individuals were to collapse, those in the regulated sector may then be pursued by the FCA under its Senior Managers and Certification Regime.

In short, senior individuals should be emboldened to proactively apply compliance measures to reduce the risk of their corporates entering into a DPA in the first place.

James Broomhall is a senior associate and Darius Latham-Koenig is an associate at Grosvenor Law.