REUTERS | Nikola Solic

Four lessons for companies from the UK SFO’s first DPA and first enforcement of the corporate offence of failure to prevent bribery

For the first time last week, a criminal court considered a failure by a company to prevent corruption under the Bribery Act 2010 (section 7) and approved the UK SFO’s first Deferred Prosecution Agreement (DPA). The case generated such interest that the public hearing on Monday had to be moved to a bigger courtroom to accommodate scores of lawyers and journalists (even then Practical Law’s own Morag Rea had to sit on the floor).

Pathfinder cases always make a big noise, but is this case really a template for future DPAs as Ben Morgan (Joint Head of Bribery and Corruption at the SFO) claimed the following day? What practical lessons can companies take away about how the SFO is approaching DPAs and corporate failures to prevent bribery in practice?

Here are four things we learnt.

1. Cooperation, cooperation, cooperation: fast, full and genuine

In a speech at PwC last year, David Green CB QC, Director of the SFO, said that consideration of a company for a potential DPA will depend on three things: “cooperation, cooperation and cooperation”.

The Standard Bank DPA bears this out. Lord Justice Leveson’s first question to himself was rightly whether it was in the interests of justice to resolve the case by way of a DPA. In answering this he put positive weight on the fact that Standard Bank self-reported before even commencing its internal investigation.

Speaking about the DPA the following day, Ben Morgan also drew attention to the way the company had behaved once it was aware of the conduct in question, noting that the judge had referred to Standard Bank’s “genuinely proactive approach to the matter” and the fact that the bank had self-reported “within days” of the suspicions coming to the bank’s attention.

This means that, to be invited to DPA negotiations, companies will need to engage proactively and have systems in place to escalate suspicions quickly enough for self-reporting to happen quickly. It seems unlikely that the SFO will look favourably on any attempt at an internal investigation before self-reporting.

 2. Companies can cooperate fully and proactively without waiving privilege

There have been suggestions from SFO officials in the past to the effect that the SFO may expect or encourage companies to waive privilege. For example, Stuart Alford QC (Joint Head of Fraud at the SFO) told the Anti-Corruption in Oil & Gas Conference in 2014:

“We recognise that privilege, when applied appropriately, is an important and fundamental protection. However, we do see occasions (perhaps too many), when privilege is asserted too readily or wrongly; asserted over the underlying factual material or a witness’s first account. We certainly wouldn’t hold against a party any decision to properly claim privilege; but what better way to demonstrate ‘cooperation’ than by an open and frank view of privilege claims.”

The Standard Bank DPA does not appear to lend weight to these suggestions. The SFO does not seem to have insisted that Standard Bank must waive privilege to meet what Morgan called the “high bar for a DPA to be suitable”, and privileged material is expressly excluded from the items that Standard Bank has to disclose to the SFO or other agencies at the SFO’s direction as part of the cooperation obligation set out in the DPA itself.

 3. The SFO wants you to know that it is definitely not focusing on DPAs rather than ordinary prosecution

Mr Morgan’s speech on 1 December 2015 made it clear that firms should not mistake the SFO’s willingness to go down the DPA route in this case for a desire to force a DPA onto every corporate case. Where the circumstances are not right, the SFO has “the appetite, stamina and resources to prosecute in the ordinary way”.

Based on the facts of the Standard Bank case, this is exactly what companies must conclude. After all, this case was relatively straightforward for the SFO, involving a single transaction, a rapid self report, full cooperation on the SFO’s terms and changes in the management and structure of the company following the conduct. It was a strong pathfinder case to support the SFO in seeking very high standards of corporate remorse and reparation. There is very little in that which companies could use to argue for a more pragmatic view in a less clear cut case.

4. DPAs are not a soft option

DPAs were never intended to be a soft option. They are not a private plea bargain; they are a way for a company to account for alleged criminality to a criminal court. An important term of the DPA is that Standard Bank has agreed to the facts underlying the SFO charges, and cannot make or authorise its affiliates to make any statement that contradicts them.

The judge had to determine if the financial penalty was fair, reasonable and proportionate. The overall package of financial obligations imposed on Standard Bank represents the second highest ever imposed for corruption (behind the £30.5 million imposed on BAE in 2010). The US Department of Justice confirmed that the penalty was comparable to what would have been imposed in the US had the matter been dealt with there and, according to the judge, intimated that if the matter is resolved in the UK the DOJ will close its own enquiry.

However, as a term of the DPA, Standard Bank has expressly agreed that it will cooperate at the SFO’s direction with other agencies, including internationally. It will be interesting to see how far authorities overseas seek the SFO’s help with their own investigations, but we don’t yet know how far a DPA will satisfy other interested parties.

And lastly one other thing we didn’t learn. The case provides only limited guidance on the pressing practical issue for companies today: how to put in place adequate procedures to prevent bribery (and so establish a defence under section 7(2)).

Lord Justice Leveson spoke with approval of Standard Bank’s “tone from the top”, which appears to suggest that companies will have to tailor their whole operations through and through to embed an appropriate compliance culture. If this sounds familiar it should, from the Ministry of Justice’s 2011 guidance on adequate procedures.

Thomson Reuters Legal UK & I Sara Catley

Leave a Reply

Your email address will not be published. Required fields are marked *