Further Guidance from the SFO on Deferred Prosecution Agreements ("DPAs")

The Serious Fraud Office (“SFO”) has recently updated its Operational Handbook to include a chapter on DPAs (the "Updated Handbook").  For companies under investigation, the question of whether or not to cooperate with the SFO in the hope of obtaining a DPA has long been a difficult one. The SFO will generally require an extremely high standard of cooperation from companies, without offering any certainty that this will ultimately result in the offer of a DPA. This has led to much debate over when it is in a company’s interests to self-report wrongdoing and hand over documents and work product from internal investigations to the SFO. The updates to the Operational Handbook will not put an end to these discussions. According to the SFO, the Updated Handbook was published “for internal guidance only” and “solely in the interests of transparency”.  The law on DPAs therefore remains the same: the relevant provisions are found in Schedule 17 of the Crime and Court Act 2013 (“CCA2013”)^[1] and it should be read alongside the Code of Practice for DPAs^[2] and other guidance including the SFO’s Corporate Co-operation Guidance.^[3] However, the Updated Handbook contains some potentially helpful guidance on the SFO’s approach, which we discuss here.

DPAs: a brief overview

In brief, a DPA is an agreement between the prosecution authorities (currently the Crown Prosecution Service (“CPS”) and SFO) and a company^[4] that criminal charge(s) will be brought, but not proceeded with, provided the organisation complies with certain negotiated terms.  Terms typically include payment of financial penalties, cooperation with ongoing investigations/prosecutions, and compliance with measures to prevent future offending.^[5]  DPAs must be approved by a judge who must agree that: (a) that it is in the interests of justice for the matter to be resolved by DPA and; (b) that the terms proposed are fair, reasonable and proportionate in the circumstances of the case.  Judges have so far shown a willingness to challenge such terms.

Cooperation

The Updated Handbook refers to cooperation being the “key factor” for the SFO when deciding whether to enter into a DPA.  Broadly speaking, cooperation is viewed by the SFO as providing assistance that goes “above and beyond” what the law requires.^[6]  The Updated Handbook provides several examples of cooperation, two of which are of particular interest:

• Privilege.The Updated Handbook refers to "waiving privilege over any [privileged] material" as an example of cooperation.Wavier of privilege in the context of internal investigations is a very controversial area that has received a lot of attention of late (with various UK regulatory authorities, including the SFO, bringing applications to the courts to try and attack assertions of privilege).Alun Milford (former General Counsel of the SFO) previously commented that “The assertion of privilege… is unhelpful and, frankly, impossible to reconcile with an assertion of a willingness to co-operate”.^[7]This has led to the suggestion that the SFO regards ‘non-waiver’ as tantamount to ‘non-cooperation’, which critics argue is unfair - if not draconian.Notably, the Law Society of England and Wales entered the debate in 2019, criticising “growing attempts by some parts of government to encroach upon the sacrosanct nature of [legal professional privilege]” and re-iterating its position that it is improper for authorities to put any form of pressure on persons to waive privilege or to conduct their affairs so that privilege does not arise.^[8] Somewhat helpfully, the Updated Handbook states that “the Company can neither be compelled to waive privilege, nor penalised for not waiving privilege” suggesting that assertion of legal professional privilege should, in principle at least, be viewed neutrally by the SFO.
• Self-reporting.When Rolls-Royce PLC secured a DPA in 2017, notwithstanding that it had not proactively reported allegations of bribery in the organisation to the SFO, this sparked much debate as to whether companies should self-report wrongdoing or take a “wait and see” approach in the hope that they would still be offered a DPA.The Updated Handbook refers to “voluntarily self-reporting suspected wrongdoing within a reasonable time of those suspicions coming to light” as an important aspect of cooperation.The Updated Handbook is not prescriptive about what constitutes a “reasonable time", but this wording suggests that notification to the SFO does not need to take place immediately on identification of potential wrongdoing.The Updated Handbook also states that "When considering a self-report made by the Company, the prosecutor must consider the totality of the information that the Company has provided…" There is, therefore, some tension in the Updated Handbook itself between reporting matters expeditiously enough (to be classed as cooperation) whilst taking sufficient time to gather, and then report, the necessary facts to the SFO so that appropriate 'credit' is given. However, it is clear that Rolls-Royce remains an exception to the general position that companies need to be proactive about self-reporting wrongdoing if they want the SFO to agree a DPA.

Use of information disclosed by the company

Entering into negotiations with the SFO to agree a DPA is not without risk.  As reflected in the Updated Handbook, both the fact that negotiations are taking place, and the information and material provided by the SFO and the company during negotiations, should be kept confidential.  Save in very narrow circumstances,^[9] if negotiations fail then material showing that the company entered into DPA negotiations (such as any draft of the DPA or any draft statement of facts intended to be included within the DPA), or other material created solely for the purpose of preparing the DPA or the statement of facts, should not be used in a subsequent prosecution against the company.^[10] 

However, the Updated Handbook makes clear “there is no limitation on the use to which other information obtained by the prosecutor during the course of DPA negotiations may be put during a criminal trial of the company and/or linked individuals to the extent that the rules of evidence permit”.  In the course of its negotiations the SFO might, for example, obtain pre-existing contemporary records such as contracts, accounting records, e-mails and other communications, all of which would be available to be used by the prosecutor in a subsequent prosecution of the company (if the matter does not proceed to a DPA).^[11] 

The Statement of Facts

Under CCA2013, a DPA must contain a statement of facts relating to the alleged offence “which may include admissions by [the company]” (emphasis added).^[12]  There is therefore no requirement for the company to admit any guilt (albeit they will need to admit the contents and meaning of key documents referred to in the statement of facts that accompanies the DPA).^[13] This is reflected in both the Code of Practice for DPAs and the Updated Handbook (the latter states that “There is no requirement for formal admissions of guilt in respect of the offences charged on the indictment.” 

However, the Updated Handbook indicates that when agreeing the terms of the DPA “consideration should be given to including admissions where appropriate”.  In our view, the SFO is under some political pressure to avoid what critics of DPAs see as companies avoiding both admissions of wrongdoing and prosecutions such that we expect there will be added impetus by the SFO on companies to make admissions (beyond confirming the truthfulness and accuracy of the statement of facts).

Named individuals

The default position is that once approved by the court the DPA (including the statement of facts)^[14] must be published unless prevented by court order.^[15]   However, the SFO in its Updated Handbook acknowledges that where charges against individuals have been brought, or are contemplated, the "publication of the DPA may pose a risk of prejudice to the administration of justice".  In these circumstances, the Updated Handbook stipulates that the statement of facts, which will typically refer to key individuals, could be postponed from publication (as occurred in the recent judgment approving the G4S DPA),^[16] or that concerns about publicity could be addressed “by publishing a redacted or (further) anonymised statement of facts”. 

To date, the SFO has never successfully prosecuted an individual following entry by the company of a DPA.  This is undoubtedly a sore point for the SFO and we expect they make every effort to improve their chances of securing a conviction, including by anonymising linked individuals or (in appropriate cases) withholding of the statement of facts from publication. 

Discount

The Updated Handbook confirms that any financial penalty under a DPA must be "discounted in a manner comparable to a fine imposed upon a conviction under a guilty plea".  The Updated Handbook confirms that the level of discount applied should be determined “based in large part on the nature and extent of the company’s co-operation with the SFO’s investigation”.  It acknowledges that in the majority of DPAs to date, the court has approved terms permitting discounts of 50% in recognition of the levels of cooperation demonstrated.