The first approved Deferred Prosecution Agreement (“DPA”) in England was made on 30 November 2015 before The President of The Queen’s Bench Division, Sir Brian Leveson, against Standard Bank- the UK subsidiary of South Africa’s largest banking group, Standard Bank Group. (“The Bank”)
Ben Morgan speaking on behalf of the Serious Fraud Office (“SFO”) hailed the Bank to be ‘courageous’ in its early cooperation and engagement with the enforcement authorities in securing a DPA.
The chosen one
In order for DPA negotiations to begin, a company must be the prosecutor’s ‘chosen one’ but this is only after a voluntary confession is made to the prosecutor. Any offer of a DPA can only be made by the prosecution authority and not by the organisation.
The prosecutor must determine whether both the evidential and “public interest” tests, of the Code for Crown Prosecutors, have been met before agreeing a DPA.
The Crown Court Judge on receiving an application from the prosecutor will decide if approval will be granted to enter into an agreement. If it can be successfully submitted before the Judge that a DPA rather than a prosecution is in the interests of justice then negotiations between the parties may begin.
Any agreement made with the designated prosecutor must contain a statement of facts relating to the alleged offence which may include admissions made by the organisation and must specify an expiry date of its terms for compliance (ordinarily to be between 1-3 years). All agreements must be held by the Judge to be fair, reasonable and proportionate.
The conclusion of settling a DPA will see the drafting of a bill of indictment.
In the case of Standard Bank the Judge placed much emphasis on the fact that the Bank immediately reported itself to the authorities and at paragraph 27 of the Judgment noted that the bank had adopted a ‘genuinely proactive approach to the matter’. However, despite this badge of recognition for good behaviour, the Bank was still made subject to the maximum term possible for a DPA of 3 years.
Although not a necessary requirement for a DPA it was noted by the Judge that the Bank was by this time a different entity from that which committed the offence in 2012. On 1 February 2015 the Industrial and Commercial Bank of China (ICBC) acquired a 60% majority shareholding and a new Board had been appointed for the Bank.
‘Try not. Do… or do not. There is no try’
The deferred draft Indictment against the Bank was for a section 7 Bribery Act 2010 offence, relating to work that one of its subsidiaries carried out in Tanzania 3 years earlier. The SFO alleged that the subsidiary had paid a US$6m bribe to politically exposed persons (PEPs) to secure a business contract from the Tanzanian government.
It seems clear that the Courts in this particular case are seeking to promote, with the enforcement agencies, an anti-corruption culture within organisations, in other words seeking deterrent rather than reactive action. In considering whether a section 7 offence had been made out Sir Brian Leveson held at paragraph 21 that;
“In essence, an anti-corruption culture was not effectively demonstrated within Standard Bank as regards the transaction in issue.”
‘These are not the droids you are looking for’
The Bank were found to have had inadequate measures to protect against bribery, notably however, neither the Bank nor its employees were implicated in knowingly participating in an actual bribery offence, it was perhaps this feature that made an offer of a DPA attractive to the Bank. The finger could fairly be pointed in a direction outside of the Bank and therefore by agreeing the DPA the Bank could seek to protect shareholders interests. Perhaps then it was not a courageous act by the Bank but an astute one in order to protect its reputation and share values.
‘No reward is worth this’
Having said that it would not pay more than US$ 40 million, the Bank was able to hold it’s ground and the following order was made;
– Compensation of US $6 million plus interest in US $1, 153,125 to the Government of Tanzania;
– A disgorgement of profit on the transaction of US $8.4 million;
– A financial penalty of US $16.8 million;
– Costs incurred by the SFO, that before the final hearing were at £290,000 and;
– An independent compliance review to be carried out by PriceWaterhouseCoopers LLP an independent monitor against the Bank.
‘I’ve just made a deal that will keep the Empire out of here forever’
The SFO proudly make the following observations about the first DPA:
“Each case will be specific of course, but we now know that this kind of arrangement is at least conceptually one that the court will consider capable of being dealt with by a DPA. There are lots of other features that were relevant to this particular case, as I will come on to, but I think it is helpful that we have this example. The model of a company appointing local agents is a common one and while there can be good honest reasons for doing so I am certain we will see many more examples where the model has, at the very least, raised a strong inference of corruption that is capable of creating potential liability for corporates connected to this jurisdiction, and that potential liability is at least capable of being resolved by a DPA.”
(Ben Morgan, the joint head of bribery and corruption at the SFO)
‘I assure you, Lord Vader. My men are working as fast as they can.” “…Perhaps I can find new ways to motivate them.’
Prior to the Standard Bank agreement there had been some reference in the media that Sarclad, a small company that provides technology products to the metals industry with operations in China, and the SFO were in talks in relation to two DPAs that were hoped to be signed by the end of 2015, we have yet to hear any more about this.
Earlier in the year there had also been much speculation about Barclays having been invited to discuss an agreement to settle its probe into its dealings with Qatari investors as part of its £5.8bn cash call during the financial crisis, however Barclays then issued a statement saying: “We are not in a position to comment on an ongoing legal matter, save to clarify that there has been no offer made of a DPA.”
Conclusion – “I have a bad feeling about this”
In practice, the lack of established case law under Section 7 of the Bribery Act 2010 means that we have not yet seen how the section 7(2) statutory defence of ‘adequate procedures’ will work out. Companies will have to play a waiting game to truly understand what this defence means in practice.
Unlike in Scotland where Civil Penalty Orders can be agreed as an alternative to a section 7 prosecution it seems that the only way for a company in England to avoid prosecution is to secure a DPA. If a DPA cannot be concluded then the company, having provided damaging evidence to the prosecuting authority, must take its chances at trial.
It is hoped that the SFO will not attempt to rely on this DPA and in particular the sentencing remarks of Sir Brian Leveson to further its position in subsequent prosecutions as this would surely be counter productive to the initiative which encourages companies to self regulate, investigate and genuinely co-operate.
Click here for more information on DPAs.
The first approved Deferred Prosecution Agreement (“DPA”) in England was made on 30 November 2015 before The President of The Queen’s Bench Division, Sir Brian Leveson, against Standard Bank- the UK subsidiary of South Africa’s largest banking group, Standard Bank Group. (“The Bank”)
Ben Morgan speaking on behalf of the Serious Fraud Office (“SFO”) hailed the Bank to be ‘courageous’ in its early cooperation and engagement with the enforcement authorities in securing a DPA.
The chosen one
In order for DPA negotiations to begin, a company must be the prosecutor’s ‘chosen one’ but this is only after a voluntary confession is made to the prosecutor. Any offer of a DPA can only be made by the prosecution authority and not by the organisation.
The prosecutor must determine whether both the evidential and “public interest” tests, of the Code for Crown Prosecutors, have been met before agreeing a DPA.
The Crown Court Judge on receiving an application from the prosecutor will decide if approval will be granted to enter into an agreement. If it can be successfully submitted before the Judge that a DPA rather than a prosecution is in the interests of justice then negotiations between the parties may begin.
Any agreement made with the designated prosecutor must contain a statement of facts relating to the alleged offence which may include admissions made by the organisation and must specify an expiry date of its terms for compliance (ordinarily to be between 1-3 years). All agreements must be held by the Judge to be fair, reasonable and proportionate.
The conclusion of settling a DPA will see the drafting of a bill of indictment.
In the case of Standard Bank the Judge placed much emphasis on the fact that the Bank immediately reported itself to the authorities and at paragraph 27 of the Judgment noted that the bank had adopted a ‘genuinely proactive approach to the matter’. However, despite this badge of recognition for good behaviour, the Bank was still made subject to the maximum term possible for a DPA of 3 years.
Although not a necessary requirement for a DPA it was noted by the Judge that the Bank was by this time a different entity from that which committed the offence in 2012. On 1 February 2015 the Industrial and Commercial Bank of China (ICBC) acquired a 60% majority shareholding and a new Board had been appointed for the Bank.
‘Try not. Do… or do not. There is no try’
The deferred draft Indictment against the Bank was for a section 7 Bribery Act 2010 offence, relating to work that one of its subsidiaries carried out in Tanzania 3 years earlier. The SFO alleged that the subsidiary had paid a US$6m bribe to politically exposed persons (PEPs) to secure a business contract from the Tanzanian government.
It seems clear that the Courts in this particular case are seeking to promote, with the enforcement agencies, an anti-corruption culture within organisations, in other words seeking deterrent rather than reactive action. In considering whether a section 7 offence had been made out Sir Brian Leveson held at paragraph 21 that;
“In essence, an anti-corruption culture was not effectively demonstrated within Standard Bank as regards the transaction in issue.”
‘These are not the droids you are looking for’
The Bank were found to have had inadequate measures to protect against bribery, notably however, neither the Bank nor its employees were implicated in knowingly participating in an actual bribery offence, it was perhaps this feature that made an offer of a DPA attractive to the Bank. The finger could fairly be pointed in a direction outside of the Bank and therefore by agreeing the DPA the Bank could seek to protect shareholders interests. Perhaps then it was not a courageous act by the Bank but an astute one in order to protect its reputation and share values.
‘No reward is worth this’
Having said that it would not pay more than US$ 40 million, the Bank was able to hold it’s ground and the following order was made;
– Compensation of US $6 million plus interest in US $1, 153,125 to the Government of Tanzania;
– A disgorgement of profit on the transaction of US $8.4 million;
– A financial penalty of US $16.8 million;
– Costs incurred by the SFO, that before the final hearing were at £290,000 and;
– An independent compliance review to be carried out by PriceWaterhouseCoopers LLP an independent monitor against the Bank.
‘I’ve just made a deal that will keep the Empire out of here forever’
The SFO proudly make the following observations about the first DPA:
“Each case will be specific of course, but we now know that this kind of arrangement is at least conceptually one that the court will consider capable of being dealt with by a DPA. There are lots of other features that were relevant to this particular case, as I will come on to, but I think it is helpful that we have this example. The model of a company appointing local agents is a common one and while there can be good honest reasons for doing so I am certain we will see many more examples where the model has, at the very least, raised a strong inference of corruption that is capable of creating potential liability for corporates connected to this jurisdiction, and that potential liability is at least capable of being resolved by a DPA.”
(Ben Morgan, the joint head of bribery and corruption at the SFO)
‘I assure you, Lord Vader. My men are working as fast as they can.” “…Perhaps I can find new ways to motivate them.’
Prior to the Standard Bank agreement there had been some reference in the media that Sarclad, a small company that provides technology products to the metals industry with operations in China, and the SFO were in talks in relation to two DPAs that were hoped to be signed by the end of 2015, we have yet to hear any more about this.
Earlier in the year there had also been much speculation about Barclays having been invited to discuss an agreement to settle its probe into its dealings with Qatari investors as part of its £5.8bn cash call during the financial crisis, however Barclays then issued a statement saying: “We are not in a position to comment on an ongoing legal matter, save to clarify that there has been no offer made of a DPA.”
Conclusion – “I have a bad feeling about this”
In practice, the lack of established case law under Section 7 of the Bribery Act 2010 means that we have not yet seen how the section 7(2) statutory defence of ‘adequate procedures’ will work out. Companies will have to play a waiting game to truly understand what this defence means in practice.
Unlike in Scotland where Civil Penalty Orders can be agreed as an alternative to a section 7 prosecution it seems that the only way for a company in England to avoid prosecution is to secure a DPA. If a DPA cannot be concluded then the company, having provided damaging evidence to the prosecuting authority, must take its chances at trial.
It is hoped that the SFO will not attempt to rely on this DPA and in particular the sentencing remarks of Sir Brian Leveson to further its position in subsequent prosecutions as this would surely be counter productive to the initiative which encourages companies to self regulate, investigate and genuinely co-operate.
Click here for more information on DPAs.
