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Deferred Prosecution Agreements – a cost of doing business?

Deferred Prosecution Agreements – a cost of doing business?
Thursday 3rd December 2015

Nick Robinson of Radio 4’s Today program interviewed the ex-boss of Barclays, Antony Jenkins – the first interview he has given since being, perhaps somewhat unceremoniously, removed from his post. The interview touched upon Jenkins attempts to reform the bank following its involvement in the various banking scandals of recent times. Inevitably Robinson asked the question as to whether Jenkins felt that sufficient individual accountability existed in banking and whether in fact bankers had learned to regard the fines, which we have seen in recent times levied against the banks, as simply a cost of doing business.  

Similar comments are made by opponents to Deferred Prosecution Agreements (“DPA’s”), a relatively recent import to the UK from the States, introduced by Schedule 17 of the Crime and Courts Act 2013.

Under a DPA, which can be used for fraud, bribery and other economic crime, a company is charged with a criminal offence, but proceedings are automatically suspended to be resumed only if the company fails to comply with conditions imposed by the court e.g. financial penalties and compensation.

On the 30th of November Lord Justice Leveson approved the first DPA. The case before him involved allegations contrary to section 7 of the Bribery Act 2010 where a former sister company of Standard Bank Plc (now ICBC Standard Bank Plc) Stanbic Bank Tanzania paid $6m to a local partner in Tanzania, a company called Enterprise Growth Market Advisors (“EGMA”). The chairman of EGMA was at the time an official within the Government of Tanzania. It was alleged that the payment was made in order to receive favourable treatment. The arrangement also resulted in a payment of a transaction fee of $8.4m which was shared by Stranbic Tanzania and Standard Bank.

The approved DPA makes clear that the bank’s procedures with regard to the prevention of bribery were inadequate. The bank will therefore be required, under the terms of the order, to carry out a full review of their existing controls, policies and procedures with specific regard to the Bribery Act 2010. The DPA also provides that the bank will pay financial orders of $25m, compensation of $7m and the SFOs costs of £330,000, with the indictment faced by the bank suspended subject to compliance with the terms of the agreement.

Deferred Prosecution Agreements are a tool used, entirely at the discretion of the prosecutor, as an alternative to prosecution. At a time of their introduction in the UK, their use was the subject of significant controversy in the States – why should businesses be able to ‘buy themselves out’ of criminal cases?

The Code of Practice issued by the Serious Fraud Office and Crown Prosecution Service provides guidance on DPA’s when consideration is given to negotiating them, seeking approval of them, overseeing their subsequent operation and dealing with variation, breach, termination and completion. From the guidance it seems clear that DPA’s are more than a mechanism by which a company can pay their way out of a prosecution.

There are no hard and fast rules as to the circumstances when a DPA might be suitable.  The available guidance suggests that a DPA may be considered when the evidential stage of the Full Code Test in the Code for Crown Prosecutors (‘reasonable prospects of conviction’) is satisfied or, if this is not met, where there is at least a reasonable suspicion based upon some admissible evidence that the potential defendant has committed the offence, and there are reasonable grounds for believing that a continued investigation would provide further admissible evidence, so that all the evidence together would be capable of satisfying the Full Code Test.

The guidance then appears broadly to set out factors which may aggravate (e.g. widespread systemic failures) and so tend towards prosecution, or mitigate (e.g. limited isolated failings and/or self-reporting) and so tend towards a DPA or some other penalty.  

Many may be left wondering why, if a case meets the test for prosecution, it is not simply dealt with in that way. This ignores the practical reality of litigation – criminal or otherwise – which is to an extent uncertain. There are many cases where the evidential test (as set out in the Code for Crown Prosecutors) is close to being met but the prosecutor is not sufficiently confidence to mount a prosecution. The DPA may be an alternative to ‘mark’ the relevant conduct, provide for compensation and financial orders and save cost – which may be a welcome prospect when hard pressed Governments are otherwise faced with investing the huge costs involved in prosecuting large and well-funded organisations. DPA’s appear also to be a useful tool in ensuring that the relevant defendant carries out a review of its policies and procedures in order to provide that they are compliant with the relevant legislation in future.