London’s Crown Court recently approved only the second Deferred Prosecution Agreement (DPA) since the introduction of DPAs to the UK’s anti-bribery regime in 2014. Herbert Smith Freehills' London Corporate Crime and Investigations team negotiated the first DPA with the SFO, which was concluded in November 2015. The recent announcement of the UK’s second DPA indicates that DPAs are likely to be an important tool in the SFO’s armoury as it increases charges of failure to prevent bribery, the corporate offence introduced by section 7 of the Bribery Act 2010.


In the UK, DPAs provide a means, in appropriate cases, of resolving offending by corporate entities for fraud, bribery and other economic crime. Under a DPA, a company agrees to certain conditions (which are likely to include a financial penalty, repayment of profits and measures to prevent future offending), and an agreed statement of facts setting out the company’s wrongdoing. In return, and provided the conditions of the DPA are met, the company will not face prosecution. DPAs are public, and must be applied for and approved by a court before coming into effect.

SFO v XYZ - the UK’s second DPA

On 8 July, Lord Justice Leveson agreed a DPA concerning offences committed by a company (XYZ) in relation to contracts to supply products to its customers overseas. The company’s identity remains anonymous due to ongoing related litigation concerning former XYZ employees. However, it is known that XYZ is a UK SME with a US registered parent company.

The indictment concerned activity between 2004 and 2012 in which certain of XYZ’s employees and agents were involved in the systematic offer and/or payment of bribes to secure contracts in foreign jurisdictions. The SFO undertook a two year investigation, and found that 28 of 74 contracts examined had been procured as a result of bribes.

Under the DPA, XYZ will pay financial orders of GBP 6.5 million. This comprises GBP 6.2 million in disgorgement of gross profits and a GBP 352,000 financial penalty. Almost GBP 2 million of the disgorgement will be paid by XYZ’s US registered parent company as repayment of dividends that it received from XYZ. Under the DPA, XYZ also agreed to co-operate fully with the SFO, including reporting on all third party intermediary transactions and the adequacy of its anti-bribery policies and procedures over the next twelve months (and annually until at least 2018).

Provided all terms of the DPA are met, the SFO charges will be withdrawn, with the result that XYZ will not be formally convicted of an offence. If the terms of the agreement are breached, a court may reinstate the charges leading to prosecution being pursued once again.

Self-reporting and co-operation

Critical to the approval of the DPA was XYZ’s approach to the investigation, as well as its financial situation. XYZ self-reported and co-operated with the SFO’s investigation.

In August 2012, the implementation of XYZ’s parent company global compliance programme flagged concerns about the way certain contracts had been conducted by XYZ. XYZ retained lawyers to conduct an internal investigation, who delivered a report to the SFO on 31 January 2013. The SFO then started its own investigation, which XYZ co-operated with fully throughout.

In passing judgment, the court said that “[the DPA] provides an example of the value of self-report and co-operation along with the introduction of appropriate compliance mechanisms, all of which can only improve corporate attitudes to bribery and corruption.”

On the company’s financial position, SFO Director David Green commented:

“This case raised the issue about how the interests of justice are served in circumstances where the company accused of criminality has limited financial means with which to fulfill the terms of a DPA but demonstrates exemplary co-operation. The decision as to whether to force a company into insolvency must be balanced with the level and nature of co-operation and this case provides a clear example to corporates.”

The future of DPAs in the UK

The first two UK DPAs have resulted in significant corporate financial settlements. It is expected that the use of DPAs and the prosecution of the section 7 corporate offence (the first successful prosecution was in February 2016 of Sweett Group plc), will result in an upward trend in the level of fines imposed on corporate offenders. These cases have all applied new sentencing guidelines introduced in October 2014. These guidelines include, for the first time, guidelines on the sentencing of corporates for fraud, bribery and money laundering.