The English Court has considered its first example of a Deferred Prosecution Agreement (“DPA”) in a case brought by the Serious Fraud Office (“SFO”) against ICBC Standard Bank Plc (“Standard Bank”). It is also the first case brought under section 7 of the Bribery Act 2010.
The SFO was empowered to enter into DPA's last year. The key points to note are:
- DPAs are a common tool for prosecutors in the US;
- DPAs provide a mechanism whereby an organisation can avoid prosecution for certain economic or financial offences by negotiating an agreement with a prosecutor;
- Unlike in the US, the English Court will examine the proposed agreement in detail, decide whether the statutory conditions are satisfied and, if appropriate, approve the DPA;
- A private hearing will ascertain whether the proposed DPA is “likely” to be in the interests of justice. Its proposed terms must be fair, reasonable and proportionate;
- If a declaration is declined, a further application is permitted;
- The hearing must be private so that the possibility of a prosecution is not jeopardised;
- Even having agreed that a DPA meets the requirements of being in the interests of justice, the Court continues to retain control and can decline to conclude that it is in fact in the interests of justice, or that its terms are fair reasonable and proportionate; and
- Once the Court has approved the declaration, it must be provided in open court.
Standard Bank worked together with its subsidiary, Stanbic Bank Tanzania Ltd (“Stanbic Bank”), on a sovereign note private placement sought by the Tanzanian Government to raise $600 million.
Stanbic Bank entered into an agreement with a Tanzanian Company called Enterprise Growth Market Advisors Limited (“EGMA”). Two of EGMA’s directors and shareholders were members of the Tanzanian Revenue Authority and thus the Tanzanian Government. It was agreed that EGMA would receive 1% of the funds raised; in order to meet this cost, the fee for the placement was increased from 1.4% to 2.4%. There is no evidence that EGMA provided services in relation to the transaction. It received $6 million, which was shortly thereafter withdrawn in cash.
The cash withdrawal concerned Stanbic Bank who alerted Standard Bank and within three weeks it self-reported to the SFO. The SFO found there was a reasonable suspicion that Standard Bank had failed to put in place adequate compliance procedures to prevent bribery and it had failed to recognise the inherent risks of a transaction.
The Court has declared that a DPA is in the interests of justice and that the terms of the DPA are fair, reasonable and proportionate, the Judge finding that, “of particular significance was the promptness of the self-report, the fully disclosed internal investigation and co-operation of Standard Bank. Finally, also relevant were the agreement for an independent review of anti-corruption policies and the fact that Standard Bank is now differently owned.”
The terms of the DPA require Standard Bank to adhere to certain obligations for a period of three years. If it complies with the agreement it will not be prosecuted on a charge of failure to prevent bribery. The obligations include paying a penalty of $16.8 million to the SFO, disgorging profits of $8.4 million, paying SFO's costs and paying compensation of $7.05 million to the Tanzanian Government. No tax reduction will be sought in relation to these payments. It will also be the subject of an independent review of its existing anti-bribery and corruption controls, policies and procedures.
David Green, Director of the SFO, has said that “this landmark DPA will serve as a template for future agreements”. It also stands as a template for self reporting under the Bribery Act and the significant benefit that can be gained by fully co-operating in circumstances where a serious breach has been identified. More generally, in circumstances where the SFO's funding has recently been cut, it will see the potentially increased use of DPA's as a significant benefit. The concern with DPA's is always that justice is seldom seen to be done. Whether the Court actively polices this aspect remains to be seen and in the event that DPAs become more common place in the UK, greater focus will be placed on the Court's role and it will, we would hope, be keen to ensure that it is not seen as a rubber stamping exercise. There may also be a tension in relation to the pursuit of individuals involved in any wrong-doing. In any DPA the SFO will secure the Company's co-operation in relation to any ongoing investigation of individuals and there is a danger that Company's may become more prone to scapegoating current and former employees if it helps buy the Company a better deal.