Rolls Royce – A Few Thoughts
For those of us who had a client caught up in the SFO’s Rolls Royce investigation, which has lasted for 6 years, the Director’s announcement last week that no criminal charges are to be brought against any individual was naturally, for them, on a personal level, a very welcome one. It brought to an end a very lengthy period of pressure and stress.
Taking a wider view of this decision however, it is perhaps illustrative of the future direction of travel that the new Director of the SFO may take.
For many of us who practice in this area the introduction of the Deferred Prosecution Agreement (DPA) has created, and will continue to create, new and unique sets of problems. There is the clear tension about the way in which DPAs are agreed, the absence of any mechanism to take into account any affected individual’s rights and interests in those proceedings, the timing of the procedure itself where it is thought appropriate to conclude DPAs before any individuals prosecutions have taken place, and the resulting disclosure challenges that result from parallel proceedings where one of those proceedings has been conducted in secret until the agreement is finalised. These challenges are made all the more acute where a DPA entails the SFO and the corporate warranting to the court that there is an agreed and accurate statement of facts before there has been the trial (where a trial is anticipated). It means those facts have not been subject to the full forensic challenge and scrutiny from the individual’s perspective that a trial will bring. It is a particularly acute issue when it is the alleged individuals acts that are said to have fixed the corporates liability in the first place, through the identification principle. The inconsistent result in the Tesco case between the corporate’s DPA, and the subsequent individuals trial outcome is testament to those problems, and why I have long held the opinion that the order of proceedings should in fact be reversed. (A close examination of schedule 17 to the Act or the associated Code does not determine the precedence of a DPA over any individual’s prosecution.)
in 2017, Rolls Royce, in a blaze of publicity, entered into the largest DPA so far, with the company disgorging £497 million under the agreement. Whilst many have commented that the Rolls Royce decision, announced at the same time as the SFO also brought the GlaxoSmithKline investigation to a close, may simply have been the new Director clearing out its long running legacy investigations, it does leave one with an overwhelming impression that DPAs will be the weapon of choice for the SFO in their larger (and arguably more difficult) enquiries, but that will be it. The DPA process will allow the SFO to focus their investigative efforts, and importantly their resources, in a way where they will be aided by ‘cooperative’ corporates and their lawyers to ensure that they pursue corporate offending behaviour. It also will yield blockbuster settlements. To date, the appetite to prosecute individuals, particularly where the SFO recognises that they could face successive and difficult trials arising from such large investigations, with the increased reputational risks that these bring for the SFO, as it did in LIBOR, appears to be diminished. Rolls Royce looks to be a case in point, despite there being an evidential basis for a DPA. Whether the SFO has been wounded by the Tesco’s experience or not, the stark reality is that, at present, the SFO’s record in this area is patchy. So far, they have only charged individuals in ‘smaller’ cases where there has been a DPA. In other words, they prosecute and are only seen to prosecute individuals who could be described as the “lower hanging fruit”. Such an approach, if that is to be adopted, will create a dangerous imbalance and precedent. A perception could and arguably has already arisen that there will be two track process – the higher and more involved cases which are resolved by DPAs only, and the smaller cases, where the individuals will remain at risk of prosecution. For the SFO to achieve its policy objectives, which must include influencing future corporate compliance via deterrence, it must ensure that it applies a consistent prosecutorial approach to corporate and individuals alike, whether they come from a large or small organisation.