United States: Tesco: The Serious Fraud Office secures its fourth Deferred Prosecution Agreement

Last Updated: April 24 2017
Article by Lloyd Firth

On 10 April 2017, the Serious Fraud Office ("SFO") entered into a Deferred Prosecution Agreement ("DPA") with Tesco Stores Limited ("Tesco Limited"), as part of which Tesco Limited will pay a £129 million financial penalty and the SFO's costs.1 It is the fourth DPA entered into by the SFO and its second this year, following the Rolls-Royce DPA which was agreed in January (considered in detail in this previous post). 

Whilst all the DPAs agreed to date have in common that they were approved as being in the interests of justice and their terms deemed fair, reasonable and proportionate by Sir Brian Leveson, the President of the Queen's Bench Division, they nevertheless form a heterogeneous body of law. This post teases out five threads for consideration. 

A mixed bag

The four DPAs concluded to date evidence a diverse assortment of: 

  • Company type: (i) a listed multinational bank; (ii) a modestly resourced private UK exporter; (iii) a listed blue chip manufacturer of central importance to the UK; and (iv) a UK subsidiary of a listed multinational retailer. 
  • Nature, location and duration of the underlying conduct: (i) a single, nine month long transaction in Tanzania which amounted to failure to prevent bribery; (ii) conspiracy to corrupt and bribe, as well as failure to prevent bribery in foreign jurisdictions, taken collectively, over a nine year period; (iii) conspiracy to corrupt, failure to prevent bribery and false accounting spanning seven countries and, taken collectively, over 24 years; and (iv) false accounting over a single four month period which occurred in the UK.
  • Scale of financial penalty imposed (including fine, compensation, disgorgement of profit and costs): (i) $32.3 million; (ii) £6.5 million; (iii) £500 million; and (iv) £129 million.2

'Extraordinary' and 'exemplary' cooperation

Sir Brian Leveson, in his Rolls-Royce DPA judgment, referred to Rolls-Royce having demonstrated 'extraordinary cooperation' on four separate occasions. He noted that the hallmarks of such cooperation, amongst others, included the voluntary disclosure of all Rolls-Royce's internal investigation findings (without the SFO seeking recourse to its powers of compulsion) and deferring interviews until the SFO had first completed its own. Whilst we have no window into the detail of the Tesco Limited DPA (the DPA itself, the supporting statement of facts and any report of the final public hearing are all subject to reporting restrictions pending the conclusion of the SFO's criminal proceedings in relation to other parties in respect of the same issues), it is worth noting the similarity in both form and content of the Financial Conduct Authority's ("FCA") acknowledgment of Tesco plc's and Tesco Limited's cooperation to that of Sir Brian Leveson in the Rolls-Royce DPA. The FCA's Final Notice twice describes the level cooperation shown as being "exemplary" and goes on to explain that both companies "refrained, at the FCA's request, from interviewing witnesses or taking statements" and, "disclosed voluntarily material which appeared to them to be significant to the FCA's enquiries."

Novel criminal and regulatory interplay

The in-principle agreement reached between the SFO and Tesco Limited to enter into a DPA was made public following a Regulatory News Service announcement by Tesco plc (Tesco Limited's publicly listed parent company) on 28 March 2017. On the same day, the FCA announced that Tesco plc and Tesco Limited agreed with the FCA that they had committed market abuse in relation to a trading update which gave a false or misleading impression about the value of Tesco plc shares and Tesco group bonds. The FCA's Final Notice makes clear that Tesco Limited's in-principle DPA related to false accounting and, "substantially similar conduct...to that described in this Final Notice." 

Notably, considering the DPA agreed between Tesco Limited and the SFO in respect of the potential criminal offence of false accounting, the FCA chose not to impose any financial penalty on Tesco Limited or Tesco plc for the civil offence of market abuse. Instead, and for the first time, the FCA used its powers under section 384 of the Financial Services and Markets Act to require Tesco plc and Tesco Limited to establish a scheme to compensate certain net purchasers of Tesco plc shares and Tesco group bonds. Whilst financially significant - the total amount of compensation payable under the scheme is estimated by the FCA to be approximately £85 million plus interest—the compensation scheme is likely to go some way to protecting Tesco plc against those civil claims already issued against it by investors seeking compensation for relying on misleading statements and any prospective claims which it may have anticipated would be issued in reliance on certain of the agreed facts contained in the DPA, once made public.

Tesco Limited's agreement represents the first DPA in which the underlying conduct touches on both the criminal and regulatory spheres. The coordinated and creative response of the SFO and the FCA is to be applauded. By ensuring that the criminal and regulatory resolutions were reached in time for a joint market announcement and that the Tesco group was not effectively punished twice for substantially similar conduct, the SFO (in conjunction with the Court) and the FCA, have reached what appears, from the company's perspective, to be a fair and just outcome.

An inconsistent and unfair approach or a flexible tool for all seasons?

Three of the four DPAs agreed to date (XYZ Limited, Rolls-Royce and Tesco Limited) envisage the subsequent prosecution of related individuals. The Court's approach in each has been markedly different. 

XYZ Limited, and its parent, benefitted from full anonymity and the making public of only redacted preliminary and final judgments, pending the conclusion of ongoing related proceedings. By contrast, Rolls-Royce was afforded no anonymity: with the publishing of a full, non-redacted approved judgment and statement of facts (albeit with the names of individuals anonymised). Tesco Limited falls somewhere between the two. It did not benefit from anonymity, and the existence and total financial cost of its DPA have been announced. However, the DPA itself, the statement of facts and any reporting of the public approval hearing are subject to reporting restrictions pending the conclusion of the trial of three former employees in September. 

It can be inferred that the key drivers for the differences in approach are (i) whether the company is itself (as was the case in Rolls-Royce), or a company related to it is (as was the case in Tesco Limited) a public company and a named announcement must therefore be made, given that the in-principle approval to enter into a DPA likely amounts to price-sensitive inside information for the purposes of a listed company's market disclosure obligations; and (ii) whether criminal proceedings have been commenced against related individuals at the time that the DPA is agreed (as was the case in Tesco Limited and XYZ Limited but not in Rolls-Royce). 

For a public company that is determining whether a DPA is an attractive option, this flexibility in approach is undoubtedly appealing, particularly in ensuring that its obligations of disclosure are not prejudiced. Significant question marks remain, however, around the potential prejudice to individuals who are yet to stand trial, when the existence of an agreed DPA, as part of which a related company has paid a heavy financial penalty to avoid prosecution, is made public. 

Signposts or weathervanes? Where next for DPAs?

One thing appears certain: we will continue to see more DPAs agreed in the coming months. Speaking recently, the SFO's Joint Head of Bribery and Corruption described the resolution of corporate criminality by way of DPAs as, "the new normal"3 and given the scale of the financial penalties that have been levied under these resolutions—more than £650 million in a little over 17 months—the direction of travel seems set. That said, companies remain well-advised to remember that, regardless of the increasing frequency and scale of such resolutions, seeking a DPA ought never to be regarded as the default response to allegations of corporate criminal wrongdoing. 

1 The DPA concerns only the potential criminal liability of Tesco Limited. It does not address whether liability of any sort attaches to Tesco plc or any employee or agent of Tesco plc or Tesco Limited.
2 This figure does not include the estimated costs of £85 million of the Tesco Limited and Tesco plc FCA compensation scheme. The precise makeup of the total GBP129 million penalty for the DPA is unknown due to the imposition of reporting restrictions.
3 www.sfo.gov.uk/2017/03/08/the-future-of-deferred-prosecution-agreements-after-rolls-royce/ 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions