UK: Rolls-Royce - Cooperation Not Confession Unlocks 50% DPA Discount

Last Updated: 24 January 2017
Article by Tony Lewis, Alexandra Underwood and Natalie Quinlivan

Yesterday was a significant day for the SFO as its Deferred Prosecution Agreement (DPA) with Rolls-Royce PLC was given the seal of approval by Sir Brian Leveson.

The resolution is the highest ever enforcement action against a company in the UK for criminal conduct. The fine, totalling £497m, comprises a disgorgement of profit (£258,170,000) and a financial penalty (£239,082,645). Rolls-Royce must also pay the SFO's costs (approximately £13m). The fine incorporates a discount of 50% reflecting the "extraordinary cooperation" of Rolls-Royce during the investigation.

The indictment (suspended for the term of the DPA) identifies conduct which stands at the most serious end of the scale - 12 counts of conspiracy to corrupt, false accounting and failure to prevent bribery are detailed in the Statement of Facts spanning a period of 25 years and multiple jurisdictions, depicting a company where bribery and corruption went to the core of its business.

This is the third DPA that the SFO has secured (the previous two being with Standard Chartered in 2015 and XYZ plc in 2016). This is the first DPA entered into by the SFO which sees them take a coordinated approach with international prosecutors. This has resulted in Rolls-Royce entering into a DPA with the US Department of Justice (DoJ) costing Rolls-Royce $170m (£141m), and a leniency agreement with Brazil's Ministerio Publico Federal (MPF) resulting in a further fine of $26m (£21.5m).


It is notable Rolls-Royce have secured a DPA in circumstances where they did not proactively self-report, something to which great weight was attached in the context of the previous two DPAs. Rather, the SFO approached Rolls-Royce in the first instance and it was at this point that cooperation was prompted.

While a failure to self-report is clearly not fatal to a company being offered a DPA, certain factors at play in the Rolls-Royce case allowed Sir Leveson to overcome this shortcoming. In particular:

  • After being approached by the SFO Rolls-Royce engaged in the investigation on a proactive and comprehensive basis. Rolls-Royce are commended in Sir Leveson's judgment, and also by Sir Edward Garnier QC acting for the SFO, for their "extraordinary cooperation" which included a comprehensive internal investigation, the results of which were made available to the SFO, and a waiver of any claim for legal professional privilege on a limited basis. They also brought to light conduct which otherwise may not have been exposed;
  • The conduct complained of concerned former senior management, and this factor weighed heavily in Rolls-Royce's favour. Rolls-Royce adequately demonstrated to the SFO and the court that the new senior management in place were not responsible for running the company during the relevant period and they were now committed to instigating wholesale changes to the strategic direction of the company, including implementing a new compliance regime.
  • The potential for Rolls-Royce, and third party interests, to be adversely effected in the future should they have been prosecuted and faced public procurement bans in multiple jurisdictions appears to have driven the assessment of the "interests of justice" in approving a DPA.

It is also notable that, in addition to unlocking access to a DPA, the "extraordinary cooperation" secured Rolls-Royce a discount of 50% on the potential penalty. The DPA guidelines provide for a discount of one third, but a further discount of 16.7% was approved by Sir Leveson. In view of the discount of in excess of one third that was also approved in the XYZ plc DPA in 2016, expectations of businesses may be raised by these developments. A discount of in excess of one third potentially makes a DPA more attractive than an early guilty plea.

We also note that a condition of the DPA is that Rolls-Royce fully cooperates in assisting the SFO as required with the prosecution of its former employees. This highlights the potentially competing interests of companies and their senior employees.

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.

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