On 31 January 2025, the High Court ruled that the Serious Fraud Office (SFO) can apply to the court to proceed with action against Güralp Systems Limited (Güralp) in respect of a breach of a Deferred Prosecution Agreement (DPA) entered into in 2019. This is a significant matter as it represents the first time that the SFO has sought to take action against a company for breaching the terms of a DPA.
The matter came before the Court on a preliminary issue of jurisdiction because the DPA was stated to conclude on or before 22 October 2024. This gave rise to a question as to whether the SFO could take action, after this date, for a breach of the DPA's terms – a question resolved in the SFO's favour. But it will be interesting to observe what happens next, given that the individuals whose conduct gave rise to the charges against Güralp were acquitted by a jury when they stood trial. The fact that individuals have been acquitted of criminality accepted by a company for the purposes of a DPA is not unusual in the history of the SFO's DPAs. However, this might be the first time that it has implications for the prosecution of a company against which the indictment had originally been deferred.
The Güralp DPA
Güralp's DPA arose out of charges that it had engaged in a conspiracy (with three of its senior executives) to make corrupt payments and had failed to prevent bribery in relation to a scheme involving payments to a South Korean public official (who separately had been convicted in the US of money laundering in respect of monies received by him). Under the terms of the DPA, Güralp was required to disgorge £2,069,861 gross profit gained through corrupt activities, to review its internal anti-bribery and corruption (ABC) policies, procedures and controls, and to provide the SFO with an annual report on its ABC compliance programme. The company's perilous financial state meant that no separate financial penalty or costs order was imposed.
The DPA is stated to be effective for a period of five years beginning on the date of the Court's approval of it (22 October 2019) and ending "on or before 22 October 2024, when the financial terms [i.e. disgorgement] have been fully satisfied."
The DPA does not contain a clear timetable for disgorgement (other than it was to happen by 22 October 2024) and in fact anticipates that this might not prove possible, setting out provisions for what should happen if the company finds itself unable to meet the payment terms, clearly contemplating that this would be dealt with by way of a variation of the DPA. Finally, the DPA states that if the SFO determines that Güralp has failed to adhere to the terms of the DPA, the SFO is authorised to request the court to terminate the agreement and lift the suspension of the draft Indictment, thereby reopening the prosecution.
Breach of the DPA: failure to pay the disgorged profit
There was no issue with Güralp's compliance with its obligations under the DPA other than disgorging the agreed sum of profit. Güralp wrote to the SFO on 2 June 2023 "to put them on notice that Güralp might not be able to meet their financial obligations under the DPA". Güralp followed this with another letter on 27 July 2023, suggesting a timetable "for the provision of financial information whereafter the terms of a variation could be suggested". The matter was stagnant until 22 April 2024, when Güralp proposed an alternative payment plan (this being the date under the DPA by which Güralp had to take this step). The SFO rejected that suggestion on 4 July 2024, offering a different payment schedule with full payment due by 22 October 2027, and interest accruing from 24 November 2024. On 22 October 2024 (the stated expiry date of the DPA), the SFO revised their approach, issuing a formal notice of breach, giving Güralp 30 days to respond before it would apply to the court.
The SFO applied to the High Court to make a finding that Güralp had failed to comply with the terms of the agreement and to terminate the DPA. Güralp responded by arguing that the Court lacked jurisdiction to deal with the breach, as the power of the Court under Schedule 17 of the Crime and Courts Act 2013 may be exercised "at any time when a DPA is in force." Güralp argued that the DPA was stated to be effective for a period ending on 22 October 2024, which meant it was no longer in force, and therefore the Court's jurisdiction ended on that date.
Lord Justice Davies found that the DPA remained in force after 22 October 2024. Applying the "principles of contractual interpretation", Davies LJ held that where there were two conflicting interpretations of a contract (here, either (i) that the DPA expired on 22 October 2024, or (ii) that it remained in force until the disgorgement payment had been made in full), the Court was entitled to "prefer the construction which is consistent with business common sense and to reject the other". Davies LJ reasoned that the intention of the parties at the point at which the agreement was made was "critical" and concluded that "[t]he quid pro quo for avoiding prosecution will be payment of a penalty or a confiscatory payment or both. Prima facie the agreement will be interpreted in such a way as to ensure such payment is made." Furthermore, the DPA contained provisions that anticipated both potential late payments, which would incur interest, and/or a complete failure to pay, triggering a written notice of failure to perform. As a result, the terms of the DPA would need to extend beyond 22 October 2024. This point was reinforced by the fact that Güralp had sought to negotiate an alternative payment schedule that would have extended past 22 October 2024.
The Court therefore rejected Güralp's argument, opening the door for the SFO to proceed against Güralp under the original (deferred) indictment.
DPAs: paved with good intentions
Over a decade ago, the UK government recognised that prosecuting large corporations was difficult, time-consuming and expensive. In order to combat corporate criminality in a faster and cheaper way, the UK government looked to the US model of DPAs. The Crime and Courts Act 2013 created provisions for the use of DPAs in cases of corporate financial crime (including bribery) as a mechanism for companies, partnerships and unincorporated associations (but not individuals) to resolve investigations where a Court is satisfied that a DPA is in the interests of justice. DPAs must include a Statement of Facts relating to the alleged offence (essentially setting out the basis agreed between the SFO and the corporate on which the corporate accepts criminal culpability), do not formally require an admission of guilt (though prosecutors prefer it), and are a non-conviction-based mechanism.
If the company meets the DPA conditions within the specified timeframe, the SFO will discontinue the criminal proceedings, meaning the company avoids a conviction. However, if the conditions are not met, the SFO may resume the prosecution of the company.
Because part of the attraction of a DPA (for both the SFO and the company under investigation) is the ability to reach a resolution of the criminal investigation more quickly – and less painfully for the corporate – than a full-blown criminal investigation and subsequent prosecution, DPAs have invariably been reached before any charging decisions about individual suspects.
Güralp's DPA was, in fact, an outlier, as it was concluded when the trial of the relevant individuals was about to start. But in all other cases, trials of individuals have taken place long after the conclusion of the DPA (where they have happened at all). And in all cases bar one (a guilty plea to receiving a bribe, when the alleged bribe payer was acquitted), none of the individuals have been convicted. There has therefore been an increasing disconnect between the version of events in a Statement of Facts, setting out details of the conduct of individuals which gives rise to the acceptance of criminal liability by the company, and the outcome when those individuals stand trial.
In the SFO's prosecution of Güralp's owner, its Managing Director, and its Head of Sales, all three were acquitted in December 2019. They had contested charges that they conspired with the recipient of the alleged bribes, a South Korean public official, to make corrupt payments.
The first of the charges against the company, dealt with by way of the DPA, was that it had been part of the same conspiracy. The second charge against the company, also dealt with by way of the DPA, was that it had failed to prevent bribery under section 7 of the Bribery Act 2010. Section 7 creates liability for a company where a person 'associated with it' bribes another person. Although the individuals were not charged with substantive offences of paying bribes, the jury's decision to acquit the individuals of conspiracy can (on the facts) only be interpreted as meaning that they were not satisfied, beyond reasonable doubt, that there was an agreement to make corrupt payments (notwithstanding the ample evidence that payments were made).
So, where does this leave the prospective prosecution of Güralp? The DPA provides that "In the event of it becoming necessary for the SFO to pursue the prosecution that is deferred by this Agreement, the Statement of Facts may be used as an admission by [Güralp] in accordance with section 10 of the Criminal Justice Act 1967." Section 10 provides that any admission of a fact which can be proved by oral evidence "shall as against that party be conclusive evidence in those proceedings of the fact admitted."
Schrödinger's Cat (in a corruption scenario)?
Here we can find ourselves in the world of facts and 'alternative facts'. Is a company bound by an acceptance of a 'fact' for the purposes of agreeing a Statement of Facts if, subsequently, the 'fact' has not been proved to the criminal standard? In short, Güralp accepted in the Statement of Facts that the payments made by its senior employees were bribes. The alleged bribe payers were acquitted. Does that mean the payments were not bribes? Or can the same payment be, as a matter of fact, a bribe (because a company accepts it is) and not a bribe (because the individual accused of paying the bribe has been acquitted)?
Normally, this question will not arise because a company, having taken the decision to resolve a criminal investigation by way of DPA, will ensure it complies with its terms to avoid the risk of prosecution. This might therefore be an isolated scenario, occasioned by the specific circumstances of Güralp's DPA and its ongoing precarious financial position. Companies entering into DPAs will, by now, be well aware of the risk that there may be no prosecutions of individuals (as has happened in a number of the bigger SFO DPAs – Rolls Royce, Airbus and Amec, by way of example) and the risk (or likelihood, at least based on present statistics) that individuals who are charged will be acquitted. However, the upsides of a DPA for a company are clear, which means that companies may be willing to accept these risks when seeking to achieve an outcome that enables them to 'move on' from the matter that brought them to the SFO's attention.
We await news of the next steps in the SFO's pursuit of Güralp. And while DPAs have always felt, to quote Lewis Carroll's Red Queen in Alice's Adventures in Wonderland, like a case of "sentence first – verdict after", the absurdity is compounded when, years after the corporate sentence has been passed and the acquittals of the individual participants handed down, a third stage is added, and the matter proceeds to a trial of the corporate.
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