Serious Fraud Office v Rolls-Royce plc & Anor [2017] EWCH (QB)

1. Case Title & Citation  

Serious Fraud Office v Rolls-Royce plc & Anor [2017] EWCH (QB)  High Court of Justice, Queen’s Bench Division (approved Deferred Prosecution Agreement) 

        2. Court Name & Bench 

Court: High Court of Justice, Queen’s Bench Division  

Judge: The Right Honourable Sir Brian Leveson, President of the Queen’s Bench Division Bench type: Single-Judge Bench (approval of Deferred Prosecution Agreement)

        3. Date of Judgement 

Date delivered: 17 January 2017 

4. Parties Involved  

Applicant/Prosecutor: The Serious Fraud Office (SOF), the UK’s principal prosecuting  authority for complex fraud, bribery, and corruption. 

Respondents/defendants:  

• Rolls-Royce plc, a UK-based multinational engineering corporation specialising in  power systems and aerospace technologies.  
• Rolls-Royce Energy Systems Inc. (RRESI), a US-registered subsidiary of Rolls-Royce  plc. 

The SFO sought judicial approval for a Deferred Prosecution Agreement (DPA) entered into  with the defendants following extensive investigations into bribery and corruption across  multiple jurisdictions. 

5. Facts of the Case 

(a) Background  

The case arose from a long-running investigation by the SFO into allegations of bribery,  corruption, and false accounting by Rolls-Royce and its subsidiaries. The allegations first surfaced publicly in 2012, prompting the SFO to open an inquiry into the company’s global  operations. Investigations revealed that Rolls-Royce had used intermediaries and third-party  agents to make illicit payments to foreign public officials in order to win contracts and  influence government decisions in several countries, including Indonesia, Thailand, Nigeria,  Russia, India, China and Malaysia.  

Between 1989 and 2013, Rolls-Royce allegedly channelled millions of pounds through  intermediaries and consultants to secure civil and defence contracts. These payments were  often disguised as commissions or consultancy fees and were routed through offshore accounts. 

(b) The Alleged Conduct  

The SFO’s Statement of Facts detailed multiple instances of bribery and corruption: 

• In Indonesia, Rolls-Royce paid intermediaries to secure contracts for supplying  aircraft engines to Garuda Indonesia. 
• In Thailand, bribes were paid to officials connected to Thai Airways to influence  tender outcomes. 
• In Nigeria, the company made corrupt payments to government officials to obtain  energy contracts. 
• In Russia and China, similar practices involved agents who channelled improper  payments through shell companies1. 

These activities were conducted systematically, and the corporate culture allegedly tolerated  or ignored misconduct. The company’s compliance system was found to be fragmented,  poorly enforced, and ineffective in preventing bribery.  

(c) Investigation and Negotiation  

The SFO conducted its investigation with cooperation from U.S and Brazilian authorities.  Although Rolls-Royce did not initially self-report, it subsequently cooperated extensively,  providing internal documents, witness accounts, and access to digital records. The company  engaged in an internal review led by external counsel and adopted recommendations from  Lord Gold, a compliance expert appointed to oversee reforms. 

(d) Deferred Prosecution Agreement  

Following negotiations, the SFO and Rolls-Royce entered into a DPA under Schedule 17 to  the Crime and Courts Act 2013, which allows prosecution to be suspended if the company  meets specified conditions. The DPA required Rolls-Royce to: 

• Pay £258,170,000 in disgorgement of profits; 
• Pay £239,082,645 in penalties; 
• Reimburse £13 million in SFO investigation costs; and 
• Implement and maintain a robust compliance programme monitored by independent  reviewers2. 

The DPA was subject to High Court approval, which Sir Brian Leveson granted. 

        6. Issues Raised  

➢ Corporate Liability under the Bribery Act 2010: Whether Rolls-Royce could be held  criminally liable for failing to prevent bribery under section 7 of the Bribery Act  2010, committed by intermediaries acting as “associated persons.” 

➢ Adequate Procedures Defence: Whether Rolls-Royce could rely on the defence that it  had “adequate procedures” designed to prevent bribery under section 7(2). ➢ Legality and Appropriateness of a DPA: Whether a DPA was in the interests of justice  and whether its terms were fair, reasonable, and proportionate under Schedule 17 of  the Crime and Courts Act 2013. 

➢ Public Interest Consideration: Whether the scale of wrongdoing justified prosecution  or whether public policy supported a DPA to preserve economic stability and  employment. 

➢ Proportionality of Sanctions: Whether the proposed financial penalties and  compliance requirements adequately reflected the seriousness of misconduct. 

7. Arguments of the Parties  

(a) The Serious Fraud Office  

The SFO argued that Rolls-Royce had committed serious and systemic breaches of anti bribery laws. It relied on section 7 Bribery Act 2010, which imposes strict corporate liability  for failure to prevent bribery by persons associated with the company3. 

The SFO contended that: 

• Rolls-Royce had gained substantial commercial benefit from corrupt payments over  several decades. 
• The misconduct involved senior management failures to ensure adequate oversight.
• The company’s compliance system was wholly insufficient to detect or prevent  bribery. 

Nevertheless, the SFO acknowledged Rolls-Royce’s extensive cooperation post investigation, arguing that a DPA served the public interest better than a full prosecution  because it would secure swift accountability, ensure corporate reform, and impose substantial  penalties without destabilising a major UK employer4. 

(b) The Defendant Companies  

Rolls-Royce accepted responsibility for the misconduct but argued that its cooperation,  transparency, and remedial efforts warranted the court’s approval of the DPA. 

Key arguments included: 

• The company had dismissed or disciplined employees implicated in misconduct and  overhauled its compliance framework. 
• A criminal conviction would have disproportionate consequences, including loss of  public contracts, potential debarment, and job losses. 
• The DPA was consistent with principles of justice, as it balanced punishment with  rehabilitation. 
• Rolls-Royce’s voluntary cooperation, though belated, was exceptional in scope and  depth5. 

8. Judgement/Final Decision  

Sir Brian Leveson approved the Deferred Prosecution Agreement under paragraph 8(1) of  Schedule 17, Crime and Courts Act 2013, holding that the agreement was in the interests of  justice and its terms were fair, reasonable, and proportionate6. 

He emphasised that: 

• The bribery was “egregious” and systemic, but Rolls-Royce’s subsequent conduct— cooperation and remedial reform—was highly significant. 
• A DPA ensured public accountability through publication of the Statement of Facts  while allowing corporate rehabilitation. 
• The financial penalty (nearly £500 million including costs) reflected both deterrence  and disgorgement of unlawful profit. 

The court also noted that the DPA maintained transparency, as the judgment and Statement of  Facts were made public. The prosecution was suspended for five years and discontinued in  2022 upon Rolls-Royce’s compliance certification7. 

9. Legal Reasoning/ Ratio Decidendi 

(a) Legitimacy of the DPA Regime 

Sir Brian Leveson confirmed the legal and constitutional legitimacy of DPAs within the UK  criminal justice system. DPAs, he held, are consistent with the rule of law because they  require judicial approval and full disclosure of relevant facts. They do not constitute  immunity from prosecution but a conditional suspension of proceedings subject to court  supervision8. 

(b) Corporate Liability under Section 7 Bribery Act 2010 

The court reaffirmed that section 7 imposes strict liability on corporations for failure to  prevent bribery by associated persons acting for their benefit. Rolls-Royce’s widespread use  of intermediaries, coupled with a lack of internal control, amounted to a clear failure to  prevent bribery. The defence of “adequate procedures” was unavailable because the  company’s compliance framework was demonstrably ineffective during the relevant period9. 

(c) Interests of Justice Test 

Leveson P articulated several factors for determining whether a DPA serves the public  interest: 

1. The seriousness of the offence; 
2. The extent of corporate cooperation; 
3. The corporate culture of compliance; 
4. The proportionality of penalties; and 
5. The deterrent and remedial value of the agreement10

He reasoned that, although the misconduct was severe, a DPA could advance the public  interest by ensuring corporate reform and avoiding collateral harm to innocent stakeholders. 

(d) Proportionality and Deterrence 

The judgment held that the financial sanctions—combining disgorgement, penalty, and  costs—were proportionate to the company’s financial standing and the gravity of  wrongdoing. Leveson P considered that the penalty achieved both specific and general  deterrence while maintaining proportionality11. 

e) Transparency and Accountability 

Leveson P required publication of the DPA and the Statement of Facts, enhancing  transparency in corporate settlements. This step, he explained, was essential to maintain  public confidence in the criminal justice system and prevent perceptions of leniency. 

(f) Compliance and Monitoring Obligations 

The DPA imposed stringent compliance undertakings, including continuous review by  external experts. This, according to the court, was integral to ensuring future prevention of  misconduct and aligning the company’s operations with international compliance standards. 

(g) Analytical Commentary 

The judgment has been praised for striking a pragmatic balance between retribution and  rehabilitation but criticised for its limited focus on individual accountability. Transparency  International argued that the absence of prosecutions against senior executives created a  “justice gap” and risked normalising corporate settlements as a cost of doing business.¹⁴  Nevertheless, the case demonstrated that effective cooperation and remediation could  mitigate corporate criminal exposure. 

10. Conclusion/Observations  

The SFO v Rolls-Royce case stands as a watershed moment in the development of UK  corporate criminal enforcement and compliance jurisprudence. It was the most extensive  application of the DPA mechanism since its introduction under the Crime and Courts Act  2013 and remains a benchmark for evaluating corporate liability under the Bribery Act 2010. 

From a compliance and regulatory standpoint, the case underscores that: 

• The “failure to prevent” model of liability imposes a heavy burden on companies to  maintain demonstrably effective compliance systems. 
• Judicially approved DPAs can promote accountability while preserving economic  stability. 
• Cooperation and self-reporting are decisive factors in determining prosecutorial  outcomes.

Critically, however, the case also exposes the tension between corporate and individual  accountability. While Rolls-Royce faced unprecedented financial sanctions, no executives  were convicted, prompting debate about whether the DPA regime achieves true deterrence. 

In conclusion, Rolls-Royce embodies the UK’s shift towards a preventive, compliance based enforcement model. It highlights that corporate ethics and governance are now  inseparable from legal compliance. For law and policy students, the case serves as a vital  study in balancing the imperatives of punishment, regulation, and economic pragmatism in  modern corporate crime enforcement.

BIBLIOGRAPHY  

Primary Sources 

Cases 

• Serious Fraud Office v Rolls-Royce plc and another [2017] EWHC 1 (QB). • Serious Fraud Office v Standard Bank plc [2015] EW Misc 8 (CC). 

Legislation 

• Bribery Act 2010. 
• Crime and Courts Act 2013. 

Secondary Sources 

• Bevan Brittan LLP, ‘Failing to Prevent Tax Evasion and/or Bribery: A Reminder of  the Corporate Criminal Offences and the First Prosecutions’ (Bevan Brittan LLP,  2024) 
• Clifford Chance, ‘Serious Fraud Office Concludes Its Most Significant Corporate  Bribery Settlement to Date’ (Clifford Chance Briefing, 2017) 
• HM Government, Deferred Prosecution Agreements Code of Practice (Crown  Prosecution Service 2014). 
• Transparency International UK, ‘Lack of Individual Prosecutions in Rolls-Royce  Bribery Case: Justice Not Served’ (Transparency International, 2017) • WilmerHale, ‘Lessons Learned from the Rolls-Royce Deferred Prosecution  Agreement’ (WilmerHale, 2017) 
• Womble Bond Dickinson, ‘Rolls-Royce: Corruption and the DPA’ (Womble Bond  Dickinson, 2017)

1 Serious Fraud Office v Rolls-Royce plc & Anor [2017] EWCH 1 (QB)

2 Crime and Courts Act 2013, sch 17

3 Bribery Act 2010, s7 

4 Serious Fraud Office, Statement of Facts: Rolls-Royce Deferred Prosecution Agreement (2017)

5 WilmerHale, “Lessons Learned from the Rolls-Royce Deferred Prosecution Agreement” (2017)

6 SFO v Standard Bank plc [2015] EW Misc 8 (CC) 

7 Clifford Chance, ‘Serious Fraud Office Concludes its Most Significant Corporate Bribery Settlement to  Date’ (2017) 

8 HM Government, Deferred Prosecution Agreements Code of Practice (2014). 

9 Womble Bond Dickinson, ‘Rolls-Royce: Corruption and the DPA’ (2017)  

10 Transparency International UK, ‘Lack of Individual Prosecutions in Rolls-Royce Bribery Case’ (2017)

11 Bevan Brittan LLP, ‘Failing to Prevent Tax Evasion and/or Bribery: A Reminder of the Corporate Criminal  Offences’ (2024)