Rolls-Royce has agreed to pay £671 million in penalties in response to several long-running bribery and corruption investigations. Regulators in the UK, the United States and Brazil investigated claims that Rolls-Royce had paid bribes to intermediaries to secure high-value export contracts in a number of overseas markets, including China, Brazil and Indonesia.
In a press announcement, Rolls-Royce stated that it had in principle reached a Deferred Prosecution Agreement (DPA) with the UK Serious Fraud Office (SFO). The proposed DPA is subject to final judicial approval, and the SFO and Rolls-Royce will appear at court on 17 January 2017 to seek this approval.
In addition to the agreement with the SFO, Rolls-Royce has also reached a DPA with the US Department of Justice (DOJ) and a Leniency Agreement with Brazil’s Ministério Público Federal (MPF).
We reported in December 2015 that DPAs were a “sign of things to come” in the UK. While common in the US, the DPA approach was introduced in the UK in 2014, and until now only two have been agreed, namely, with Standard Bank and a Small Medium Enterprise (SME) that has not yet been named. The fact that Rolls-Royce has agreed to a DPA of significantly greater value than the first few agreements the SFO struck a year ago is evidence that the DPA is seen as a key weapon in the SFO’s anti-corruption armoury.
The DPA is a voluntary agreement that results in the automatic suspension of a prosecution, provided that negotiated terms including the payment of a financial penalty are fulfilled by the company by the end of the agreement term. If the conditions are not complied with, then prosecution proceeds.
The financial penalty imposed in the DPA between Rolls-Royce and the SFO amounts to £497.2 million plus interest, payable in accordance with a five-year payment schedule, and costs. The fine and other terms set out in the agreement with the SFO are subject to examination and approval by Lord Justice Leveson of the Royal Courts of Justice on 17 January 2016. If approved, this DPA will be, by far, the largest settlement reached by the SFO. The agreement is also of immense importance to the SFO given Rolls-Royce’s stature as a flagship UK company and a household name.
Rolls-Royce has been praised as “one of the United Kingdom’s great global companies” and “a world leader in the development of advanced technologies… of which the whole country can be proud.” The allegations of bribery and corruption within Rolls-Royce could have severely damaged the company’s reputation and share price, not least because other companies may choose to steer clear of companies that are under investigation for bribery and corruption.
Nonetheless, it was reported today that Rolls-Royce’s shares were up almost eight percent in the wake of the settlement agreements with the anti-bribery and corruption authorities. A spokesperson for the company said that “Rolls-Royce has co-operated fully with the authorities and will continue to do so”. It was also reported that, “[w]ithout admitting any wrongdoing, Rolls-Royce has repeatedly attempted to signal its willingness to reform after the bribery allegations emerged.”
The eye-watering fine against Rolls-Royce sends a clear signal that the UK means business in cracking down on bribery and corruption. However, it is a positive outcome that Rolls-Royce avoided prosecution, which ultimately will help the company move forward and recover from this issue more quickly.