- SFO enters into the largest Deferred Prosecution Agreement so far, with $1.1 billion being paid to the UK.
- The agreement is part of a wider $4 billion global resolution.
- 50 percent reduction to the UK financial penalty to reflect “exemplary cooperation.”
- It is clear, in case there was any doubt, that whether ABAC procedures are "adequate" is a question of substance, not form.
On Friday, January 31, anti-corruption authorities in France, the UK, and the United States announced penalties totalling 3.6 billion Euros against Airbus SE. In the world of anti-corruption law this is an historic case, and not just because of the money involved. A link to the SFO press release, statement of facts, and judgment is provided at sfo.gov.uk.
Not all of the details have become public, but we know enough to give some “points forts,” as we are sure will be said in Paris.
Following the money
Aircraft are expensive and purchases can run into the billions. So in a case of serious misconduct, connected to numerous contracts, then the only credible penalty will be on a huge scale. Cases can be hard to compare due to variables such as currency and costs regimes, but suffice it to say that the total payable by Airbus is the highest on record, surpassing behemoths such as the Odebrecht and Petrobras cases.
Airbus is a European company with its main base of operations in Toulouse. It seems fitting that France gets the lion’s share of the fines. Slightly over €2 billion will go to the Parquet National Financier (PNF), pursuant to a Convention judiciaire d'intérêt public, ("CJIP")”, which is the equivalent of a UK Deferred Prosecution Agreement or DPA.
The UK comes next, with a penalty of €991 million being approved by a senior judge. This is pursuant to a DPA between the company and the Serious Fraud Office (SFO). The figure is the largest under the DPA regime so far. The SFO and other UK agencies such as the export finance authority can take considerable credit for initiating the investigation and involving other international agencies.
The U.S. is to receive €525 million, by reason of a DPA and/or civil settlements. Even this “smaller” amount puts Airbus among the all-time largest resolutions related to the U.S. Foreign Corrupt Practices Act (FCPA) (although about half this amount was related to breaches of the International Traffic in Arms Regulations (ITAR)1 statute rather than FCPA per se).
Hands across the seas
The case is a powerful example of international cooperation between law-enforcement. The British and French authorities created a joint investigation team (JIT) which will be regarded as a model for the future. The JIT worked in cooperation with the U.S. Department of Justice, and it is obvious that there has been very close collaboration across the Channel and the Atlantic.
The French, British, and American authorities split the work between them. Each took responsibility for different regions and by different parts of the company. For example, the UK investigated conduct in Sri Lanka, Malaysia, Indonesia, Taiwan, and Ghana. France took the lead in relation to matters in China, Colombia, Nepal, South Korea, the United Arab Emirates, Saudi Arabia (Arabsat), Taiwan, and Russia. The United States also focused on China, with an additional limb relating to breaches of ITAR.
The case demonstrates the new teeth available to European law -enforcement agencies. Historically the Europeans – and the French in particular – had less to boast about as regards inernational anti-bribery enforcement. They are now catching up with the United States, and quickly.
The UK: DPAs at cruise
For the UK, these are exactly the droids that the Bribery Act has been looking for. A haul of over $1 billion represents the apotheosis of the Serious Fraud Office’s powers under the Act and under its more recent DPA powers.
After a slightly uncertain start, the key principles for DPAs now seem to be clear. Rather than a prosecution and trial, a corporation with a serious case to answer on bribery generally agrees to disgorge any gains and pay additional fines, as well as handing over all evidence which might be relevant to the liability of others. The fines are usually at a discount of 50 percent of what might be imposed after a conviction at trial, and the Airbus case is no different. The judge accepted that 50% was justified, despite what she described as a “slow start”. The company had given “exemplary” cooperation once proper internal investigations had commenced.
Adequate ABAC procedures
All the UK charges against Airbus related to breaches of section 7 of the Bribery Act 2010. This is the innovative provision that creates an offence, not of bribery directly, but of failing to prevent bribery by third parties connected to a commercial organisation. Section 7 is subject to a defence of “adequate procedures” designed to prevent the bribery in question.
What happened to Airbus’s procedures in this case? It seems that, despite having had detailed written codes, important-sounding committees, and something described as an Anti-Corruption Compliance Certificate (awarded by an external consultant), Airbus still failed to stop many millions in illicit payments. It seems that many procedures could still be bypassed. The company did not try to defend itself on the basis that procedures were “adequate”. This illustrates a point some of us have been making for years, that effective ABAC procedures are about actions rather than just nice-looking documents. Substance trumps form.
It is much to Airbus’s credit that the trigger for the ultimate investigation was its apparent change of heart as regards the substance of its relationships with intermediaries. This apparently took place in 2014 or 2015. Reading between the lines, it seems that there was a change of culture at the top, a process of self-examination and voluntary reporting began thereafter.
The future of the SFO and individual cases
Of course, this sort of result reflects positively on the SFO. €991 million is not to be sneezed at, and it follows other huge DPA settlements in the Tesco and Rolls Royce cases. The agency, which tends to be (unfairly) scorned by many, will place this trophy very prominently on its mantlepiece, in sight of any and all future critics.
While admiring this glittering prize we should sound a note of caution. Care was clearly taken to keep this outcome from being too severe, both in the decision to proffer a DPA rather than prosecute and in the calculation of the penalty. The court accepted, of course, that the outcome was in the public interest and there was no argument made to the contrary. However a cynic might remark that the very largest companies tend to get the benefit of the doubt when the public interest in leniency is being considered. Other companies have not been so lucky2.
Another, more important, quibble: The received wisdom is that punishment of individuals remains the best deterrent to white-collar crime.
Although seven DPAs have now been agreed by the UK, there have yet to be any convictions of employees or agents. In some cases, the SFO has not decided to charge at all. In others, people were charged but were acquitted at trial. For some, such as those in the Tesco case, proceedings were dismissed before even reaching trial.
We have written elsewhere about the rather strange legal paradox this situation has created. We will not pursue the point at length here. It is not clear whether any individual will be charged in connection with these matters.
The more general point is this: For a long time, some people at the top of large companies thought foreign bribery was a “cost of doing business”. The idea behind legislation such as the FCPA and the Bribery Act was that, while corporate liability was important, senior people should still be personally answerable for conspiracies to corrupt.
With personal jeopardy seemingly low, might the board or the sales-director still be tempted to authorize that doubtful payment, notwithstanding Airbus and similar cases? They may see the main risk as being a (non-fatal) hit to corporate profits, at some unknown time in the future. Could an un-intended consequence of DPAs be an actual increase in personal impunity? We hope not. It may not be easy, but we think that the UK government should consider widening the scope of DPAs so that, in some circumstances, a fair resolution for individuals might also be reached voluntarily.