Engineering giant Rolls Royce has been in the news recently, and not for the right reasons. So what’s the deal with these bribery allegations?
What were the allegations?
Following what was described as “the largest individual investigation conducted by the SFO to date”, Rolls Royce has admitted making payments over a sustained period to middle-men in six countries, to assist in securing orders for its aero engines and turbines.
What’s wrong with that?
Under the Bribery Act 2010, it is a criminal offence to offer, promise or give a financial or other advantage to another person with the intention of inducing someone to perform improperly a relevant function or activity, or to or to reward someone for doing so.
Surely that was the liability of the individuals?
Yes, but corporate entities cannot hide behind an individual’s wrongdoing: commercial organisations are criminally liable if a person associated with them bribes another person intending to obtain or retain business, or an advantage in the conduct of business, for that organisation. The only defence is if the organisation can show it has adequate preventative safeguards in place.
But all this was overseas. Surely that is not a crime here?
Wrong: A function or activity is a relevant function or activity even if it has no connection with the United Kingdom, and is performed in a country or territory outside the United Kingdom.
So who was investigating?
The enquiries into Rolls Royce’s conduct was carried out by investigators from three countries – the UK, US and Brazil. The investigation, which lasted some five years, examined 30 million documents, and cost more than £13m.
What is a DPA?
A DPA is a Deferred Prosecution Agreement: these were introduced on 24 February 2014, under the provisions of Schedule 17 of the Crime and Courts Act 2013, and comprise an agreement between a prosecutor and an organisation (they are not available for individuals) which could be prosecuted, allowing a prosecution to be suspended for a defined period, provided the organisation meets certain specified conditions.
A DPA enables a corporate body to make full reparation for criminal behaviour without the collateral damage of a conviction (for example sanctions, or reputational damage that could destroy the jobs and investments of innocent people).
So is a DPA just a stitch up?
No. A DPA must be a punishment. It cannot be a cosy deal. Corruption is regarded as a serious criminal offence, and the sanction should acknowledge that, in particular compensation (where appropriate), disgorgement of illegal gain, and an additional fine, in order to deter others. It has to be a just financial sanction, that stands up to scrutiny, and is constructed on a transparent and principled basis.
DPAs are concluded under the supervision of a judge, who must be convinced that the DPA is ‘in the interests of justice’ and that the terms are ‘fair, reasonable and proportionate.’ They are transparent, public events, hence the publicity surrounding the Rolls Royce case.
A DPA will only be available where the company co-operates with the prosecution authorities.
What happened with Rolls Royce?
Under the DPA approved by Sir Brian Leveson, the President of the Queen’s Bench Division, Rolls Royce agreed to pay £671m to settle the allegations that it had corruptly paid out substantial sums in order to secure orders in Thailand, India, Russia and elsewhere. It admits wrongdoing, and will submit to other measures to monitor its conduct over a specific period.
If it does not break the agreement, it will not be prosecuted at the end of the agreed period.
In a statement read out in court, the company said that it “apologised unreservedly for the conduct which has been uncovered”
So who’s next?
In July 2016, the SFO opened an investigation into Airbus in relation to allegations concerning its third-party consultants. The company has said that it continues to co-operate with the authorities. It is not known whether this will also be viewed as appropriate for a DPA.
Richard Walford is a barrister at Serle Court