The record-breaking €991 million Deferred Prosecution Agreement ("DPA") with global aerospace company Airbus SE ("Airbus") is a success for the Serious Fraud Office ("SFO"). It has secured a large fine against a substantial multi-national organisation. It has also demonstrated the impact of successful cross-border co-operation. However, the question of individual accountability remains live.
On 31 January 2020 the SFO announced that it had entered into a DPA with Airbus. Under the terms of the DPA, Airbus has agreed to pay a fine and costs amounting to €991 million in the UK, and in total €3.6 billion as part of a larger global resolution for bribery, involving agreements with authorities in France (the Parquet National Financier ("PNF")) and the United States (the Department of Justice ("DoJ") and Department of State ("DoS")). This is the seventh DPA the SFO has negotiated and is the largest (in terms of financial penalty) to date. The DPA was the result of a long-term investigation alongside the PNF as part of a joint investigation team ("JIT") which worked in parallel with the US investigation and US authorities. The scale of the investigation was very significant – 30.5 million documents (excluding duplicates) were collected from over 200 custodians, the SFO‘s costs were £6.9 million and Airbus engaged five international law firms to handle the investigation, defence work and related remediation.
Airbus' alleged misconduct which the SFO investigated and was the subject of the DPA, took place between 2011 and 2015 across five jurisdictions (Sri Lanka, Malaysia, Indonesia, Taiwan and Ghana) and concerned Airbus' Commercial and Defence & Space divisions.1
The scale of the alleged misconduct was large and varied, and included2:
- Paying US$50 million in sponsorship to a sports team jointly owned by executives of a major airline that went on to purchase large amounts of aeroplane stock from Airbus.
- Making numerous corrupt payments directly to airline executives, employees and/or their relatives.
- Making numerous corrupt payments to relatives of government officials.
- Engaging intermediaries known as "Business Partners" ("BPs") in several jurisdictions, who were paid (often undue) commission for sales Airbus made in their region. BPs were managed by an Airbus subsidiary with an annual budget of $300 million. The JIT reviewed more than 1,750 entities and identified around 110 BPs as having "red flags" for corruption.
No disclosure of misconduct was made by Airbus until UK Export Finance ("UKEF") declared its position (see below). On the contrary, in 2012, at the height of the alleged misconduct, Airbus commissioned a private company to review its compliance programme and was awarded with an "Anti-Corruption compliance certificate" for the design of its anti-bribery compliance program.3 Certainly, as Dame Victoria Sharpe (President of the Queen's Bench Division of the High Court) pointed out in her judgment, Airbus had an elaborate compliance programme including detailed written policies governing payments and contractual relationships with third parties which belied the reality of Airbus‘ conduct (see more below). The programme extended beyond policies and was put into action soon after Airbus’ conduct came to light – for example from 1 June 2015 the Legal & Compliance functions at Airbus were merged and re-structured; being given far greater prominence and authority under a newly-appointed General Counsel, who became a member of the governing Group Executive Committee (which also comprised of a new Board of Directors).4
As part of its business, in 2015 Airbus obtained export credit financing from UKEF, a Government body. The UKEF initially raised concerns regarding the suspicious practice of BPs, and the lack of information that had been provided to it in relation to one BP in Sri Lanka. In April 2015 UKEF wrote to Airbus, informing it of its duty to report all suspicious circumstances to the SFO. In response to this, Airbus conducted a review of the accuracy and completeness of its declarations to the UKEF relating to the use of BPs in applications for export credit financing. This review culminated in a detailed report made to the UKEF in 2016, following which the UKEF felt it appropriate to contact the SFO and expressed a strong preference that Airbus do the same. Both Airbus and the UKEF reported to the SFO at the same time on 1 April 2016.5
The interests of justice
As with all DPAs, in performing its duties the Court had to conclude that the SFO's agreement with Airbus was in the interests of justice and fair, reasonable and proportionate. The Court spent some time deliberating the first part of this test in its judgment approving the DPA.
In this case Dame Victoria Sharpe was satisfied that the DPA met the required test - in spite of the following factors:
- the extent of the alleged misconduct;
- the fact that the Court acknowledged that seriousness was a key factor in rendering a DPA outside the interest of justice; and
- that the Court stated that the "seriousness of the criminality in this case hardly need[ed] to be spelled out".6
The key factors that contributed to the Court's ultimate decision in this regard was the level of Airbus’ self-reporting, co-operation and remediation efforts including significant changes to its internal systems and senior management team, which were described as "exemplary" (see below).7
Co-operation and compliance
Though Airbus’ co-operation was described by the Court as initially "slow [to] start" Airbus received credit for reporting conduct which had taken place “almost exclusively overseas”8. Airbus was then commended for the extent to which it co-operated with the authorities including accepting the extraterritoriality of section 2 notices.
The Court also made much of the changes that Airbus carried out on its internal systems and compliance, on this topic it stated:
"Airbus has (i) created numerous new compliance roles and extensively recruited highly experienced senior compliance professionals; (ii) revised its Anti-Bribery and Corruption policies and procedures in response to recommendations by external stakeholders, the Independent Compliance Review Panel (ICRP), PwC and Agence Française Anticorruption (AFA), the French state anti-corruption agency which is positioned within the Ministry of Justice and headed by a Magistrate; (iii) launched a company-wide, systemic and comprehensive ABC Risk Assessment; (iv) significantly reduced the use of external consultants across the Airbus group of companies, and has stopped the use of consultants in relation to sales of aircraft within the Commercial Aircraft Division; (v) redesigned the 'onboarding', due diligence and ongoing monitoring for all third parties with a business relationship with the Airbus group; (v) implemented a targeted ABC 24 month training plan under the supervision of the Ethics and Compliance Engagement Team for all employees identified in high and medium risk".9
On this topic, the Court further stated:
“Airbus has made significant changes to its internal processes… Airbus has commissioned an ICRP to complete an independent review of Airbus’ ethics and compliance procedures. The ICRP’s instructions have included reviewing Airbus’ policies and procedures, conducting site visits with employees and carrying out focus groups with employees. The ICRP has produced two reports to date. The first report in 2018 noted the considerable progress made by Airbus and made fifty five recommendations. The second report, in 2019, noted that “the company is now in a very different place than it was two years ago”. The ICRP is due to issue another report later this year. Further, the Airbus Ethics and Compliance teams have been restructured to ensure functional independence from the business. Amongst other things, there has been a merger of legal and compliance functions and the change of the reporting line to the newly appointed General Counsel; the creation of a subcommittee of the Board, entitled the Ethics & Compliance Committee to provide independent oversight of the company’s Ethics & Compliance programme; and appointed a new Ethics & Compliance Officer with changed reporting lines directly to the General Counsel and the Ethics & Compliance Committee.
Co-operation between authorities”10
The SFO's collaboration with the PNF, DoJ and DoS was fundamental in achieving the enormous fines attributable to the DPA and related settlements. In this case, the SFO formed a joint investigation team with the PNF which worked in parallel with the US investigation. Each of the prosecuting authorities took responsibility for a number of geographical areas or customers and have entered into separate DPAs. SFO Director Lisa Osofksy also praised of the collaboration between authorities stating: "A resolution of this scope would not have been possible without the commitment, determination and hard work of SFO staff and our French and American colleagues". 11
Conviction of individuals
However, the DPA represents the completion of only the first stage of the investigation into the offences. A large part of the misconduct involved systematic bribe-paying, primarily through the use of BPs. Such misconduct can include multiple levels of involvement: those paying the bribes, those involved in any cover-up, professionals who failed to respond to red flags, senior managers who either actively encouraged the practice or deliberately turned a blind eye, and executive directors and board members who permitted the culture to allow misconduct to happen. Clearly, there may be several culpable individuals operating at different tiers of Airbus that may face prosecution.
In the recent past the SFO has notably been unsuccessful in prosecuting individuals for their role in an organisation's misconduct (e.g. the SFO investigation into Guralp resulted in the prosecution of three employees, all of whom were acquitted; the investigation into individual involvement in the Rolls Royce misconduct was dropped and most recently the SFO failed in its high profile prosecution of Barclays executives). It remains to be seen whether any current or former employees of Airbus will face charges in the UK arising from the offences which were the subject of the DPA, but a failure to properly investigate individuals will undoubtedly increase the scrutiny faced by the SFO. 12
The Airbus DPA is noteworthy for the record breaking fine and its international co-operation with French and US authorities which eventually led to the DPA. It also demonstrates that, even where there is significant and pervasive misconduct, a DPA can still be deemed in the interest of justice, provided an exceptional level of co-operation is established by the organisation at fault. Elsewhere, the DPA provides an understanding of the weight the court gives to co-operation over other factors when deciding on awarding a DPA (e.g. self-reporting, the level of misconduct etc.) and provides some clarification over the level of ongoing co-operation that is required by organisations subject to a DPA. Looking beyond the DPA, the SFO have demonstrated that it is capable of co-operating with other international authorities in order to achieve a common purpose. This serves as a reminder to the international community that no organisation is too large to avoid scrutiny. However, past failures mean this DPA will place increased pressure on the SFO to investigate and successfully prosecute culpable individuals.
1 The PNF's investigation related to bribery and corruption offences in China, Colombia, Nepal, South Korea, the United Arab Emirates, Saudi Arabia (Arabsat), Taiwan and Russia. The DoJ’s investigation related to conduct that took place during the group’s sales campaign in China, certain aircraft component parts that were exported from the U.S. to Spain, and Airbus’ sale of aircrafts to Ghana, Vietnam, Indonesia, and Austria.
11 “SFO enters into €991m Deferred Prosecution Agreement with Airbus as part of a €3.6bn global resolution”, 31 January 2020 https://www.sfo.gov.uk/2020/01/31/sfo-enters-into-e991m-deferred-prosecution-agreement-with-airbus-as-part-of-a-e3-6bn-global-resolution/
12 Authorities are still investigating the involvement of individuals in Airbus’ alleged misconduct, and the question of individual prosecutions remains live. “Airbus fraud investigation ‘remains active’ as penalty details emerge”, David Kaminski-Morrow, 31 January 2020 https://www.flightglobal.com/airframers/airbus-fraud-investigation-remains-active-as-penalty-details-emerge/136480.article