Airbus DPA: as Ashurst predicted?

On 31st January the record-breaking global settlement between Airbus and the UK, French and US enforcement authorities was announced. With a global payment of €3.6 billion it tops the enforcement charts, replacing Odebrecht as the world's largest foreign bribery case in history. Another success story for global cooperation.

The conduct concerned spanned several years and was described by the UK's presiding Judge, the Rt. Hon. Dame Victoria Sharp, as "grave". But self-reporting, "exemplary" cooperation, "complete rehabilitation", and the far reaching impact a criminal conviction would have made, saved yet another global organisation from prosecution.

What can we take away from the SFO's seventh DPA? And how did it match up to Ashurst's 5 predictions (see our briefing dated 30 January)? 

Prediction 1: Evidence of exceptional cooperation between authorities?

Absolutely. The French enforcement agency, the Parquet National Financier (PNF) had primacy in the investigation, which was run jointly from an early stage with the SFO. The Joint Investigation Team (JIT) was formalised via a JIT Agreement. The US investigation, which commenced in 2018, ran in parallel with this investigation.

The JIT's investigation was huge. It covered all of the Business Partners (BPs) engaged by Airbus until 2016 (more than 1,750 entities globally) and over 30.5 million documents. Once the JIT had identified the investigation priorities and which BPs to focus on (110 out of 1750), the work was then divided between the UK and French authorities on a jurisdictional basis.

Other jurisdictions were also called on to cooperate via requests for mutual legal assistance. And the fallout in those jurisdictions is likely to be felt for some time, with related investigations triggered on the back of the Airbus settlement. Global cooperation looks set to continue.

Takeaway: When investigating potential misconduct, consider which authorities you may need to consider reporting to. In the US settlement, Airbus was not given voluntary disclosure credit because it did not disclose the corruption-related conduct until after the SFO investigation was made public. 

Prediction 2: Insight into the activities of the French authorities in the ABC sphere?

The PNF took a clear lead in this investigation, establishing primacy at an early stage. It was keen to cooperate, but only on its terms. 

One potential stumbling block to cooperation was the French Blocking Statute, which protects French entities against cross-border disclosure. To deal with this, the SFO agreed to the PNF having control over the supply of documents to the SFO. In return for cooperation from the PNF, the US DOJ was also required to formally agree to comply with the Statute, and accept the primacy of the European investigation, and limit its investigation to any alleged FCPA violations brought about by the scheme. The DOJ also agreed to a fair allocation of proceedings against any individuals. As such, the US investigation was much more limited in scope.

This is the ninth DPA type deal agreed by the French authorities and the biggest fine imposed by the PNF to date. They are clearly keen to make effective use of this enforcement tool and are not afraid to take the lead in investigations of this size and scope.

Does this signal the end of US dominance? If you look at the top 10 FCPA fines, the majority are against European companies. The fact that the DOJ played a more limited role, with the European agencies taking the lead and the bigger cut of the financial settlement, could mean we see a move away from the US being the dominant player in these types of global investigations. 

Prediction 3: New precedents set by Dame Victoria Sharp?

Not really. This was the first DPA to be approved by the new President of the Queen's Bench Division. However, in terms of approach, she very much followed that set by her predecessor, Sir Brian Leveson, in the Sarclad and Rolls Royce DPAs.

As with Rolls Royce, "the criminality involved was grave" (para 5). The conduct took place over many years, extended to every continent in which Airbus operates and involved senior personnel. Both the financial gain and the harm caused to the integrity and confidence of markets by the conduct was substantial. Yet, as with Rolls Royce, and despite the "egregious nature of the conduct " (para. 87), she considered that the interests of justice were nevertheless served by a DPA rather than a prosecution.

Why?

Self-reporting and "exemplary" cooperation

Although she accepted that Airbus was slow off the mark (concerns were first raised in 2014), and that the "true catalyst" for the self-report to the SFO was the government body, UK Export Finance, she considered that Airbus had cooperated "to the fullest extent possible" (paras. 69 and 73). She was particularly impressed by the fact that a Dutch/French domiciled company accepted that the SFO had extra-territorial jurisdiction and was so fulsome in its cooperation.

The examples given of genuine cooperation ticked most of the boxes in the SFO's recently published guidance on cooperation (see our briefing for more detail). It included helping the JIT become aware of offences overseas that it may not have otherwise discovered, assisting in and enabling the efficient review of over 30.5 million documents, waiving privilege over witness first accounts, and providing full access to individuals and information. In short, enabling the investigation to be conducted in a proportionate and efficient manner.

For those who think that extensive disclosure will get them home, be warned. In its Statement of Facts the SFO made it clear that all the information provided was, to the extent possible, independently interrogated and validated by the SFO via independent investigation, interviews, and document review. The message is clear: if you try to hide something, the SFO will find out.

Remedial measures and culture change 

As with previous DPAs, the Judge gave credit for the steps taken to ensure that Airbus was now "a changed company to that which existed when the wrongdoing occurred" (para. 87). In addition to identifying compliance concerns and taking significant steps to overhaul its compliance processes (see below), Airbus completely changed its management team and conducted disciplinary investigations against existing and former employees.

This is now a given. As made clear in her conclusion, the Court wants to see "corporate rehabilitation and commitment to effective compliance". Otherwise, a key objective of using DPAs to ensure corporates operate according to high ethical and compliance standards is lost.

Collateral impact of a conviction

While acknowledging that "No company is too big to prosecute", the Judge accepted that a criminal conviction would have "a number of materially adverse consequences." A conviction would most likely result in debarment in the UK, EU and other jurisdictions. The significant impact it would have on the financial health of the company would impact on other innocent stakeholders, including employees, shareholders, pension holders, and companies in the supply chain. Thousands of jobs would be at risk and that would in turn impact the economies of the countries in which Airbus operated. 

Prediction 4: Endorsement of risk assessment, proportionality and robust implementation by a properly resourced compliance function?

Without doubt. As with Rolls Royce, the measures Airbus took to overhaul its compliance function were a key factor in approving the DPA. 

And as with Rolls Royce, the biggest ABC risk facing Airbus was its extensive use of business partners (BPs) to increase its international footprint and assist in winning sales contracts globally. 

Airbus had extensive policies and procedures in place to address this risk. It had even gone so far as to secure independent certification in 2012. In addition, a series of committees were responsible for reviewing and overseeing the use of BPs. 

However, serious weaknesses within Airbus’ compliance and oversight structure and its corporate culture meant that those policies and procedures could be circumvented. As found by the Judge, there existed a corporate culture which permitted bribery; in two core businesses she described the bribery as "endemic" (para. 64). The wrongdoing involved senior employees, including employees with compliance responsibilities. And the information provided to the committees was incomplete, misleading or inaccurate. Consequently, the committees were not able to do their job.

However, that all changed once the wrongdoing was discovered. The measures taken provide a useful endorsement of the six principles set out in the UK government guidance on adequate procedures, which was reflected in the SFO's recently published internal guidance on evaluating compliance programmes (see our briefing).

• Tone from the top: In order to ensure proper oversight at Board level, and functional independence from the business, Airbus completely overhauled its compliance structure. This included merging legal and compliance functions, a change of reporting to the newly appointed GC; the creation of a sub-committee of the Board to provide independent oversight of the company’s ethics & compliance programme; and the appointment of a new Ethics & Compliance Officer.
• Proper risk assessment: Airbus launched a company-wide, systemic and comprehensive ABC Risk Assessment.
• Reviewed its use of BPs: Airbus stopped using BPs to assist with sales in the Commercial Division, and restricted the use of BPs in other divisions. Overall, use of BPs was reduced by 95 per cent across the Group by 2015.
• Proportionate procedures: Airbus commissioned a complete review and testing of all policies and procedures, with assistance from an external Independent Compliance Review Panel (the ICRP), PwC and the French anti-corruption agency, Agence Française Anticorruption (AFA). It also redesigned its internal financial controls.
• Due diligence: Airbus redesigned "onboarding", due diligence and ongoing monitoring for all third parties with a business relationship with the group.
• Communication: It implemented a targeted ABC 24 month training plan for all employees identified as high and medium risk.
• Monitoring: The ICRP has produced two reports. 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 in 2020.

Takeaway: Policies and procedures are no good without proper independent oversight. The enforcement agencies will look at all aspects of implementation. Corporates need to ensure that they are ticking all the boxes. Not just a couple.

It is interesting to note that the AFA was involved in advising on and testing the policies and procedures. Other enforcement agencies, such as the DOJ, are also prepared to take a more proactive role in assisting corporates with compliance. Contrast that with the position taken by the SFO, which has made it clear that its role is as a prosecutor – not a provider of guidance. Query whether we will see this change over time as the SFO works with more agencies who take a different approach.

Prediction 5: A bumper financial settlement?

Oh yes. This turned out to be the largest settlement the UK has seen, exceeding the total value of all other DPAs concluded to date. It was a record-breaker for PNF as well. And, although the US had a limited role, the US$2.09 billion settlement agreed (but then reduced to give credit for the UK and French penalties) meant that it now tops that FCPA list.

Author: Ruby Hamid, Partner