Deferred Prosecution Agreements Undermine OECD Bribery Convention
(Source: Defense-Aerospace.com; posted Feb. 10, 2020)

By Giovanni de Briganti
Infographic by UK Serious Fraud Office illustrating the deferred prosecution agreements obtained by Airbus to settle charges of corruption in Frabce, the United Kingdom and the United States
PARIS --- In the long fight against bribery and corruption, those twin scourges of international trade, the OCDE Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 1997, and its related 2006 Action Statement on Bribery represented a major advance.

Personal liability of CEOs and managers

For the first time, this treaty made individuals (“natural persons”) as well as corporations (“legal persons”) liable to hefty, personal penalties for bribery. It also defined misdeeds liable for prosecution, and defined a range of punishments that went well beyond the norm at the time.

These include the “exclusion from entitlement to public benefits or aid; temporary or permanent disqualification from participation in public procurement or from the practice of other commercial activities; placing under judicial supervision; and a judicial winding-up order.”

The Convention also innovated by making CEOs – “the person with the highest-level managerial authority” – ultimately legally liable by designating him for prosecution, whether because he bribes, directs an employee to bribe, or allows bribery to take place in his company.

The entry into force of the Convention, and especially of its 2006 Action Statement, had an immediate effect as industry CEOs took appropriate actions to ensure bribery was stamped out in their companies, purely because they didn’t want to risk being criminal prosecution and, possibly, going to jail.

Bribery “endemic in two core business areas”

It has now been established by prosecutors in France, the UK and US that Airbus’ Commercial Aircraft and Defense and Space divisions failed to prevent the payment of bribes to costumers “across five jurisdictions: Sri Lanka, Malaysia, Indonesia, Taiwan and Ghana between 2011 and 2015,” according to a Jan. 31 statement by the UK’s Serious Fraud Office.

Airbus announced on Jan. 31 that it had agreed to settle diverse bribery charges brought against it by the SFO, as well as by France’s Parquet National Financier financial prosecutors, the US Justice Department and the US State Department. The company signed Deferred Prosecution Agreements in all three countries, and agreed to pay a total of €3,592 million to the four agencies.

Commenting the Airbus settlement, Dame Victoria Sharp, President of the Queen’s Bench Division, noted that it “demonstrate[s] that bribery was to the extent indicated, endemic in two core business areas within Airbus.”

The US Department of Justice on Jan. 28 said that it had charged Airbus under the Foreign Corrupt Practices Act (FCPA), because of “Airbus’s scheme to offer and pay bribes to foreign officials, including Chinese officials, in order to obtain and retain business, including contracts to sell aircraft.”

All charges, including similar ones filed by France’s Parquet National Financier financial prosecutors, arise from various instances of bribery that Airbus reported to these three authorities shortly after discovering them. At the time, Airbus management fired several senior executives and closed down a special marketing and sales unit which had proved especially attuned to illegally lubricate the wheels of commerce.

Deferred Prosecution Agreements undermine OCDE Convention

Under the terms on the OCDE Bribery Convention, Airbus (then known as EADS) as a legal person, and its top management, as natural persons, could have been criminally prosecuted for having bribed, for having allowed subordinates to bribe, and for having failed to prevent bribery.

However, for having reported its own misdeeds, and for “its consistently strong cooperation during the investigations,” Airbus was able to avoid prosecution. It also was allowed to benefit from a lenient treatment invented by the UK’s Special Fraud Office to make up for its past failure to win convictions in several major cases of corporate corruption.

The resulting initiative, known as Deferred Compensation Agreements (DPA), effectively undermine the entire OCDE anti-bribery construct.

First of all, DPAs “do not amount to an admission of liability,” which means that neither a corporation nor its management can be prosecuted once the fixed-term agreement lapses. More importantly, it also means that no civil damages can be sought against them, for example by unhappy shareholders, because there is no admission of liability by either the company or its managers.

Secondly, DPAs have a limited duration – three years for those announced regarding Airbus on Jan. 31 – and as long as the company pays a (hefty) fine and avoids a recurrence of the culpable behavior, the charges are automatically dropped without prejudice – i.e., they cannot be revived.

Management escapes prosecution and fines, shareholders foot the bill

DPAs not only allow management to escape prosecution and penalties as prescribed by the OECD Convention on Bribery; they also allow management to negotiate terms, in other words to agree and pay fines using corporate – and thus shareholder – funds.

Under the DPAs announced Jan. 31, for example, Airbus agreed to pay €3,592 million to settle the corruption charges filed by the UK’s SFO, France’s PNF and the US Justice and State Departments.

This is almost twice as much as the company’s profit for the first nine months of 2019 (€2,174 million), and probably more than its total profit for the full year, which the company will reveal on Feb. 13.

This money, belonging, to shareholders, will be paid in fines to settle charges brought against the company.

Managers, whose misconduct caused the charges to be filed in the first place, will escape scot-free, without even forfeiting their salaries, bonuses, perks or losing their jobs.

No prosecution, no conviction, no fine.

Thanks to DPAs, managers will escape the very same penalties that the OCDE Convention so effectively established to stamp out corruption. In fact, the three DPAs unveiled Jan. 31 are based on the infringement of local legislation (Section 7 of the UK Bribery Act 2010 in the case of the Airbus DPA with the SFO, for example), and do not even mention the OCDE Convention and its much stricter provisions.

It is unconscionable that bilateral, back-room deals with prosecutors allow corporations to escape the sanctions mandated not only by the OECD Convention, but also by ordinary anti-corruption laws and regulations simply by paying a fine, without even admitting liability.

These DPAs effectively undo everything that the OCDE and its member nations have done to stamp out corruption, which will continue to prosper because corporations will always have the option, when they feel they risk getting caught, of confessing their misdeeds to the authorities, negotiating a DPA and paying a fine.

This is clearly not what the OCDE members wanted when they negotiated, signed and ratified the 1997 Convention on bribery. It is time to act, either by banning DPAs outright or repealing the Convention. Both cannot co-exist.


Click here for full coverage of the Jan. 31 DPAs, together with Airbus’ related statement.

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