Insights from the Airbus DPA

The deferred prosecution agreement (DPA) entered into between Airbus SE and the Serious Fraud Office (SFO) on 31 January 2020 was unprecedented in scale, both in terms of the financial penalty obtained and the corruption in which Airbus was implicated.

The DPA saw Airbus admit to five counts of failing to prevent persons associated with it from bribing third parties to secure contracts in various jurisdictions around the world, contrary to section 7 of the Bribery Act 2010, and pay a record-breaking fine of €984 million. The UK DPA is part of a larger settlement with the Parquet National Financier in France and the US Departments of Justice and State, resulting in total penalties of almost €3.6 billion, making it the largest global bribery resolution to date.

We focus in this article on the financial aspects of this DPA. Drawing on innovative methodologies developed in other recent cases, the Airbus case shows that the SFO and the courts are willing to take a flexible and pragmatic approach to calculating the financial penalty in the context of a negotiated settlement, particularly where there are significant mitigating factors in the company’s favour.

A welcome victory

The Airbus DPA – the seventh such agreement in the UK so far – will be considered a welcome victory for the SFO in the context of recent high-profile acquittals.

In the Statement of Facts accompanying the DPA, Airbus admitted to “endemic” levels of bribery within its core business areas across five jurisdictions between 2011 and 2015. The penalty paid by Airbus in the UK alone far surpasses the SFO’s previous record fine of just under £500 million, which Rolls-Royce agreed to pay under a DPA in 2017. As Dame Victoria Sharp recognised, in her first DPA judgment as the new President of the Queen’s Bench Division:

“To put this figure into context, this financial sanction is greater than the total of all the previous sums paid pursuant to previous DPAs and more than double the total of fines paid in respect of all criminal conduct in England and Wales in 2018.”

The multi-jurisdictional investigation into Airbus will also be considered a triumph of cooperation among prosecuting authorities, bringing together investigators in the UK, US and France to deal with widespread corruption within a truly multi-national business spanning several jurisdictions. The SFO’s investigation was conducted jointly with the French authorities and parallel to an investigation by US prosecutors, with each prosecuting authority taking responsibility for a number of geographical areas or customers.

Full cooperation (eventually)

Dame Sharp noted that Airbus had a “slow start” in reporting its concerns to the SFO. While there were serious concerns within Airbus from at least October 2014, the company did not self-report until April 2016, having been notified by UK Export Finance (a Government body that provided export credit financing to Airbus), that it felt it appropriate to contact the SFO regarding its own suspicions of corruption at Airbus.

That Airbus was not penalised more for this failure to make a timely report is perhaps surprising, given that one of the main purposes of creating the DPA regime was to incentivise self-reporting of corporate wrongdoing. However, once the criminal investigation was underway, the company cooperated “to the fullest extent possible” with the UK, US and French prosecuting authorities.

The long list of actions taken by Airbus included:

• Accepting the SFO’s extra-territorial jurisdiction under the Bribery Act 2010, which Dame Sharp acknowledged was “an unprecedented step for a French and Dutch domiciled company” to take.
• Reporting conduct that had taken place almost exclusively overseas.
• Disclosing and assisting investigators to review more than 30 million documents, including through the use of predictive coding.
• Waiving legal professional privilege over notes of internal interviews with employees and business partners and taking a “cooperative approach” to privilege generally.
• Providing full access to key personnel and information, coordinating and cooperating with prosecutors in the conduct of investigative interviews and providing the first accounts of all relevant individuals.

As noted below, Airbus received substantial ‘cooperation credit’ when it came to assessing the fine to be paid under the DPA. This is, of course, a powerful incentive for companies considering a DPA to cooperate with prosecutors to the fullest extent possible. At the same time, however, the Airbus case is a striking illustration of the extent of the measures that companies considering a DPA are expected to take to assist an investigation. As the SFO’s recently-published Corporate Cooperation Guidance has made clear, even for a company to be deemed “cooperative”, and thereby in with a chance of being considered for a DPA, the SFO will expect it to go “above and beyond what the law requires”

“A changed company”

Airbus also took extensive steps to change the management and compliance structure of the business, leaving it a “changed company to that which existed when the wrongdoing occurred”.

As has been the case for previous DPAs, this “changed company” status was attributed to the complete overhaul of Airbus’ compliance policies and procedures, a newly elected management team and the opening of internal investigations into the actions of existing and former employees.

These actions were given significant weight both in justifying the DPA process, rather than a prosecution, and in reducing the financial penalty. In reviewing the changes undertaken at the company, Dame Sharp felt satisfied that Airbus had “truly turned out its pockets”.

A flexible approach to financial sanctions

Despite the magnitude of the fine Airbus agreed to pay, some anti-corruption campaigners have argued that the company did not end up paying as much as it might have and its swift payment of the penalties has done nothing to allay their concerns. What is clear from the Airbus DPA is that the SFO and the courts appear willing to facilitate a creative approach to determining the financial sanction under a DPA, particularly where the company has taken extensive steps to reform its business and cooperate with investigators.

The fine levied on Airbus in the UK comprised disgorgement of profit of €586 million and a further penalty of €398 million, plus almost €7 million to cover the costs of the SFO investigation. As with most previous DPAs, compensation was not considered appropriate in the circumstances.

Of particular note is the concurrent approach taken to the disgorgement of profit element of the fine. In assessing this amount, the SFO took the average gross profit obtained across the first four counts. Given that profits obtained from the transactions at issue in each of those counts varied in size, the average figure was naturally lower than the total gross profit across all four counts. A similar approach was also taken in the Rolls-Royce DPA, another case involving a massive fine.

In both the Airbus and Rolls-Royce cases, this concurrent approach was accepted by the court as leading to a more just and proportionate overall penalty, consistent with the totality principle that is applied in sentencing. However, where companies and corruption of the scale at issue in the Airbus and Rolls-Royce cases are subject to negotiated settlement, there is an obvious tension between applying reasonable principles of totality and proportionality on the one hand and ensuring that the size of the penalty matches the magnitude of the crimes committed.

In addition, as has now become common practice for DPAs, the financial penalty was reduced by 50% in light of Airbus’ cooperation and remediation efforts. The same level of discount has been applied, for similar reasons, in a number of previous DPAs, leading to a much reduced overall fine.

The principal justifications for a 50% discount (rather than the one-third required under the sentencing guidelines on a plea at the earliest opportunity) are the significant savings of time and costs of investigation and prosecution that engagement in the DPA process is considered to make, and that it provides added incentive for companies to self-report at an early stage. It has not been suggested, however, that the actual cost savings for the SFO are anywhere near 50% of a sizeable penalty (almost €400 million in Airbus’ case), particularly when the company is invariably required to pay the SFO’s costs in any event. In addition, as noted above, Airbus had not in fact made an early report, although it did take exceptional steps to cooperate and reform the business once a report had been made.

The Airbus DPA reiterates the importance of extensive cooperation and remedial efforts as a condition for any company wishing to engage in the DPA process. In return, however, as the Airbus DPA makes clear, the SFO and the courts may be willing to take a flexible and pragmatic approach to the assessment of the financial penalty to be agreed under the DPA. We discuss some of the implications of this trade-off for companies considering whether a DPA will result in the best overall outcome, particularly those also defending related civil claims and regulatory investigations, in our article: DPAs: worth the price of cooperation for companies fighting multiple fronts?

See our DPA tracker for up-to-date information on the DPAs approved, rejected or known to be pending approval by the SFO or the Crown Prosecution Service.