On 1 July, which marks the 10th anniversary of the UK's Bribery Act coming into force, the Serious Fraud Office ("SFO") secured court approval for a Deferred Prosecution Agreement ("DPA") with Amec Foster Wheeler Energy Limited ("AFWEL"). This latest DPA concludes yet another significant multi-year corruption probe and highlights the importance of continued ABC compliance measures for multinational organisations.
Under the terms of the DPA, AFWEL has taken responsibility for ten offences relating to the use of corrupt agents in the oil and gas sector by the legacy Foster Wheeler business. The offences took place across multiple jurisdictions, including Nigeria, Saudi Arabia, Malaysia, India and Brazil, between 1996 and 2014. While the DPA deals with the culpability of AFWEL as a corporate entity, the possibility remains that individuals will be prosecuted in relation to the same activities.
The DPA forms part of a US$177m global settlement between AFWEL and the UK, US and Brazilian anti-corruption authorities. Of that amount, c.£103m relates to the penalty, costs and disgorgement of profits under the DPA, including c.£200,000 in compensation to the people of Nigeria to reflect the amount of local taxes which AFWEL avoided as a result of the payment of bribes to local officials.
While the amounts involved pale in comparison to the €3.6bn global settlement agreed with Airbus last year (see briefing here), the SFO has been keen to highlight the cross-jurisdictional nature of the AFWEL investigation, as an example of its capacity for international cooperation and enforcement. It is also a salient reminder of the extra-territorial reach of the Bribery Act, which extends to offences committed abroad by companies with a close connection to the UK.
The final corrupt payment identified by the SFO was made in October 2014, just a few weeks before Foster Wheeler Energy Limited was acquired by Amec. The SFO announced its investigation of AFWEL on 11 July 2017, almost three months before the completion of AFWEL's takeover by John Wood Group Plc ("Wood Group") on 9 October 2017.
Approving the DPA, Edis LJ came to the view that Wood Group was not tainted by criminal activity which occurred well before its ownership but was rather an "innocent party who is now clearing up the mess caused prior to October 2014". The judge also noted that Wood Group's offer for AFWEL was made before the SFO's investigation was made public and was not discounted to reflect the liabilities which might result from that investigation. If Wood Group had dropped its offer price (or sought protection under the sale documentation), the court would probably have looked less favourably on an argument that it was an entirely innocent party.
At four years' distance from the takeover, it is difficult to know whether more in-depth due diligence might have uncovered the historic misdeeds. In any event, this may not have done Wood Group much good – if it had decided to proceed with the takeover but extracted concessions to reflect the possible exposure, the judge's comments suggest that this would have been reflected in a higher fine.
Justice for all?
The offer of a DPA in this case is in part reflective of Wood Group's cooperation with the SFO and the extensive remediation and compliance programme which it has now put in place across the whole group, including the legacy AFWEL business.
Concerns persist, though, that the DPA regime is less accessible to small and medium-sized enterprises which may struggle to put the same mitigation measures in place. The level of the fine should (as Edis LJ pointed out) be proportionate in view of the size and financial position of the defendant organisation. However, it is more difficult for the SFO to argue that a DPA is "in the interests of justice" where the defendant has not been able to find the time, money and resources required to undertake a full compliance project and implement sweeping governance changes.
The successful conclusion of yet another significant DPA with far-reaching jurisdictional cooperation marks an example of the progress made following the Bribery Act's initial implementation. Countries and organisations around the world continue to use the Bribery Act as a high watermark for anti-corruption deterrence and related remediation and compliance programmes. Looking ahead, we can expect UK and international regulators to continue to enhance the global effort to tackle corporate level bribery and corruption through an increased use of DPAs and larger penalties for non-compliance.
- Risk assessment – the AFWEL DPA related to its activities in Nigeria, Malaysia, Saudi Arabia, India, and Brazil, none of which jurisdictions score highly in Transparency International's Corruption Perceptions Index. Companies should regularly assess their global risks to determine which parts of their operations are likely to require greater oversight and implement specific measures, particularly in higher-risk jurisdictions, to help prevent bribery and corruption from occurring.
- Due diligence – consider whether more focused or in-depth due diligence is needed when investing in targets in high-risk sectors or jurisdictions. Do not assume that commercial protections on acquisition, e.g. price reductions or warranty/indemnity cover, will ultimately improve the buyer's position if an investigation proceeds.
- Dedicated resources – ensure that dedicated internal resources are put in place commensurate to the level of risks faced, including appropriately staffed teams and/or individuals who have clear oversight of ABC matters.