By Eoin O’Shea
Introduction On Monday 30 November, an English court approved a Deferred Prosecution Agreement (DPA) between the Serious Fraud Office and Standard Bank, in connection with payments made in Tanzania. This was the first DPA approved by the courts and the first time the SFO had charged the “failure to prevent bribery” offence under section 7 of the Bribery Act.
There is, already, no shortage of instant comment on the case from lawyers, journalists and ABAC aficionados worldwide. This isn’t surprising since section 7 is the most controversial part of the Bribery Act and DPAs are completely novel, on this side of the Atlantic at least.
A good summary of the case can be found on the SFO’s own website. The process of obtaining a DPA means there are in fact two judgments, with the first going into more detail of the factors considered by the court and the second essentially re-confirming the first. They are both available here.
So what can we learn from the case? The judgment is reasonably extensive and is generally helpful to commercial bodies and their advisers, although I have a few concerns about it which I explore below. To summarise this note:
- The outcome is broadly supportive of the SFO’s advertised approach to corporate bribery, i.e. that self-reporting is worthwhile.
- The penalties imposed reflect quite a hard-line approach to corporate crime among the judiciary.
- Aspects of the judgment should be treated with caution on topics not directly within its purview, such as the nature of the adequate procedures defence.
- The case exemplifies both the pros and cons of DPAs, plea-bargaining and the like. There are some topics on which the rigour of contested submissions would have improved the analysis and perhaps specific outcomes. However, the fact that the SFO and the court have rewarded the bank’s ethical approach to self-reporting with at least some leniency is a step in the right direction.
Underlying Facts In 2012 the Tanzanian government wanted to raise funds. Standard Bank (based in South Africa) and a Tanzanian-based subsidiary, Stanbic, offered to assist by means of a placement of US$600 million of sovereign debt instruments. The bank’s original fee was 1.4% of funds raised. A further payment of 1% was then offered by Stanbic to a “local partner”, a Tanzanian company whose shareholders included current or former members of the Tanzanian government. There is no evidence that the local partner did anything to earn the payment and the inference is that the 1% (i.e. US$6 million) was intended as an improper inducement to (un-identified) officials to approve the engagement of Standard / Stanbic. Within ten days of the payment to the local partner’s account, most of the $6 million had been withdrawn in cash.
Importantly, the SFO did not allege that anyone at Standard Bank itself knew the 1% payment was for an improper purpose. Just as importantly, once Standard’s headquarters knew of the payment by Stanbic, an investigation was started and a report of its concerns was made to the UK authorities very rapidly, a remarkably ethical response. The UK had jurisdiction because of the considerable business which Standard does in the country.