The allegations of widespread bribery by aerospace and defence giant, Rolls Royce, raised both by Panorama and the Guardian are a fundamental test of the UK’s political will and ability to prosecute such crime. A successful prosecution of Rolls Royce would be hugely symbolic and help lay to rest the demons of the UK’sdisastrous handling of allegations of extensive bribery by BAE Systems. It would also help address the following issues:
1. WHETHER BIG COMPANIES IN THE UK ARE BEYOND THE LAW
The SFO has been successful in getting various small companies into court since David Green became Director. But it has yet to nail a large British company. And Rolls Royce is very big. With a revenue of £13.8 billion and nearly 50,000 employees globally (around half in the UK), it is the second largest provider of defence aero-engine products in the world.
The UK has always struggled to prosecute large companies successfully partly due to weak corporate liability laws and partly due to lack of political will. Rolls Royce’s alleged wrongdoing spans both the old corruption laws in the UK (under which prosecuting a large company is nearly impossible) and the new Bribery Act, under which it is fairly easy – the SFO just needs to prove that Rolls Royce failed to prevent an offence. Whether the SFO can bring a prosecution against Rolls Royce is a key test of whether it can prosecute large multinational companies in general and whether UK corporate liability laws are up to the job.
2. WHETHER SOME COMPANIES ARE TOO IMPORTANT TO PROSECUTE
The real question is whether the SFO is going to be able to prosecute a company that is politically so powerful, where it failed to do so with BAE. Rolls Royce is the only other UK company, apart from BAE, where the government holds a ‘golden share’ which means that those companies cannot sell more than 25% of their assets without government permission. At the end of 2015, the Financial Times reported that the governmenthad drawn up plans for nationalising Rolls Royce’s nuclear business to prevent hostile takeover bids after a series of profit warnings. Rolls Royce is supplying the nuclear propulsion systems for the next generation of nuclear submarines under Trident. It is also said to be presenting itself as a ‘White Knight’ to rescue the UK’s nuclear power strategy with a programme of work around mini nuclear reactors.
Rolls Royce is additionally a major partner in the government’s Industrial Strategy, under which it receives significant government support for research and development. Between 2005 and 2014, Rolls Royce received around £335 million in research and development grants from the UK government . As Matt Hancock, both a former business minister and current culture minister told Parliament in 2014: “Of course the relationship between the Government and Rolls-Royce is a very close one, not least because of the support we give it for research and development, but also because of the defence relationship, which is vital to our national security.”
Cases against a company like this will really test a prosecutor’s resolve. On top of which, if the SFO wants to prosecute Rolls for any of the wrongdoing alleged to have occurred prior to 2011 under the UK’s old anti-corruption laws, it’s going to need to get the Attorney General’s consent to do so. David Green, the SFO’s Director, is a tough operator – but just how tough is he going have to be?
3. WHETHER BIG POWERFUL COMPANIES CAN GET SPECIAL TREATMENT THROUGH AN OUT OF COURT SETTLEMENT
Rolls Royce is said to be keen on settling with the SFO and talk is in the air for it to receive a Deferred Prosecution Agreement. There is a little sticking point: while getting one of these in the US is fairly routine, to get one of these agreements in the UK you have to have self-reported (and that means giving information that the SFO would not otherwise have known about). While Green’s predecessor Richard Alderman was very relaxed about the definition of a self-report, the SFO under Green is fairly strict.
The allegations, according to press reports, emerged after a whistleblower, Dick Taylor, made comments in online posts which resulted in the SFO asking Rolls in early 2012 for further information. The very fact that the SFO asked the company for information should preclude Rolls from claiming credit for a self-report.
The original allegations involved China and Indonesia. Rolls Royce’s internal investigation in December 2012 found matters of concern in both China and Indonesia but also “in other markets”. The key question is whether Rolls already passed informationto the SFO about allegations that have subsequently emerged related to Petrobras in Brazil; to Unaoil, the Monaco company alleged to have acted as a corrupt middleman for various Western companies in the Middle East and for Rolls Royce in Iraq, Kazakhstan, Azerbaijan and Angola;and to Nigeria; or whether these emerged as new allegations during the course of the SFO’s investigation.
Rolls Royce will be hoping to get credits against a prosecution by having appointed a senior legal figure, Lord Gold, to review its anti-bribery compliance procedures – just as BAE appointed Lord Woolf to do so. Gold’s review has led to a considerable reduction in the number of intermediaries used by Rolls, and a new code of conduct and other new compliance measures. But some have criticised the lack of transparency in the Gold review which has yet to be published, unlike the Woolf review and other reviews of its type into Barclays and the Bank of England. How can the public know how much a company has actually changed if it isn’t transparent about what its problem was?
One of the key arguments Rolls may use to push for a settlement is to help it avoid exclusion from public procurement if convicted. In BAE’s case, it was specifically charged with non-corruption related offences both in the UK and the US specifically to avoid exclusion from public procurement. The reality is that few companies have faced this consequence for corruption, and if Rolls Royce is convicted under Section 7 of the Bribery Act, it is purely discretionary whether it would be excluded. In fact, under new procurement forms drawn up by the UK, it isn’t clear whether Rolls would even have to declare such a conviction. This is despite the fact that the Declaration from the UK’s Anti-Corruption Summit specifically signed countries up to excluding corrupt companies from bidding for public contracts.
However cooperative Rolls Royce has been with the SFO, the sheer scale of Rolls’ alleged offending would suggest that some kind of settlement would be wholly inappropriate. The UK needs to walk the talk on corruption. Anything less than a full airing of Rolls Royce’s wrongdoing in a court room is going to look like a cop out.