The bribery and corruption deep seated in the renowned British engineering company, Rolls-Royce, came into the limelight in 2012 when concerns were raised on the internet over the operation of its civil business in China and Indonesia. Following these allegations, the Serious Fraud Office (SFO) embarked on an investigation and sought information from Rolls-Royce Plc. The company commenced internal investigation and voluntarily submitted a comprehensive report to the SFO in 2013 which uncovered the corruption that had spanned for more than 20 years in its energy, defence, civil, and marine businesses in seven (7) countries. As a result, the SFO commenced an extensive 4-year investigation on all the businesses of Rolls Royce unveiling the serious breaches of the criminal law in the areas of bribery and corruption (some of which implicated senior management staff) including:
- agreements to make corrupt payments to agents in connection with the sale of Trent aero engines for civil aircraft in Indonesia and Thailand between 1989 and 2006
- concealment or obfuscation of the use of intermediaries involved in its defence business in India between 2005 and 2009 when the use of intermediaries was restricted;
- an agreement to make a corrupt payment in 2006/2007 to recover a list of intermediaries that had been taken by a tax inspector from Rolls-Royce in India;
- an agreement to make corrupt payments to agents in connection with the supply of gas compression equipment in Russia between January 2008 and December 2009;
- failing to prevent bribery by employees or intermediaries in conducting its energy business in Nigeria and Indonesia between the commencement of the Bribery Act 2010 and May 2013 and July 2013 respectively, with similar failures in relation to its civil business in Indonesia;
- failure to prevent the provision by Rolls-Royce employees of inducements which constitutes bribery in its civil business in China and Malaysia between the commencement of the Bribery Act 2010 and December 2013.
In response to these grave offences, Rolls-Royce plc cooperated with the SFO in the investigations and implemented new ethics and compliance procedures under the auspices of Lord Gold, an internationally respected authority on compliance. It also reorganised its reporting lines to ensure that the financial compliance officers are independent of the business divisions. This entire procedure imposed huge costs on Rolls-Royce.
Deferred Prosecution Agreement
Following the four year investigation of the SFO and the steps taken by Rolls-Royce towards corporate compliance, the parties entered into a Deferred Prosecution Agreement (DPA) pursuant to S. 45 and Schedule 17 of the UK Crime and Courts Act 2013. The DPA provides a mechanism whereby, subject to the approval of the court, prosecution of a corporate body for an economic or financial offence can be avoided by entering into an agreement on negotiated terms with a prosecutor designated by the 2013 Act. This, however, does not exonerate the individual offenders from prosecution.
On 17th January, 2017, the DPA was approved by Sir Brian Leveson, President of the Queen’s Bench Division, wherein Rolls-Royce agreed to pay the sum of £497,252,645 (comprising disgorgement of profits of £258,170,000 and a financial penalty of £239,082,645) plus interest. Rolls-Royce will also reimburse the full cost incurred by SFO in conducting the investigations.
Lessons for businesses
This case highlights, with clarity, the grave consequences of bribery and corruption within corporations, its subsidiaries and supply chain such as depreciation of business reputation, loss of money, time, and trust of investors and clients. In light of this, for business sustainability to be enhanced, we recommend the following:
- The establishment of a Comprehensive Code of Business Ethics and Compliance Procedures
- The formulation of Anti-bribery and Corruption policies and procedures which will apply to all employees of the company, its subsidiaries and controlled joint ventures, wherever they are located.
- The establishment of appropriate reporting lines as well as monitoring and financial officers across its subsidiaries and joint ventures.
- Be Proactive. When information is received concerning any form of bribery and corruption, the business should engage in internal investigation and self-reporting to the relevant Prosecutors. For businesses in the UK, this could lead to a DPA with the Prosecutor as opposed to a criminal prosecution which will be egregious for the business.
- Irrespective of the DPA, the prosecution of the employees of the company who are implicated will present a bad image for the company. Thus, zero tolerance to bribery and corruption is imperative for the achievement of sustainability in business