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No Body to Kick, No Wings to Clip: The Airbus Settlement and Corporate Criminal Liability

Anton Moiseienko
Commentary, 1 April 2020
Aerospace, Centre for Financial Crime and Security Studies, International Institutions, Law and Ethics
As it unfolds, the Airbus corruption saga will offer yet another opportunity to reflect on whether wrongdoers are all too often able to hide behind corporations for which they work.

Amid the turmoil of the coronavirus epidemic, Airbus’s multi-jurisdictional settlement of bribery charges for €3.6 billion in January may, in the scheme of things, prove to be a small dent in the finances of a company which now has to contend with a catastrophic fall in demand for air travel. For anti-corruption enforcement, though, this is a remarkable case – and not only by virtue of being the largest-ever bribery settlement, but also because it underscores the challenges of ensuring that the right person pays the price for corporate wrongdoing.

The Airbus enforcement action arises from allegations of bribes paid across multiple countries and continents, including in China, Latin America, the Middle East and Russia. Payments were allegedly arranged through intermediaries engaged by Airbus to win overseas contracts. In 2014, Airbus commenced a far-reaching internal review of its business practices. A year later, UK Export Finance (UKEF), the UK’s export credit agency, requested additional information on Airbus’s due diligence in relation to intermediaries. In 2016, Airbus and UKEF jointly reported the matter to the Serious Fraud Office (SFO).

These facts are laid out in Dame Victoria Sharp’s judgment, which approves the deferred prosecution agreement (DPA) between Airbus and the SFO. Under its terms, Airbus paid €990,963,712 to the SFO to avoid criminal prosecution. Similar settlements were also reached with US and French authorities, bringing the total amount payable in three countries to €3.6 billion, compared with €3 billion in net income earned by Airbus in the 2018 financial year. In contrast to the US DPA, which contains an acknowledgement by Airbus that the Department of Justice’s allegations are ‘true and accurate’, the UK judgment does not state that Airbus formally admits the facts presented by the SFO.

If justice was measured in moneys collected by governments, this would be nothing but a resounding success. Yet it is doubtful that, for now, justice has been done. The US Department of Justice’s filings detail a litany of alleged wrongdoing by Airbus executives, such as ‘funnel[ing] payments to business partners from bank accounts not directly affiliated with Airbus’ to conceal bribery. According to Sharp’s judgment, criminality at hand was ‘grave’ and ‘endemic in two core business areas within Airbus’.

The Individual, or the Corporation?

Corporate culture is a factor to be reckoned with, but even though companies too can face criminal liability, ultimately all crimes are committed by people – and sometimes very well-compensated ones. It is right, therefore, that the joint letter from Spotlight on Corruption and Transparency International UK – two leading anti-corruption NGOs – notes the ‘public concern that in order to ensure that DPAs are not seen as an easy way out for companies, senior executives should face penalties where they have run a company that engages in such wrongdoing’.

The choice – or balance – between individual and corporate criminal liability is fraught with difficulties. As counter-intuitive as it may seem, bringing successful prosecutions against men and women can be more difficult than going after corporations. Someone whose livelihood or even liberty is on the line is likely to contest the allegations more vigorously than a company would. And although one might expect that a company’s admission of incriminating facts would allow for the easy prosecution of the individuals involved, this is far from the truth.

US prosecutors learned this lesson the hard way in 2007 when criminal charges against 13 out of 16 KPMG executives on trial collapsed spectacularly despite the firm’s prior admission of criminal tax fraud. In early 2019, the SFO caused a furore by declining to pursue criminal charges against Rolls Royce executives following an almost £500- million corporate settlement related to bribery in Africa, Asia and Russia. As for Airbus, the SFO is currently considering possible individual prosecutions.

The need to enforce personal accountability is wholly uncontroversial, and there is no reason to doubt the SFO’s commitment to this principle. One can sympathise, however, with the difficult decisions that its director Lisa Osofsky may have to take, particularly since dedicating resources to Airbus-related prosecutions will inevitably divert them from other worthwhile targets. Although second-guessing such critical resource choices is always easier than making them, there is no doubt that public confidence in the justice system would be best served by mounting vigorous prosecutions against those (allegedly) culpable.

The Real Significance of the Case

What the Airbus case tells us about corporate criminal liability is more controversial. Much ink has been spilled in discussions of the UK’s legal framework, which generally only makes a company criminally liable for the acts of those who are its ‘directing mind and will’. Under the UK’s Bribery Act 2010, however, a commercial organisation can be guilty of failing to prevent bribery by an associated person, and this is the provision that enabled the charges against Airbus.

One of the principal considerations in the High Court’s ratification of the DPA was that, simply put, Airbus of today was no longer the same organisation that had orchestrated a worldwide bribery scheme. As Dame Victoria Sharpe put it in her Approved Judgment:

Airbus has changed its management team ... None of the new Executive Committee or Board of Directors is implicated in the conduct set out in the Statement of Facts. The Board of Directors is largely a different board … from that which presided over Airbus during the indictment period. The SFO has confirmed it has no evidence that the current Executive Committee members knew of the corrupt practices or culture of Airbus … Since 2015 [Airbus] has parted with sixty three of its top and senior management employees.

The fluidity of corporate life will be well-known to anyone who returns to a place of former employment years later, to find few if any familiar faces. And, in this instance, wholesale personnel renewal is a positive step. But if we accept that Airbus’s corporate culture has already undergone radical change, what purpose is served by penalising the company now?

Compare this with society’s typical treatment of offenders, which assumes that it is as a result of sanction and censure that they will be reformed. One might argue that fines will incentivise innocent shareholders to oversee their companies more closely – but there seems to be little knowledge on whether this incentivisation works.

The artificiality of prosecuting corporations is encapsulated in the 18th century Lord Chancellor Edward Thurlow’s phrase that they have ‘no body to kick, no soul to damn’. Corporations can be fined or, in extreme cases, debarred or dissolved, but it is not always the wrongdoer who suffers the economic impact.

In short, the key question that resurfaces as a result of the Airbus settlement is whether we, as society, are sufficiently adept at looking behind the corporate veil and ensuring that the right people – that is, the wrongdoers – bear the economic brunt of law enforcement action. If forcing a company to pay helps achieve that objective, then whether it is done as a criminal, civil or tax measure seems to be of little weight. Likewise, whether someone’s guilty mind can be ascribed to their employer is less important than ensuring they cannot hide behind a corporation to escape the fallout from their actions.

As the Airbus saga unfolds, it will become evident whether it can truly leave a lasting mark in anti-corruption enforcement or will be yet another temporary holder of the largest-ever bribery settlement award.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

BANNER IMAGE: Courtesy of pickrepo.com

Author

Anton Moiseienko
Research Fellow, Centre for Financial Crime and Security Studies

Anton Moiseienko is a Research Fellow at RUSI’s Centre for Financial Crime and Security Studies. His current and recent work covers a... read more

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