Airbus’ record US$4 billion (AED 14.6 billion / 15 billion Saudi Riyal) global settlement with the US Department of Justice (DOJ), France’s parquet national financier (PNF), and the UK’s Serious Fraud Office (SFO) for bribery and related offences has dominated the headlines over the past week. The investigation into Airbus uncovered bribery and attempted bribery in several countries including the United Arab Emirates, Saudi Arabia, Turkey, Kuwait, India, and Russia.
Documents filed by the PNF, DOJ and SFO reveal a number of developments in compliance enforcement of which businesses operating in the Middle East should be mindful.
France’s PNF is active in the Middle East
The PNF, the French agency that led the investigations into Airbus’ misconduct in Saudi Arabia, the UAE, Turkey, and Kuwait will receive nearly $2.29 billion from Airbus, the lion’s share of the global settlement amount. US authorities also credited a portion of the over $580 million they will receive from Airbus to the PNF. These figures reflect the central role a joint SFO-PNF team played in the investigation. The DOJ ceded primacy to the French and UK team, in recognition of “the strength of France and the UK’s interests over the Company’s corruption-related conduct”. The DOJ and the SFO have historically been the most active anti-bribery and anti-corruption enforcement agencies, both globally and in the Middle East. The Airbus scandal demonstrates that companies, particularly those with French parent companies or subsidiaries, or that are controlled by French companies, must also be mindful of their anti-bribery compliance obligations under France’s Loi Sapin II, which like the UK Bribery Act and the US FCPA has extraterritorial reach.
Defense Companies must be mindful of trade compliance
In addition to investigations into breaches of the FCPA, the DOJ pursued Airbus for violations of the Arms Export Control Act (AECA) and its implementing regulations, the International Traffic in Arms Regulations (ITAR). Defense companies that export defense articles and services to the Armed Forces of foreign countries or international organizations are required to comply with AECA and ITAR. Airbus breached AECA and ITAR by failing to report political contributions made in connection with the sale of defense items, failing to keep records in relation to sales of defense articles and services for a five-year period, and engaging third parties who had not secured export licenses as required. Airbus also paid $10 million to the US Department of State’s Directorate of Defense Trade Controls (DDTC) in relation to these breaches. The Armed Forces of Gulf nations are amongst the largest importers of US military equipment, signing contracts for $14 billion of US military equipment last year. Defense companies who supply US military equipment and services in this region must be mindful of their export-control compliance obligations, particularly in relation to the end-use of military goods.
Third parties can be both sources and conduits of bribery
In most of the instances of bribery for which Airbus was sanctioned, the company paid bribes to intermediaries whom it had engaged to facilitate the sale of aircraft. In one case, Airbus, through its UAE subsidiary, paid bribes to intermediaries in relation to its sale of aircraft to China Airlines. Third parties like distributors and agents are often highlighted as sources of bribery risk because they may make corrupt payments to government officials to facilitate business on behalf of companies, often without the knowledge of the companies they represent. The Airbus investigation reminds us that executives of multinational companies could also use third parties as conduits to conceal the trail of corrupt payments originating from the parent company, and intended for government officials and private business executives.
The Airbus investigation lasted four years, spanned 19 countries, and cost the company the equivalent of more than half of its 2018 profit before income and taxes. The cost and global nature of this settlement show that regardless of where it occurs, illegal conduct could have world-wide repercussions for your business.