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Tuesday
Oct242017

Susan Hawley: Is Airbus a repeat of the BAE-Al Yamamah fiasco?

The UK Serious Fraud Office has been investigating corruption allegations against Airbus subsidiary GPT on a Saudi contract overseen by the UK Military of Defense. The case has alarming similarities with the BAE-Al Yamamah case from a decade ago.

The decision to drop the SFO investigation into allegations of widespread corruption by BAE on the Al Yamamah government-to-government contract with Saudi Arabia in 2006 caused international outrage. The decision, taken by the SFO following intense pressure from then Prime Minister Tony Blair and other government officials, was ostensibly taken on national security grounds. Blair mentioned British jobs and relations with Saudi Arabia in public statements a little too frequently, however, for that to be fully believable.

The decision, which was upheld by the UK’s uppermost court, created a huge national security shaped hole in the OECD Anti-Bribery Convention. Article 5 of the Convention forbids national economic interest and foreign relations to impact upon investigation and prosecution. But no one can argue with a nation’s right to national security, even if it acts as a figleaf for economic and diplomatic reasons for dropping an investigation.

The scandal was, however, devastating to the UK’s reputation, with charges of hypocrisy and double standards sticking hard. The OECD issued a strong rebuke that the decision had not been consistent with the Convention.

Just over a decade on, after the UK has managed to put the BAE-Al Yamamah legacy behind it by introducing the Bribery Act and becoming a serious player in terms of foreign bribery prosecutions, could it risk a re-run?

The SFO began investigating allegations of corruption in relation to Airbus’ UK Subsidiary GPT Special Project Management in 2012. The allegations relate to another government to government contract in Saudi Arabia known as the SANGCOM (Saudi National Guard Communications) Project overseen by the UK’s Military of Defense. In early 2011, a whistleblower bought an email trove to the SFO laying out the attempts of an internal whistleblower to get Airbus to take seriously his concerns that offshore payments made to subcontractors on the £2 billion ($2.6 billion) project were illegal.

By most reckonings, nearly seven years on, the SFO investigation should be drawing to some kind of conclusion and rumours abound that the SFO could be close to charging. But there are a few hurdles in its way.

First, the documents given the SFO by the whistleblower suggest that the Ministry of Defense or MOD had knowledge of the payments and may have signed off on them. In 2013, press reports suggested that Airbus was maintaining that it had done nothing on the project without MOD approval. The SFO is going to need full cooperation from the MOD if it is going to bring a prosecution -- a big ask from a ministry that is used to operating in secrecy and that will be desperate to cover its back.

In 2015, the MOD refused to release information under the Freedom of Information Act about its oversight of the SANGCOM project -- a decision that was upheld by a tribunal on the grounds that to do so would cause ‘real and significant harm’ to UK-Saudi relations. But it also means that the SFO is also going to need to adopt a hard-hitting and potentially risky prosecution strategy that doesn’t accept that government authorization makes potentially corrupt payments legal.

Second, there is the little matter of Brexit and the UK’s desperate desire for non-EU trade deals. The government recently announced that it would be holding six-monthly strategic dialogues with Saudi Arabia to lay the foundation for a post-Brexit trade deal with Saudi Arabia. In September, it signed a new Military and Security Cooperation Agreement with the country. The government won’t want any upsets to Saudi relations that an embarrassing trial might bring.

Clearly the government shouldn’t have a say in how the SFO’s case proceeds given the independence of the prosecuting bodies in the UK. However, any prosecution is going to need the consent of the UK Attorney General (a government minister) because this is a requirement for proceedings that need to be brought, as the GPT case would, under pre-Bribery Act laws. Further, the Attorney General reserves the right to consult ministerial colleagues where "national security" considerations are at play.

Meanwhile, despite the BAE-Al Yamamah scandal and the pasting the UK got from the OECD over it, the UK has yet to make Article 5 of the Convention legally binding domestically. So even if the UK government decides to invoke British jobs or damaging relations with the Saudis as reasons to drop an investigation or prosecution, there is little that could be done to challenge it at least on a legal level.

Recently Corruption Watch and Transparency International UK wrote to the UK Attorney General, asking him to make a public statement in Parliament that he and his colleagues across government will respect Article 5 in the GPT case and in all future foreign bribery prosecutions. The letter also asked him to make Article 5 legally binding in the UK, and to ensure a full public review into any failings by government, particularly in relation to the MOD’s oversight of the contract, that allowed any such alleged corruption to occur.

The stakes are high. The UK cannot afford to trash the OECD Anti-Bribery Convention again nor risk sullying its reputation on fighting corruption. It needs allies as it heads into the uncertain economic times that Brexit is creating, and it needs to recognize that its long-term interest is in upholding strong anti-corruption standards in international trade, not undermining them.

____

Susan Hawley is Policy Director of Corruption Watch, which has just released a report, "State-sponsored Bribery? Airbus' Saudi Saga and the UK's Ministry of Defence," which is here.

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