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Tuesday
Dec082015

Did the UK's first DPA comply with the UN Convention Against Bribery?

The judicial approval required for UK Deferred Prosecution Agreements raises the issue as to whether and to what extent the Courts must be satisfied that such settlements comply with the United Nations Convention Against Corruption.

Art 53 (b) of the UNCAC provides that each state party shall, in accordance with its domestic law take such measures as may be necessary to permit its courts to order those who have committed offenses established in accordance with this Convention to pay compensation or damages to another state party that has been harmed by such offenses.

The UK’s first DPA arose from a self-reporting bank -- ICBC Standard Bank -- failing to prevent its subsidiary from bribing officials in connection with a $600 million sovereign debt private placing contrary to section 7 of the Bribery Act 2010 ((Failure of commercial organizations to prevent bribery).

Aside from cooperation and monitoring provisions, the settlement involved various tranche payments:

$6,000,000 (the amount of the bribe) plus interest of $1,046,196.58 (based on the loan note interest rate) payable as compensation to the Government of Tanzania

$16,800,000 as a financial penalty payable to the UK’s consolidated fund

$8,400,000 disgorgement of profits payable to the UK’s consolidated fund, and

£330,000 in respect of the SFO’s costs

In addition to the UK payments, ICBC Standard Bank also agreed to pay the United States Securities and Exchange Commission a civil money penalty of US $4.2 million.

In approving the settlement, the UK judge noted that the Tanzanian Prevention and Combating Corruption Bureau had commenced its own investigation but did not object to the proposed DPA.

Out of a tainted $600 million transaction, the underlying merits of which do not appear to been expressly considered, ICBC Standard Bank has paid approximately $30 milion to the UK and U.S. authorities and merely returned $7 million in the form of the bribe monies and interest to the Tanzanian authorities.

Does returning bribe monies fairly represent the true damage suffered by Tanzania on account of the tainted transaction? It certainly seems disproportionate compared to the amounts pocketed by the UK and the U.S. authorities. One might at the very least have expected the disgorgement of profits to have been remitted back to the country most exposed to the tainted transaction.

Hopefully, this parsimonious aspect of the UK’s first DPA will not set a precedent for future DPAs. Perhaps countries such as Tanzania should be advised to stick their oar in more forcefully when consulted about DPAs.  

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Alistair Craig, a commercial barrister practicing in London, is a frequent contributor to the FCPA Blog.