In this article we discuss Africa-related enforcement actions under the UK Bribery Act 2010 (UKBA) (and previous UK legislation) and reflect on the issues that corporates and their advisers should be considering when entering or operating in African markets.

Corruption remains a major legal and economic risk for doing business in Africa. The African Development Bank (AfDB) estimates that USD 148 billion is lost to corruption in Africa every year. Whilst it is difficult to generalise about corruption in Africa as the risks vary significantly across the continent, any organisation operating in Africa should take steps to assess, manage and mitigate corruption risk.

The reach of the UKBA is now well understood by international businesses.  UK companies and persons doing business in Africa (or anywhere in the world) have to comply with the provisions of the UKBA, which prohibit all forms of bribery: active, passive, public and commercial, and including facilitation payments. In addition, section 7 of the UKBA makes it a criminal offence for a commercial organisation to fail to prevent bribery by an "associated person", namely a person or entity providing services to it. The "corporate offence" (as section 7 UKBA is informally known) is very broad and creates jurisdiction over any UK or foreign company or partnership which carries on a business, or part of a business, in any part of the UK. Where corporates can establish that they had adequate procedures in place to prevent bribery they will have a defence to the corporate offence.

The effect of the UKBA's extra-territorial reach allows UK law enforcement agencies to investigate and prosecute companies that have only a slight connection to the UK, including where the unlawful conduct occurred wholly outside the UK.

Enforcement of the UKBA has been boosted by the introduction in 2014 of Deferred Prosecution Agreements (DPA). A DPA is an agreement whereby a prosecutor and corporate defendant can settle certain types of criminal cases, including for corruption. The company agrees to be charged but the criminal proceedings are immediately stayed upon entry into the DPA. When the DPA expires at the end of a stipulated term, and assuming its terms have been met, the criminal proceedings are discontinued. A DPA is not offered to a defendant as of right but a company which co-operates with the authorities (and co-operation usually includes self-reporting) may be invited to negotiate a DPA, thus avoiding a criminal conviction and consequences that may attend a conviction, such as debarment. The UK government has to date recovered over £1.6 billion in financial penalties and disgorgement through DPAs.

Smith and Ouzman

Before considering Africa-related enforcement actions under the UKBA it is worth noting that in 2014, after the UKBA had come into force but in relation to charges brought under pre-UKBA bribery legislation, Smith and Ouzman Ltd, a company specialising in printing security documents such as ballot papers, was convicted of corruptly agreeing to make payments of £395,074 to influence the award of business contracts in Kenya and Mauritania. This was the first SFO trial resulting in conviction of a corporate for foreign bribery.  Of interest is that the SFO thanked the Kenyan, Ghanaian and Swiss authorities for their assistance in securing the convictions, suggesting that the SFO received significant co-operation from agencies in those jurisdictions.

Standard Bank

The first DPA entered into by the Serious Fraud Office was in 2016 and related to allegations of corruption in Tanzania. The SFO agreed the DPA with Standard Bank Plc (Standard Bank), a UK regulated bank and a subsidiary of the Standard Bank Group Limited, a publicly owned company registered in South Africa.  By the time of the DPA Standard Bank had been acquired by the Industrial and Commercial Bank of China and was called ICBC Standard Bank.

In February and March 2013, Standard Bank and its sister company, Stanbic, acted for the Government of Tanzania to raise commercial finance for its development plans through a $600m sovereign note private placement.  Stanbic was a Tanzanian company, directly owned by a UK company and ultimately owned by the Standard Bank Group.  Negotiations with regards to the placement began in February 2012. Standard Bank and Stanbic initially proposed charging the Government of Tanzania a 1.4% fee of the gross proceeds raised, but by August 2012 the deal had lost momentum.  In September 2012, Stanbic proposed involving a Tanzanian company called Enterprise Growth Markets Advisors Limited (EGMA) in the deal for an additional 1% fee (US$6m), following which the deal concluded.

EGMA's director and one of its shareholders was a Commissioner of the Tanzanian Revenue Authority and the transaction was within his jurisdiction.  Another EGMA director had been CEO of the Tanzanian Capital Markets and Securities Authority and knew government officials involved in the transaction. Standard Bank accepted that the money paid to EGMA was intended to induce representatives of the Government of Tanzania to favour Standard Bank's and Stanbic's bid for a joint mandate.

The conduct was discovered when EGMA withdrew its fees (paid into a bank account with Stanbic) in large cash amounts, triggering reporting obligations within the bank.

Standard Bank self-reported the matter to the SFO and co-operated in the SFO's investigation. Standard Bank was ordered to pay a discounted financial penalty of US$16.8m, to disgorge its transaction profits of $8.4m and to provide compensation to the Government of Tanzania of $6m plus interest of approximately $1m.

Standard Bank was charged with the corporate offence under the UKBA.  Standard Bank conceded that at the time of the offence, its compliance procedures were not adequate in respect of situations where two or more entities within the bank were acting on a joint mandate.

Rolls Royce

In 2017 the SFO entered into a DPA with Rolls-Royce plc in relation to payments made by the civil aerospace, defence aerospace and energy businesses of Rolls-Royce to intermediaries in seven overseas markets, including Nigeria. The payments made related to contracts earning the business over £250 million in gross profits. Rolls-Royce was ordered to pay nearly £500 million as a result of the corrupt arrangements. At the time, the penalty was the highest imposed on a company for breaches of UK bribery legislation, although it has subsequently been exceed by the Airbus disposal (€983,974,311 to the UK authorities out of a total to the combined UK, US and French authorities of €3,592,766,766).

In relation to corruption in Africa, Rolls Royce had engaged a Nigerian company to assist it with bidding in relation to two projects in Nigeria.  The Adanga project concerned the sale by Rolls Royce of two gas compression engines to an international oil and gas exploration company. A public entity called National Petroleum Investment Management Services (NAPIMS) responsible for supervising the Nigerian government’s investment in the oil and gas sector oversaw the bidding process. The Egina project concerned the supply by Rolls Royce of gas turbine generators and compressors and related Long Term Service Agreements. Egina was an offshore oil field project operated by Total Upstreams Projects Nigeria, which was responsible for bid evaluation and the submission of recommendations to NAPIMS.  A relative of the directors of the Nigerian company engaged by Rolls Royce to assist with the Adanga and Egina projects was employed by NAPIMS.

The Nigerian company was classified by Rolls Royce as a customer or distributor rather than an intermediary which enabled mark ups to be paid to the company. According to the Statement of Facts supporting the DPA, the Nigerian company used the additional funds to make a number of payments to officials involved in the NAPIMS approval processes, including officials working on the Adanga and Egina projects. In return, Rolls Royce employees received confidential information about the bidding processes and influence over the requirements of the customer in the tendering process.

Rolls Royce did undertake some diligence in relation to the Nigerian Company but it was ineffective. Following corruption concerns being raised in the press, Rolls Royce obtained two independent due diligence reports from third party providers. Both these reports highlighted corruption risks and a meeting was held with the Nigerian company to discuss these concerns.  Rolls Royce employees also raised concerns internally. The Higher Risk Committee of Rolls Royce met to discuss the findings but Rolls Royce accepted for the purpose of the DPA that the meeting was not independent and that not all relevant information was placed before it. Accordingly, Rolls Royce continued to use the services of the Nigerian company.

Ultimately Rolls Royce accepted a charge that it had failed to prevent bribery of the relevant Nigerian officials. There was, however, no financial benefit to Rolls Royce as it ultimately withdrew from the tendering processes due to corruption concerns.

Unlike the ICBC Standard Bank DPA, the Court did not award compensation to any victims of Rolls Royce's corrupt conduct, noting that it was often impossible to trace, through intermediaries, what bribes were actually paid. The Court also recognised that victims still had a private right to pursue a claim against Rolls Royce for any losses suffered.

Smith and Ouzman, ICBC Standard Bank and Rolls Royce were all significant outcomes for the SFO. The decisions of ICBC Standard Bank and Rolls Royce to co-operate in the SFO's investigation would have made it quicker and easier for the SFO to obtain the necessary evidence to support the charges.  Co-operation avoids the need for enforcement authorities to spend time and resources on obtaining mutual legal assistance from foreign countries, which can be a complex and protracted process – and in some cases, may prove ineffective. The conduct in the Rolls Royce case spanned three decades and much of it occurred before the UKBA came into force.

The SFO has now concluded nine DPAs and in that time the conduct that is expected of a company that wishes to secure a DPA has become clearer and more certain. It is likely that DPAs will continue to play a significant role in the SFO's enforcement activity.