Corporate corruption settlement policy finalised in South Africa

According to Johannesburg-based anti-corruption law experts Deirdré Simaan and Edward James of Pinsent Masons, while the corporate ADR process is not a “get out of jail free card” for all corruption, it is a “pioneering” new process in South Africa that formalises the state’s position on resolving corruption cases with companies without having to go through protracted criminal trials.

The mechanism is essentially a non-trial resolution which has been widely adopted in other jurisdictions, such as the US and England and Wales, in the form of either non-prosecution agreements or deferred prosecution agreements (DPAs). The ADR policy brings South Africa into alignment with international practices advocated by the OECD for corporate leniency and is akin to non-prosecution agreements used in the US. Whilst there are some differences between the mechanism in the ADR policy and DPAs, including the fact that ADR agreements don’t need to be signed off by courts, the principle of resolving corporate corruption without having to convict companies is aligned with a recommendation made by Justice Raymond Zondo, who led an inquiry into ‘state capture’ in South Africa where he recommended that South Africa adopt DPAs.

Simaan said: “South Africa is a signatory to the OECD’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the Anti-Bribery Convention) (2021) and member of the Working Group on Bribery in International Business Transactions. The Anti-Bribery Convention particularly provides for non-trial resolutions including, where appropriate, leniency for corporations that voluntary self-disclose misconduct, cooperate with law enforcement authorities, and remediate.”

“Corporate ADRs align with international best practice, as advocated by the OECD, and the South African remediation principles of restorative justice. It is a pioneering legal development in South Africa which encourages corporations to self-police, voluntarily report and remediate, in return for non-prosecution by the NPA of its criminal transgressions. Importantly, corporate ADRs uphold the law by providing a mechanism to hold corporations accountable for their criminal transgressions while also considering the broader public interest in the NPAs attempt to curtail the current crisis of state capture,” she said.

The state has deployed ADR resolutions in two high-profile cases. The first case was the well-publicised ABB case that involved a multijurisdictional settlement for corruption relating to the Kusile power plant project with the US Department of Justice, US Securities Exchange Commission, attorney general of Switzerland, and the national director of public prosecutions of South Africa. The ABB case was a landmark development. Pinsent Masons represented ABB in South Africa. The settlement was announced in December 2022. The second case was that of the software giant SAP, which involved the resolution of corruption transgression with various state-owned enterprises in South Africa. The SAP settlement was announced in January 2024.

Whilst the practice had begun prior to the publication by the South African National Prosecuting Authority (NPA) of its policy on the new corporate ADR procedure (11-page / 209KB PDF) on 19 April, the state had not formalised its position or provided clear guidance.

Under the policy, the NPA can hold a corporation to account for multi-jurisdictional criminal transgressions outside of the formal criminal justice system, at pre-trial stage. It provides for companies to come clean about corruption and pay appropriate restitution in exchange for avoiding criminal prosecution. For the state, the process allows savings on cost, time and resources attributable to fighting drawn-out corruption cases.

The ADR policy sets out guiding principles that need to be applied when the state is considering a resolution through ADR.

The first principle relates to legality and rationality and provides that the primary aim of decisions to resolve corruption through ADR is to uphold the rule of law by promoting corporate accountability for corruption offenses, and that decisions must be within the legal authority conferred upon the NPA. Decisions must align with objectively justifiable public interest considerations, as articulated in the prosecution policy and policy directives.

The second principle relates to public interest. It further provides that, as guardians of the public interest, NPA decisions should be based on the specific facts of each case, informed by public interest factors.

The third principle confirms that the NPA must apply guided discretion in when and how it applies the corporate ADR procedure. Specific factors that should be used to guide the discretion are listed as part of the third principle. These essentially operate as conditions that businesses should look to fulfil if they want their case to be considered under the corporate ADR procedure.

For example, businesses should disclose wrongdoing and proactively remediate, such as by compensating victims; cooperate fully with ongoing and future investigations, asset forfeiture proceedings, and individual or other implicated company prosecutions; and show willingness and capacity to implement and monitor effective compliance programs. Businesses should also look to be able to evidence that there is no pervasive wrongdoing within the company. The NPA will also consider whether there is a likelihood that conviction could result in significant adverse collateral effects on the company’s employees, shareholders, creditors or the economy.

In addition to the factors listed as part of the third principle, the criteria to be considered are dealt with in more detail elsewhere in the policy. Whilst the criteria largely overlap, added criteria include the nature, seriousness, and complexity of unlawful activities, past misconduct of the company, and existence of an effective compliance programme.

The fourth principle relates to transparency and provides for corporate ADR decisions to be documented in writing and summaries to be made publicly available on the website of the NPA. This is to ensure transparency and accountability.

James said: “The publication of the corporate ADR is an excellent development that helps provide policy certainty for companies that want to self-report. We previously advocated for deferred prosecutions agreements to be provided for in South Africa. This policy essentially achieves a similar outcome albeit through a different mechanism.”

“The policy only applies to companies and does not give corrupt individuals a way out. It is clear that any ADR settlement will not preclude the state from taking action against the individuals involved – that includes the employees of the company and third party recipients of bribes. For the state, corporate ADR provides an expedited route to recover money from companies involved in wrongdoing while not precluding them from going after the bad actors that perpetrated the crime. It should place the state in a better position to prosecute individuals, as the cooperation that companies have to provide to benefit from corporate ADR will include disclosing evidence that the state can then use against individuals,” he said.

Simaan led the team at Pinsent Masons that acted as South African counsel for ABB in the negotiation of the first of its kind corporate ADR agreement with the NPA that laid the ground for the policy to be developed and formalised. The team were recognised for their work at an award ceremony run by Global Investigations Review in Washington DC in the US, in November 2023.