DEIRDRÉ SIMAAN AND EDWARD JAMES: Two high-profile cases pioneer resolution of corruption cases

A newly published corporate alternative dispute resolution (ADR) policy has confirmed the route through which companies can avoid criminal prosecution for corruption in SA by self-reporting to the state and complying with clearly laid out principles.

While the corporate ADR process is not a “get out of jail free card” for all corruption, it is a “pioneering” new process in SA that formalises the state’s position on resolving corruption cases with companies without having to go through protracted criminal trials.

The mechanism is a nontrial resolution that has been widely adopted in other jurisdictions, such as the US, England and Wales, in the form of either nonprosecution agreements or deferred prosecution agreements. The ADR policy brings SA into alignment with international practices advocated by the Organisation for Economic Co-operation and Development (OECD) for corporate leniency and is akin to nonprosecution agreements used in the US.

While there are some differences between the mechanism in the ADR policy and deferred prosecution agreements, 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 chief justice Raymond Zondo, who led the inquiry into state capture in SA. He recommended that SA adopt deferred prosecution agreements.

SA is a signatory to the OECD’s 2021 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and member of the working group on bribery in international business transactions. The antibribery convention provides for nontrial resolutions, including leniency for corporations that voluntary self-disclose misconduct, co-operate with law enforcement authorities, and remediate.

Best practice

Corporate ADRs align with international best practice as advocated by the OECD and the SA remediation principles of restorative justice. It is a pioneering legal development in SA, which encourages corporations to self-police in return for nonprosecution by the National Prosecuting Authority (NPA) of criminal transgressions.

Corporate ADRs uphold the law by providing a mechanism to hold corporations accountable while considering the broader public interest in the NPA’s attempt to curtail corruption in the wake of state capture.

The state has deployed ADR resolutions in two high-profile cases. The first was the well-publicised ABB case, which involved a multijurisdictional settlement for corruption relating to the Kusile power plant project with the US department of justice, Securities and Exchange Commission, the attorney-general of Switzerland and the national director of public prosecutions of SA. The ABB case was a landmark development. Pinsent Masons represented ABB in SA. The settlement was announced in December 2022.

The second case was that of software giant SAP involving the resolution of corruption transgression with various state-owned enterprises in SA. The SAP settlement was announced in January 2024. While the practice had begun before the publication by the NPA of its policy on the new corporate ADR procedure on April 19, the state had not formalised its position or provided clear guidance.

Under the policy, the NPA can hold a corporation to account for multijurisdictional criminal transgressions outside the formal criminal justice system at pretrial 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 should be applied when the state is considering a resolution through the process.

The principle on legality and rationality 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 offences, 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 principle on public interest provides that as a guardian of the public interest, the NPA’s decisions should be based on the specific facts of each case, informed by public interest factors.

Disclosure

Another 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 principle. These operate as conditions that businesses should look to fulfil if they want their case to be considered.

For example, businesses should:

• Disclose wrongdoing and proactively remediate, such as by compensating victims;
• Co-operate fully with ongoing and future investigations, asset forfeiture proceedings, and individual or other implicated company prosecutions;
• Show willingness and capacity to implement and monitor effective compliance programmes; and
• Be able to provide 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.

The principle regarding transparency provides for corporate ADR decisions to be documented in writing and summaries to be made publicly available on the website of the NPA.

The policy applies only 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, because the co-operation that companies must provide to benefit from corporate ADR will include disclosing evidence that the state can then use against individuals.

• Simaan and James are partners at Pinsent Masons SA, which acted as SA 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.