Confirmation late Friday afternoon that, having completed agreement with the regulatory authorities three days earlier, approval for the deal has now been formally passed by the French, US and British courts is excellent news for Airbus investors just as it is for senior management of this hugely important international aerospace and defence company.
Agreement with the various international regulatory authorities and settlement achieved within a Deferred Prosecution Agreement process follows four-year long investigations carried out by the three main authorities involved. It removes what may best be described as a major overhang for Airbus inherited from the previous generation of management.
Expensive but affordable as the settlement agreed undoubtedly is, the new generation of Airbus management now has the necessary freedom to concentrate on moving the company forward, planning for future requirements, investing in research and development for future aircraft developments that will undoubtedly require even greater cognisance of environmental issues, in making itself even more efficient at what it does and importantly allows them the freedom to continue growing the company apace without having to look over the shoulder at its past.
The agreed settlement having now, as required, passed through the three international courts involved means that this long running and damaging investigation is at an end. Airbus can and will move forward notwithstanding that the EUR 3,598 million cost of final settlement to the four regulatory authorities involved [the French Parquet National Financier (PNF), U.K. Serious Fraud Office (SFO) and U.S. Department of Justice (DoJ)] and that will be taken in the FY19 accounts has left a mark. Allegations made on Airbus had centred on claims of bribery and corruption and in the US also, inaccurate and misleading filings made with the DoS pursuant to the U.S. International Traffic in Arms Regulations (ITAR).
Airbus has learned many lessons from the allegations made and has quite rightly since the process started significantly enhanced its compliance system under the supervision of an Independent Compliance Review Panel. No one should in my view be in any doubt that Airbus is fully committed to conducting business with integrity.
To that end in a statement made to accompany the announcement that all three courts has formally passed the agreement through, Denis Ranque, Chairman of the Board of Directors of Airbus, said that “The settlements we have reached today turn the page on unacceptable business practices from the past. The strengthening of our compliance programmes at Airbus is designed to ensure that such misconduct cannot happen again. The agreements also reflect that the decision to voluntarily report and cooperate with the authorities was the right one. The commitment from the Board, and its Ethics and Compliance Committee, to provide full support to the investigation and the implementation of globally recognised compliance standards have paved the way to today’s agreements.”
Guillaume Faury, Chief Executive Officer of Airbus, added: “The agreements approved today with the French, UK, and US authorities represent a very important milestone for us, allowing Airbus to move forward and further grow in a sustainable and responsible way. The lessons learned enable Airbus to position itself as the trusted and reliable partner we want to be.”
Airbus will continue to cooperate with the regulatory authorities in the future, pursuant to the agreements, and will install a strong Ethics & Compliance culture throughout the Company. From the company perspective it is clear that the Self-reporting and cooperation was the right approach and in the best interests of the Company. Importantly, while the penalties imposed by the regulatory authorities are very high, they allow for Airbus to now move forward without requiring to carry the burden of major regulatory investigations into past events.
The fact that Airbus has achieved an agreement with multiple authorities is also correct recognition by regulatory authorities of the substantial progress that the company has subsequently made on its compliance requirements programme since the investigation process began in 2016. No one should be in any doubt that Airbus has, through this long running investigation process, made huge strides forward in order to achieve exemplary compliance with applicable laws and best practices laid down by regulators and also that the company has implemented a very effective compliance programme across all parts of the company – this being a prerequisite to the achievement of an agreement with the various international regulatory authorities.
As per the company’s own statement, detail of what Airbus has agreed to with the three separate regulatory authorities is as follows:
Deferred Prosecution Agreement with the SFO:
Airbus has agreed to enter into a Deferred Prosecution Agreement with the SFO. This agreement does not amount to an admission of liability. Under this agreement, the SFO has agreed to suspend prosecution of Airbus for a duration of three years. Prosecution will be discontinued if Airbus complies with the terms of the agreement throughout this period, which it is committed to doing. In light of the continuing monitorship to be conducted by the French Anti-Corruption body, the AFA, no independent compliance monitor will be imposed on Airbus under the agreement with the SFO.
Convention Judiciaire d’Intérêt Public with the PNF
Airbus has agreed to enter into a Convention Judiciaire d’Intérêt Public with the PNF. This agreement does not amount to an admission of liability. Under this agreement, the PNF has agreed to suspend prosecution of Airbus for a duration of three years. Prosecution will be discontinued if Airbus complies with the terms of the agreement throughout this period, which it is committed to doing. The agreement also contains an obligation for Airbus to submit its compliance programme to targeted audits carried out by the Agence Française Anticorruption (AFA) over a period of three years.
Deferred Prosecution Agreement with the DoJ
Airbus has agreed to enter into a Deferred Prosecution Agreement with the DoJ. Under this agreement, the DoJ has agreed to suspend prosecution of Airbus for a duration of three years. Prosecution will be discontinued if Airbus complies with the terms of the agreement during this period, which it is committed to doing. No independent compliance monitor will be imposed on Airbus under the agreement with the DoJ.
Consent Agreement with DOS
Airbus has also agreed to enter into a Consent Agreement with the DoS. Under this agreement, the DoS has agreed to settle all civil violations of the ITAR outlined in Airbus’ voluntary disclosures identified in the Consent Agreement, and Airbus has agreed to retain an independent export control compliance officer, who will monitor the effectiveness of Airbus’ export control systems and their compliance with the ITAR.
In 2014, following compliance concerns and as a precautionary measure, Airbus froze payments to its sales intermediaries / business partners engaged in sales support activities, in order to put them through an enhanced compliance due diligence and screening process. During this process, Airbus discovered misstatements and omissions relating to information provided in certain applications for export credit financing for Airbus customers.
As a result, Airbus made the decision to “self-report” to the relevant UK authorities in early 2016. In August 2016, the UK Serious Fraud Office (“SFO”) informed the Company that it had opened an investigation into allegations of bribery and corruption in the civil aviation business of Airbus relating to irregularities concerning third party consultants (business partners).
In March 2017, France’s Parquet National Financier (“PNF”) informed the Company that it had already opened an investigation into the same subject and that the two authorities would act in coordination going forward.
Following a review of its US regulatory compliance procedures, the Company discovered and subsequently informed relevant US authorities in December 2016 concerning certain inaccuracies in filings with the DoS pursuant to part 130 of International Traffic in Arms Regulations (ITAR) (US export control regulation).
As part of the Company’s engagement with the US authorities, the latter (DoJ & DoS) requested information relating to conduct forming part of the SFO/PNF investigation that could fall within US jurisdiction in 2017. The Company chose to cooperate with the US authorities in close coordination with the SFO and PNF.
CHW (London – 3rd February 2020)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785