South Africa’s legislation permits for the investigation and enforcement of corrupt activities. Our agencies, however, lack the capacity, resources and independence to do so meaningfully. While positive strides are being made to address these concerns, successfully prosecuting complex cases of bribery and corruption remain a challenge.
Although not formally a member of the Organisation for Economic Co-Operation and Development (OECD), South Africa is bound by the organisation’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
Accordingly, it is obliged to implement the recently published 2021 OECD Anti-Bribery Recommendations. The 2021 recommendations follow from the 2009 recommendations, which largely focused on ensuring that countries promulgate dedicated anti-bribery legislation to deal with cross-border corruption cases involving both public and private officials.
The 2021 recommendations introduced and expanded on several principles which would assist prosecuting authorities not only in detecting wrongdoing, but in successfully prosecuting complex corruption cases. The most notable recommendation is what the OECD recommendations term non-trial resolutions.
There is nothing inherently technical about the term itself. In essence, non-trial resolutions are mechanisms developed and used to resolve matters without a full court trial, based on a negotiated settlement agreement between a company (or individual) and a prosecuting authority.
A particular matter could see non-trial resolutions being achieved in various ways. For example, they could take the form of a guilty plea, wherein a firm admits to wrongdoing and in return receives a more lenient sanction or they could take the form of deferred prosecution agreements. The latter occurs between enforcement agencies and accused persons, and entails deferring the prosecution of a complaint subject to the fulfilment of certain conditions.
For corporates involved in misconduct, such conditions could entail the imposition of a compliance programme. As such, deferred prosecution agreements are best suited to firms who self-report and fully cooperate with the relevant agency by providing prosecutors with pertinent information on the nature and extent of misconduct as well as those within the firm responsible for the misconduct.
Non-trial resolutions have been widely used in the United States, Britain, Brazil, France and Germany and may be well suited to South Africa. They provide incentives for compliance and promote the spirit of restorative justice, one of the principles enshrined in the South African Constitution.
While obtaining certainty, reducing litigation costs and leniency are clearly advantageous to firms involved in corruption and bribery, self-reporting may also enable firms to adequately detect and punish the responsible individuals within their entity for the wrongdoing. From the state’s perspective, a formal non-trial resolution regime will assist in preserving scarce government resources which would otherwise be expended on lengthy investigations and trials.
Accordingly, in creating incentives for self-reporting and cooperation, non-trial resolutions will assist the prosecuting authority in its investigation, especially in relation to complex corruption cases where the National Prosecuting Authority (NPA) may not have the resources or expertise to successfully investigate and prosecute such cases. Nothing erodes confidence in the judicial system more than an inability to prosecute wrongdoing.
Notwithstanding the residual concerns that some have expressed regarding the appropriateness of non-trial resolutions, the data and experiences which form the basis of the recommendations clearly support their use. Any residual concerns relating to companies being able to engage in wrongful conduct and absolve themselves of any liability by entering into a settlement agreement can be relatively easily mitigated by ensuring that there is a clear and transparent non-trial resolution regime in place, which is subject to some degree of judicial oversight.
In addition to the implementation of non-trial resolution regimes, the recommendations further elaborate on the importance of protecting whistleblowers and the establishment of legal and institutional frameworks. In this regard, it is important that, in addition to a non-trial resolution regime, South Africa develops effective whistleblower protection legislation.
For South Africa, an effective non-trial resolution regime is essential. Coupled with a competent framework for incentivising whistleblowers, non-trial resolutions could significantly increase the detection of wrongdoing, while simultaneously lowering the resources required and burden placed on the state. In addition, incentives for whistleblowers may even be extended to various other corporate crimes such as cartel conduct under the auspices of the competition agencies.
In this regard, the current leniency regime (which only provides self-reporting firms from facing administrative penalties), could be expanded to include incentives for individuals within a firm who reports acts of collusion. This would achieve two objectives, firstly, individuals within a firm may be incentivised to come forward and blow the whistle more readily and secondly, firms may be more inclined to come forward and apply for leniency knowing that if they do not, a potential whistleblower may.
To debate these issues further, Primerio hosted a project-roll out session in March in conjunction with the International Bar Association’s Anti-Corruption Committee and the OECD’s Anti-Corruption Working Group, to promote and debate the OECD recommendations in South Africa.
Moderated by Michael-James Currie, the African regional representative for the International Bar Association’s Anti-Corruption Committee, the panel consisted most notably of minister of justice Ronald Lamola, together with Judge Dennis Davis (former president of the Competition Appeal Court); Willie Hofmeyr (former head of the Asset Forfeiture Unit at the NPA); John Dludlu (chief executive officer at the Small Business Institute); Professor Sope Williams-Elegbe (professor of law at Stellenbosch University); Drago Kos (chair of the OECD Working Group on Bribery); Jennifer Arlen (director at the New York University Program on Compliance and Enforcement); and Peter Solmssen (International Bar Association’s Non-Trial Resolutions of Bribery Cases subcommittee chair and former general counsel at Siemens AG).
Primerio managing partner, John Oxenham, the co-author of this article, highlighted not only the timely juncture of the event, but also the challenges faced by South Africa’s NPA. This resonated with Kos, who stated as an overarching remark that while the OECD Working Group on Bribery has been satisfied with the development of anti-corruption legislation and institutions in South Africa, there remains significant concerns regarding the lack of enforcement.
In the context of adopting non-trial resolutions, Arlen elaborated that the “single biggest challenge to deterrence is to make sure that the probability of getting caught is high enough that the people committing crimes take it into account”.
Solmssen pointed out that it made sense for companies to produce evidence to the relevant authority as they could benefit from a reduction in potential sanctions. As such, quick disclosure of wrongdoing, remediation of the wrongdoing, and cooperation with the authority makes the investigation and prosecution procedure less resource intensive, while ensuring cases are resolved instead of being left to languish.
In highlighting several concerns with non-trial resolution regimes, Professor Williams-Elegbe noted that in many countries a conviction against companies engaged in unethical or illegal acts is required to debar companies from participation in public procurement processes. A non-trial resolution regime must be flexible enough to cater for this. In addition, the non-trial resolutions system must be flexible enough to consider corporate recidivism, which should ensure companies are unable to continuously “buy their way out of prosecution”.
It is also essential that the private sector is involved in the policy debate. In this regard, Dludlu highlighted the support that Business Unity South Africa has offered to the NPA and the legislature in formulating policy, as well as the role that businesses could play in the protection of whistleblowers.
While it is widely acknowledged that South Africa’s whistleblowing regime does not adequately incentivise or protect whistleblowers, the extent to which whistleblowers should be financially compensated and how such compensation will be funded, is still widely debated.
Deterrence against corporate crimes depends on efforts by the government to obtain information on the firm’s misconduct. In doing so, providing incentives and protection to whistleblowers may provide enforcement authorities with the information it needs to prosecute cases of bribery.
One solution, postulated by Hofmeyr and equally endorsed by Judge Davis, is to set up an ombudsman headed by retired higher court judges to oversee, not only the manner in which whistleblowers are compensated and protected, but also to potentially provide some informal judicial scrutiny over a non-trial resolutions regime so as to ensure that any settlement concluded between private parties and the NPA is independently assessed.
It is encouraging that Lamola not only recognises the importance of implementing the OECD recommendations, but specifically indicated that a more robust whistleblower regime as well as a formal non-trial resolutions framework is being considered. Below are some of the remarks he made at the workshop:
“We are approaching [the OECD Recommendations] in the context of the Zondo commission’s recommendations.”
“[The Zondo recommendations] are voluminous and it is becoming clear to us that it will be practically difficult to implement them without some of the mechanisms that are available to other jurisdictions in the world, which includes some of the recommendations that the OECD is making.”
“We are looking at the recommendations favourably because we do think that we do need some of the mechanisms that could help us with these multinational companies to cooperate with law enforcement agencies in our country.”
“It is becoming an increasing feature of criminal justice systems across the world that non-trial resolutions are used to resolve economic crimes, including corruption and bribery of foreign public officials.”
“There is still much to be debated as to whether these are harsh enough punitive measures to dissuade corporate citizens from engaging in conduct which often has catastrophic consequences for the government and the nation at large.”
“In the South African context, these settlements are rarely accompanied by punitive sanctions. For example, in addition to paying a settlement, should we also not bar the individuals at the centre of the problematic conduct from doing business in the country for a period of 10-15 years? In other jurisdictions, we are seeing that this can be accompanied by non-prosecution agreements or deferred prosecution agreements.”
“Another critical facet of combatting multi-jurisdictional effects of corruption is within the arena of mutual legal assistance. Despite our economies becoming highly digested, some of our mutual legal assistance practices are not modern enough to match the scale of economic digitisation.”