Rolls-Royce, the world’s second largest aircraft engine maker, made a public announcement on the 6 December 2012 that it has provided information to the Serious Fraud Office (SFO) in relation to bribery and corruption activities that have taken place in Indonesia, China and other undisclosed overseas markets involving its intermediaries.

In a statement released through its website, Rolls-Royce stated, “It is too early to predict the outcomes, but these could include the prosecution of individuals and the company.  We will cooperate fully”.

The UK Bribery Act, which was implemented in July 2011, claims jurisdiction over corrupt payments occurring anywhere in the world, if they are made by or on behalf of an organisation that “carries on a business or part of a business” in the UK.  The extent of its reach covers not only those who engage in bribery, but also companies who fail to implement adequate procedures and compliance controls to prevent it.

The Financial Times reported last week that the SFO approached Rolls-Royce earlier this year following allegations made by a whistleblower (a former employee) that the company had paid bribes to secure business for its civil aircraft engines in Indonesia.  These allegations dated back to 2006.  Rolls-Royce investigated and the results of their investigation were sent to the SFO, who have also informed and shared the information with the US Department of Justice.  Rolls-Royce could also be liable for acts by intermediaries under the US Foreign Corrupt Practices Act if it had “reason to know of any bribes”.

The SFO has yet to confirm whether it has or will launch a formal investigation, but given recent comments by its new Director, David Green, there is a feeling by some commentators that the SFO are keen to signal an end to the perception they prefer civil settlements over criminal prosecutions.  Interestingly, many of the alleged transgressions predate July 2011, when the new tougher Bribery Act 2010 came into force in the UK, which will clearly impact on the SFO’s decision.

Rolls-Royce has taken recent steps to strengthen its compliance system, and in a statement pointed to its new “Global Ethics Code” and a new “Intermediaries Policy”.  It also intends to “appoint an independent senior figure who will lead a review of current procedures and report to the Ethics Committee of the Board” (quotes taken from the Rolls-Royce statement on the 6 December 2012).  The recent steps taken by Rolls-Royce to implement effective compliance measures may suggest the company were concerned they might incur liability for failing to establish “adequate procedures” to prevent bribery under the UK Bribery Act.

Whilst it is not clear what measures the SFO will take against Rolls-Royce, the company’s approach to its compliance program and willingness to cooperate with the SFO and its investigations, are strong examples of proactive management, which may lead to a better outcome for the business.