The National Prosecuting Authority’s corporate alternative dispute resolution policy directive is set to enhance South Africa’s anti-corruption efforts in line with international best practices.
The National Prosecuting Authority has published its corporate alternative dispute resolution (C-ADR) policy directive to explain how alternative dispute resolution can assist in fighting corruption, allowing companies to self-report.
The publication of this directive demonstrates the NPA’s commitment to the constitutional principle of transparency, as well as its intention to provide clear guidance for companies seeking to self-report and enter into such resolutions.
South Africa recently joined the global movement towards using non-trial resolutions (NTRs) to resolve multijurisdictional corruption cases when it concluded a resolution with the multinational SAP, in terms of its C-ADR directive.
Read more in Daily Maverick: Special Tribunal orders Germany’s SAP to pay R500m in restitution after ‘Gupta-linked’ Eskom contracts
The alternative dispute resolution approach has always been a part of the NPA’s prosecution policy and has been applied in many aspects of the NPA’s work over the years.
However, the C-ADR directive provides clarity to an innovative form of NTR for corporate corruption. This approach is a key step towards broader accountability for corruption as it incentivises companies to:
- Acknowledge responsibility for corruption;
- Make financial restitution;
- Hand over information that can be used to criminally prosecute individuals, especially within the company; and
- Improve their corruption prevention and detection systems (known as anti-corruption compliance programmes).
Prosecution of individuals
NTRs are a type of public-private cooperation, a method prescribed by the UN Convention against Corruption to improve the effectiveness of anti-corruption enforcement. Methods of public-private cooperation require transparent and full disclosure by implicated parties. They are used in serious, complex corruption cases because these are uniquely difficult to solve without help “from the inside”. The legal entity of the company is the “person” on the inside, providing information that can be used to prosecute individuals, including its former directors.
This needs to be clearly understood: The resolution is a decision not to prosecute, only the legal entity. Individual persons, including former directors, will still be investigated and may be prosecuted on the basis of the information or evidence, including that provided by the legal entity.
The use of NTRs has resulted in increased levels of anti-corruption enforcement globally. They are used by many countries including Brazil, Britain, Canada, France, Germany, Kenya, Malaysia and the Netherlands.
NTRs are endorsed by the Organisation for Economic Co-operation and Development, which has released recommendations encouraging member states, of which South Africa is one, to use NTRs to resolve corruption cases in ways that are transparent and accountable. The UN Office on Drugs and Crime has also noted the increasing rate of NTRs and encouraged countries to adopt a principled approach to their use. The NPA has done this by developing a C-ADR policy directive that is in line with international law and the South African Constitution.
The Zondo Commission of Inquiry into Allegations of State Capture also recommended the use of NTR-type approaches, namely deferred prosecution agreements. The Department of Justice and Constitutional Development is in the process of developing this legislation. In the meantime, the National Prosecuting Authority (NPA) must continue with its work and has a duty to innovate, within the current legal framework, to uphold the rule of law, reclaim stolen money fast and prosecute people for serious corruption. There is an added benefit of incentivising enhanced corporate governance, extending the reach of law enforcement beyond agencies themselves.
The use of NTRs enhances broader accountability, ensures immediate results, and sends a clear message that crime does not pay. The criminal justice system needs to follow an often protracted process to prove criminal responsibility in complex multijurisdictional financial crimes. NTRs are typically much quicker to finalise than trials, saving time and resources for the NPA, delivering justice and reclaiming stolen state money sooner.
Among other benefits, the NPA will not incur the high legal costs required to prosecute companies in complex corruption cases which can take many years to conclude. In addition, NTRs support associated criminal investigations into individuals since companies must cooperate with the NPA or the SA Police Service, and provide evidence on the conduct of these individuals. A further advantage is that NTRs incentivise increased voluntary compliance with anti-corruption standards by companies.
Restitution and rehabilitation
NTRs are a more advanced form of justice than punishment — they incorporate elements of restitution and rehabilitation. As a result, companies which may be victims themselves can continue to operate and thus unemployment does not arise as collateral damage if a company closes.
There is a pressing need for the NPA to cooperate with leading enforcers of foreign bribery laws such as the US, UK and France. These countries exercise jurisdiction over companies in all parts of the world. For example, when a company subject to the jurisdiction of the US Department of Justice (DoJ) is implicated in a corruption scandal in another country, this triggers an investigation by the DoJ. The DoJ often makes it a condition of an NTR with the company that it first makes financial restitution to the country in which the offence occurred. This pressure by the DoJ is a critical factor in companies deciding to cooperate and pay back stolen money.
The NPA has opportunities to participate in these multijurisdictional corporate resolutions, “punching above its weight” by cooperating with more powerful countries. A failure by the NPA to take the opportunities on offer to reclaim stolen money and get information about perpetrators would have a seriously negative impact on South Africa’s fight against corruption, in particular, State Capture — a consequence the NPA is not willing to endure.
To participate in these international resolutions, the NPA urgently needed to develop a mechanism to deal specifically with corporate entities within its alternative dispute resolution framework, while the Department of Justice and Constitutional Development developed legislation in terms of which the NPA could accept the money and information that was on offer by the companies. It responded by developing the C-ADR directive.
As stated above, this policy directive is an extension of the National Prosecution Policy, which states that prosecutors may decide not to prosecute a case when it is in the public interest to do so, considering factors such as where the offender has made restitution. In line with the constitutional principle of legality, the C-ADR policy directive provides more specific criteria for prosecutors to decide whether a company has made sufficient restitution for a decision to be made concerning prosecution purposes.
Exemplary cooperation
For a company to benefit from a corporate resolution, it will have to demonstrate exemplary cooperation with the NPA, as well as enhanced internal governance. The company will also have to make appropriate financial restitution and hand over sufficient information to aid the State’s investigations and future prosecutions.
This instrument will not be used for companies where the wrongdoing has been pervasive and is ongoing. The NPA, for instance, may consider whether the company has dismissed implicated directors and taken civil and/or disciplinary steps against them. The company will also have to demonstrate improvements to its anti-corruption compliance programme which prevent and detect misconduct, such as improved data-driven risk detection systems and whistle-blower protection. This instrument is intended for companies that have erred, yet have taken steps that demonstrate the will and capacity to make amends to society and become good corporate citizens.
A criminal conviction — obtained in a trial or a plea bargain — can harm a company’s reputation, causing financial distress and potentially leading to collapse, with disastrous implications for employees and shareholders. Bearing in mind the social and economic consequences of such collapse, the NPA’s C-ADR directive may provide deserving companies with an opportunity to make amends in appropriate cases.
South Africa’s new legal and policy framework is a more holistic approach to combating corruption that addresses multiple priorities at the same time: strengthening the hand of prosecutors and incentivising public-private cooperation, while helping to create the conditions for a thriving economy in which companies uphold better standards of corporate governance.
The C-ADR directive ushers in a new era of partnership between law enforcement and the private sector in combating corruption together for the economic recovery of the country. DM
Adv Ouma Rabaji-Rasethaba is Deputy National Director of Public Prosecutions: AFU, Adv Rodney de Kock is Deputy National Director of Public Prosecutions: NPS, Dr Tebello Thabane is a senior lecturer at the UCT Law Faculty and Colette Ashton is a member of the Advisory Committee on Criminal Procedure Reform Investigation.