In brief
In June 2022, Glencore, one of the world’s largest commodity traders, pleaded guilty to paying bribes to officials in three West African countries and for failing to prevent agents and employees from doing so in two other African countries.
On 3 November 2022, Glencore was sentenced and ordered to pay a record amount of GBP 281 million (consisting of a GBP 182.9 million fine, a GBP 93.5 million confiscation order and GBP 4.5 million in respect of the Serious Fraud Office’s (SFO) costs).
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Background
Following an investigation launched in 2019, the SFO alleged that Glencore had paid more than USD 28 million to gain preferential access to oil, favourable delivery dates and increased cargoes between 2011 and 2016. The payments made were described as service fees or funds required to open new offices.
In June 2022, Glencore pleaded guilty to two counts under Section 7 of the UK Bribery Act 2010 (UKBA) for failing to prevent bribery. It also pleaded guilty to five further counts under Section 1 of the UKBA. As a result, this case represents the first-ever corporate conviction for actively authorising bribery (as opposed to failure to prevent bribery).
Glencore received a discount of one-third on its fine, as the guilty plea was made “at the earliest opportunity”. The judge also gave Glencore credit for its full co-operation with the SFO’s investigation and efforts to overhaul its compliance procedures. Still, the confiscation order is the largest ever for an SFO case and GBP 281 million is the highest penalty imposed in the UK following a corporate criminal conviction (although higher fines have been imposed on companies that have entered into deferred prosecution agreements with the SFO).
What this means for corporates
The record-breaking amount of the penalty should serve as a warning. As His Honour Judge Peter Fraser stated in his sentencing remarks, “[o]ther companies tempted to engage in similar corruption should be aware that similar sanctions lie ahead”.
Four key themes of interest to multijurisdictional corporates can be drawn out from the outcome of this matter:
- The effectiveness of the SFO
The SFO has, in recent years, come in for a barrage of criticism for its failure to secure big-ticket convictions and its investigative processes and procedures. While this conviction will do little to quell that criticism, the conviction does at least amount to a success for the SFO and its embattled director, both in terms of the eventual outcome and, arguably, the time in which the matter was concluded (the investigation having commenced in 2019).
- Global co-operation
The international element of this case, and the involvement of (and, presumably, co-operation between) prosecutors from the UK, US, and Brazil demonstrates, yet again, the increasing levels of co-operation between prosecutors from around the world when investigating and prosecuting international corruption. That co-operation brings into focus the importance of companies seeking local legal advice in all relevant jurisdictions at an early stage when a compliance issue arises. This is so that steps/positions taken in one jurisdiction do not undermine steps/positions taken in another jurisdiction.
- Adequate systems and controls must be policed globally
The sentencing remarks make it clear that, while Glencore had in place anti-bribery and anti-money laundering policies and procedures, there was a failure to implement those policies and procedures. Again, this case makes the point for international corporates that the presence of policies and procedures is just part of the compliance jigsaw. To ensure adequate compliance (and to enable reliance on defences such as adequate procedures under the UKBA), policies and procedures must be fully implemented, regularly updated and reviewed, properly funded, and rigorously enforced throughout a company’s worldwide operations. See Baker McKenzie’s guide to the 5 Essential Elements of Corporate Compliance here.
- The benefits of co-operation
The judge noted that there may have been an even higher fine if not for the company’s full co-operation with the SFO and the work that the company had done to improve its compliance procedures. This outcome reinforces that companies seeking a reduction in sanctions from the court following a compliance issue must ensure that there are immediate and significant improvements to the culture of compliance within the organisation. Specifically, the judge noted that: “Glencore has engaged in corporate reform, and today appears to be a very different corporation than it was at the time of these offences”. Cooperation with the SFO’s investigation also served to reduce Glencore’s sanction, with the judge noting that:
It is very much in Glencore’s favour…that it demonstrated such full co-operation with the investigation. It not only instituted its own internal review, and engaged external professionals to assist, but shared the fruits of that with the SFO, including limited waiver of privilege over some internal interviews.
Potential next steps
The next test for the SFO may come as soon as April of next year, as it has indicated that it is considering bringing charges against 11 (currently anonymous) former Glencore executives for their role in the conduct. While the SFO has secured large fines from companies in recent years in relation to bribery allegations, both through guilty pleas and the DPA process, its record securing convictions against individuals has been far less convincing. Time will tell whether the SFO’s efforts to secure convictions against individuals in the Glencore matter will fare any better.
Related content: 5 Essential Elements of Corporate Compliance – A Global Template
