Saturday, October 31, 2020

Airbus estimate €200 billion potential damage from bribery conviction

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Airbus analysis estimated that the damage impact from a criminal conviction arising from bribery charges levelled against the company could have reached €200 billion across its commercial aircraft, defence and helicopter divisions.

The airframer has agreed to pay a €3.6 billion ($4 billion) fine to settle the case under a three-year deferred prosecution arrangement, a deal intended to avoid a costly fraud trial and potential collateral damage affecting the workforce.

Airbus stood accused of failing to prevent bribery in a number of countries following an extensive investigation. The probe covered over 1,750 entities which were engaged by Airbus as business partners, third parties used to increase the airframer’s international reach and assist in winning sales contracts. Of these, 110 were the subject of particular concerns.

Conviction could have resulted in discretionary – and, in some states, mandatory – debarment from tendering for public-sector contracts.

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“What matters here is not the potential loss of contracts…but the effect this will have on the company financially and on its [innocent] employees, and the wider effects this will have on innocent third parties,” remarked the president of the UK High Court’s Queen’s Bench Division, Dame Victoria Sharp, regarding the case.

Airbus had examined the value of contracts for which it could be banned from tendering if debarred, the effects of which could last up to 15 years.

This analysis showed that, in the worst case, the total future revenue at risk could exceed €200 billion.

Such an extensive financial impact would have put thousands of jobs at risk – at the airframer and its suppliers – across the 15-year timeframe, and would have affected Airbus substantially in terms of market presence given its position as one of the two players in a global commercial aircraft duopoly.

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Financial firm Deloitte estimates, in a study commissioned by Airbus, that the indirect impact on the economies of countries including France, Germany, the UK, Spain and the USA could adversely affect their GDP by over €100 billion, said Sharp.

The reduction in competition from Airbus’s absence in public tenders, she added, could also result in additional public spending amounting to “many billions” of euros.

“Notwithstanding the seriousness of the conduct in this case, I consider the public interest factors against prosecution clearly outweigh those tending in favour of prosecution,” Sharp said.

She referred to Airbus’s “exemplary” co-operation in the matter, noting its voluntary submission to the UK Serious Fraud Office regarding overseas conduct and highlighting 24 individual areas in which it subsequently provided full assistance to the subsequent investigation – a factor which helped to halve the penalty portion of the UK fine to €398 million, resulting in a total sanction of €991 million.

This co-operation included providing access to over 30 million documents relevant to the probe. Independent investigation did not identify any additional documents not already brought up by Airbus’s own efforts.

“Airbus has, to use a colloquial phrase, truly turned out its pockets and is now a changed company to that which existed when the wrongdoing occurred,” added Sharp.

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