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It will allow criminal cases against companies to avoid going through normal criminal court proceedings. From Moneyweb.

Companies will be allowed legal representation during the process, but will be expected to make a full and honest disclosure of wrongdoing. Image: Shutterstock

The National Prosecuting Authority (NPA) has published a directive on a new corporate alternative dispute resolution (Corporate ADR or CADR) mechanism for companies accused of corruption and other criminal offences, which the NPA hopes will expedite justice and corporate accountability.

This is similar to mechanisms in place for adult offenders and children in conflict with the law.

Criminal cases will be diverted from the formal criminal justice system at pre-trial stage, with a view to disposing of the cases early in the process, while still being able to proceed with prosecution and asset forfeiture against the company’s directors, employees or agents.

This could short-circuit long and costly litigation, replacing the adversarial tug-of-war in the courtroom with one of relative cooperation and contrition.

Companies will be allowed legal representation during the CADR process, but will be expected to make a full and honest disclosure of wrongdoing. Information disclosed may be used later to prosecute company directors or employees.

The CADR mechanism would be particularly useful where multinationals are accused of multi-jurisdictional offences, allowing the NPA to obtain the disgorgement of the proceeds of unlawful activities and compensate victims of corruption or crime.

“Additional advantages that are in the interests of justice include enhancing corporate accountability within the South African corporate sector and advancing a culture of compliance with laws and regulations within a company,” says the NPA.

Public interest

The decision not to prosecute a company in favour of CADR must hew to principles of legality and rationality, and must be in the public interest.

According to the NPA, the process will be fully transparent, recorded in writing and a summary published on its website.

Whether or not to pursue CADR is at the discretion of the NPA, guided by considerations such as:

  • Voluntary and effective disclosure of wrongdoing by the company, proactive remediation and, where appropriate, compensating victims
  • Full cooperation by the company with current and future investigations of individuals and other implicated companies
  • Implementation and monitoring of compliance programmes and internal controls
  • No pervasive wrongdoing in the company; and,
  • Any adverse collateral effects on the company’s employees, shareholders, creditors or the economy.

The Asset Forfeiture Unit will be consulted in all cases.

In deciding whether a CADR case is in the public interest, the NPA says it will give favourable consideration to disclosure of information not previously known to it, and whether the company disclosed evidence of unlawful activities timeously and voluntarily.

Corporate cooperation 

Companies are expected to preserve and provide the NPA with all material evidence, or point to its whereabouts as part of a broader expectation of cooperation with investigations and prosecutions, both in SA and elsewhere if necessary. They will also be required to pay the costs of a private forensic or similar investigation, subject to the control of the NPA or other law enforcement agencies.

The willingness of a company to make “fair, reasonable and proportionate” restitution will influence the NPA’s decision to allow use of the CADR mechanism.

Other factors weighing on the NPA’s decision to use the mechanism include the nature and seriousness of the unlawful activities, and whether the decision would be in the public interest.

Reducing lengthy trials

This new CADR mechanism would also benefit the NPA by reducing the burden of preparing for lengthy trials that can take years.

The NPA will be less accommodating where a company is involved in “pervasive wrongdoing” and recurring offences showing a pattern of coordinated conduct. The nature and extent of prior breaches of the law will also influence the NPA’s decision.

However, the prosecuting body will take a more favourable view where the offending actions are the doings of isolated individuals, such as rogue directors or employees, and the company has substantially changed its board or management team. It will count against a company if the offences were committed at a time when there was no effective compliance programme and there has been no attempt to significantly improve the situation.

Another factor weighing on the decision to institute corporate ADR proceedings is the collateral effect of a court conviction or asset forfeiture on the company’s viability and the impact this will have on employees, shareholders, creditors, the economy, and community or broader society.

“Regard may be had to any meaningful action taken by the company to make good the harm that it has caused, including actions to identify victims of its wrongdoing and adequately compensate them for the harm to them,” says the NPA.

The authority to issue a CADR rests with the director of public prosecutions or by way of an investigating director.

The company will be invited to participate in the CADR process and be advised that it is a voluntary process. Should the company not meet all the requirements, the case may then proceed to trial. Companies can also apply to the NPA to be considered for a CADR case.

The company will also be warned that knowingly providing false or misleading statements or information may lead to prosecution for defeating the ends of justice, corruption, and other possible charges.

The NPA undertakes to keep confidential information provided by the prosecutor and the company in the course of the representations made during the CADR process, and the fact that the CADR is taking place. Information gathered during the process may be used to prosecute directors and other individuals in the company.

The National Director of Public Prosecutions will publish a quarterly report on all engagements with companies involved in CADR.