SriLankan Airlines sues Airbus for $ 1 b

An Airbus of SriLankan Airlines on air 

• Action follows UK Crown Court approving Deferred Prosecution Agreement between the Serious Fraud Office and Airbus SE
• National carrier demands cancellation of Purchase Agreement for 4 A350-900 aircraft among other claims
• Previous regime paid $ 98 m penalty for cancelling 4 Airbus A350s

By Nisthar Cassim

SriLankan Airlines has sued Airbus for $ 1 billion as damages, loss of reputation, reimbursement of costs and interests.

The action follows the information revealed in the judgment of the Crown Court of the United Kingdom approving the Deferred Prosecution Agreement between the Serious Fraud Office and Airbus SE.

The national carrier has also demanded from Airbus for cancellation of the A350-900 Purchase Agreement for four A350-900 aircraft, returning the advance payment of $ 19 million made for those four A350-900 aircraft.

Attorney General’s advice had been obtained whilst the national carrier has hired an international law firm for the case.

SriLankan Airlines Chairman Ashok Pathirage, when contacted by the Daily FT, confirmed that legal action has been instituted against Airbus SE.

The previous UNP Government cancelled the purchase of the four A350 aircraft, resulting in SriLankan Airlines paying a cancellation fee exceeding $ 98 million.

The Serious Fraud Office's (SFO) investigation revealed bribery offences in Malaysia, Sri Lanka, Taiwan, Indonesia and Ghana by Airbus SE.

The SFO’s investigation demonstrated that in order to increase sales, persons who performed services for and on behalf of Airbus offered, promised or gave financial advantages to others intending to obtain or retain business, or an advantage in the conduct of business, for Airbus SE. 

It was alleged that those financial advantages were intended to induce those others to improperly perform a relevant function or activity or were intended to reward such improper performance and that Airbus did not prevent, or have in place at the material times adequate procedures designed to prevent those persons associated with Airbus from carrying out such conduct.

Contrary to section 7 of the Bribery Act 2010 of UK, between 1 July 2011 and 1 June 2015, Airbus SE failed to prevent persons associated with Airbus SE from bribing others concerned with the purchase of aircraft by SriLankan Airlines from Airbus, namely directors and/or employees of SriLankan Airlines, where the said bribery was intended to obtain or retain business or advantage in the conduct of business for Airbus SE.

In 2013, Airbus engaged the wife of a person concerned with the purchase of aircraft from SLA through a straw company (the Company of Intermediary 1).

Pursuant to the engagement, Airbus employees offered up to $ 16.84 million to the Company of Intermediary 1 to influence SLA’s purchase of 10 Airbus aircraft and the lease of an additional 4 aircraft. In fact, only $ 2 million of the $ 16.84 million was paid. The Company of Intermediary 1 was approved by Airbus employees as a Business Partner (BP). To disguise the identity of the person behind the BP, Airbus employees misled UK Export Finance (UKEF), a Government body. 

UKEF expressed dissatisfaction with an application made by Airbus in November 2014 for export credit financing, and then with the details about the BP (the relevant agent) which Airbus subsequently submitted. UKEF asked a series of questions about the BP, including why they had been employed as such, when their CV suggested they had little aviation experience and that they were domiciled and paid outside Sri Lanka.

During the course of February 2015, Airbus provided misleading and untrue answers to the questions that had been asked. In late February UKEF personnel spoke to Airbus employee 10 and Airbus employee 8 [senior]. This call did not alleviate UKEF’s concerns. Airbus employee 10 then reported to Airbus employee 12 and Airbus employee 4 [very senior]. On about 12 March 2015, Airbus withdrew the application to UKEF.

On 1 April 2016, UKEF reported this and other matters disclosed to it by Airbus to the SFO.

In January last year, the Crown Court ordered that Airbus must pay a total financial sanction of approaching one billion euros (€ 990,963,712 including costs) to the Consolidated Fund via the SFO, made up of the disgorgement of profit of € 585,939,740 and a penalty of € 398,034,571. This financial sanction was greater than the total of all the previous sums paid pursuant to previous Deferred Prosecution Agreements (DPAs) and more than double the total of fines paid in respect of all criminal conduct in England and Wales in 2018.

The total sums which Airbus had to pay in a global context, however, exceeds € 3.5 billion. This was because the SFO investigation, which has led to the 2020 DPA was part of a joint investigation with the French Parquet National Financier (PNF) conducted by a joint investigation team (the JIT) and is parallel to an investigation conducted by the United States Department of Justice (DOJ) and by the United States Department of State (DOS). 

Each of the prosecuting authorities has taken responsibility for a number of geographical areas or customers and has now entered into their own DPA, Judicial Public Interest Agreement (CJIP) or (in the case of the Department of State) a Consent Agreement with Airbus SE.