In February 2023, South Africa was greylisted by the Financial Action Task Force (FATF) - a significant global development that signals a country's failure to comply adequately with international standards for combatting money laundering and terrorist financing.
The FATF's decision to greylist South Africa was largely based on the country's failure to adequately investigate and prosecute financial crimes. In its view, South Africa had not demonstrated an adequate track record in investigating and prosecuting high-profile cases of financial crimes. This concern was particularly significant considering the widespread corruption and state capture that occurred under Jacob Zuma's presidency, during which public institutions were looted and significant financial crimes went unpunished for years.
The failure to prosecute financial crimes is exacerbated by the fact that the South African legal system is increasingly under strain due to a growing backlog of cases.[1] As courts struggle to manage the backlog, the delays in justice delivery pose serious challenges for both civil and criminal matters. The overwhelming caseload often leads to frustration among litigants, financial burdens, and erosion of public confidence in the justice system.
Private prosecutions and alternative dispute resolution mechanisms, such as the National Prosecuting Authority's (NPA) recently published
Corporate Alternative Dispute Resolution Policy (the C - ADR Policy), have gained renewed attention as essential tools not only to alleviate the pressures on the courts but to also provide efficient paths to justice.
Private prosecutions as an alternative dispute resolution mechanism
South African courts have, for many years, recognised that a victim of crime may institute a private prosecution.[2]
In terms of the Criminal Procedure Act No. 51 of 1977 (the CPA), there are two types of private prosecutions:
- Private prosecution by an individual under section 7 of the CPA based on a certificate known as a nolle prosequi (a formal notice of abandonment by a plaintiff or prosecutor of all or part of a case) issued by the Director of Public Prosecutions (the DPP) and;
- Private prosecution by statutory right under section 8 of the CPA. This type of private prosecution can be undertaken by both natural and juristic persons on the basis of specific pieces of legislation and requires no certificate from the DPP.[3]
In 2017, South African rights group, AfriForum, made legal history by launching the country's first dedicated Private Prosecutions Unit to be headed by former State prosecutor Gerrie Nel. The development came amidst accusations that the NPA was politically biased and highly selective about the prosecutions it pursued. AfriForum have since pursued several notable private prosecutions, including cases against individuals for hate speech[4]and incitement to violence.[5]
Private prosecutions serve as a vital check on the state's prosecutorial discretion. The option to privately prosecute a matter gives victims who feel the state has denied or ignored justice, a degree of control over their pursuit of justice. This is particularly important in cases of corruption, fraud, or high-profile criminal activities where there might be concerns about impartiality or thoroughness in the state's prosecutorial decisions.
Alternative dispute resolution in the criminal justice system
In response to the greylisting by the FATF, the South African government has committed to strengthening its anti-money laundering and counter-terrorism financing laws. Authorities have already taken various measures to enhance oversight and improve co-operation between regulatory bodies.
The NPA's C-ADR Policy allows for an alternative mechanism to resolve criminal cases against companies, as opposed to only relying on normal criminal court proceedings. Therefore, companies implicated in corruption may, in certain circumstances, avoid criminal conviction, at a cost.[6]
The C-ADR does not apply to individuals such as directors (former or current), employees and other individuals involved in wrongdoing. This means that any ADR settlement in terms of the C-ADR Policy will not preclude the state from taking separate legal action against the individuals involved.[7]
The C-ADR Policy not only offers a practical approach to addressing multi-jurisdictional offences by multi-national companies but also enhances corporate accountability. While acknowledging resource constraints within the NPA, the C-ADR Policy emphasises considerations such as the nature and complexity of unlawful activities, the likelihood of successful prosecution, and the availability of resources needed for effective legal proceedings. Balancing these factors ensures decisions under the C-ADR Policy align with the public interest and contribute to effective law enforcement.
Key principles and considerations of the C-ADR Policy
The C-ADR Policy sets out four guiding principles and 10 criteria that prosecutors will consider when determining whether C-ADR will apply. A legality and rationality principle commits the NPA to take decisions that uphold the rule of law, and a public interest principle requires that decisions are taken in line with objectively justifiable public interest considerations. To ensure transparency and accountability, the NPA must record and publish its decisions in accordance with a transparency principle.
A guided discretion principle sets out the principles and practical considerations that should guide the NPA in exercising its discretion whether to use C-ADR. It provides that a prosecutor's discretion should be guided by whether there is:
- voluntary and effective disclosure of wrongdoing by the company and proactive remediation including, where appropriate, compensating victims;
- full co-operation by the company with current and future investigations, asset forfeiture proceedings in terms of the Prevention of Organised Crime Act and prosecution, of individuals and/or other implicated companies;
- willingness and capacity of the company to implement and monitor an effective compliance programme and internal controls;
- no pervasive wrongdoing within the company; and
- the likelihood that conviction might result in significant adverse collateral effects on the company's employees, shareholders, creditors or the economy, in respect of self-reporting, how investigations are conducted, cooperation with law.
ADR, in its many forms, is essential for resolving commercial disputes in South Africa and provides cost-effective, efficient, and collaborative avenues for dispute resolution. Most forms of ADR help to alleviate the pressure on the court system, and in some cases also help to foster a business environment built on trust, co-operation, and sustainable growth. The introduction of C-ADR is no exception, and it demonstrates a sophisticated approach to addressing white-collar crime in South Africa while navigating various institutional constraints. As the NPA continues to refine its strategies under the C-ADR Policy, stakeholders anticipate enhanced transparency, accountability, and a renewed focus on combating corporate corruption in South Africa.
In addition to ADR, private prosecutions serve as a vital check on the state's prosecutorial discretion. This is particularly important in cases of corruption, fraud, or high-profile criminal activities where there might be concerns about impartiality or thoroughness in the state's prosecutorial decisions.
