Annual Report 2010 (PDF, 5.2MB) - Panalpina Annual Report 2012

Consolidated and Annual Financial Statements 2010
132
Claim against Pantainer Ltd.
In a case which originated in 2004, it is alleged that a fire occurred on a container vessel due to containers shipped under Pantainer bills
of lading containing chemicals that were not declared as hazardous cargo. As a consequence the vessel has declared general average.
Claimants may seek compensation of general average contributions, damage and loss of cargo and potential damages to the vessel. Formal
legal proceedings were launched in Tokyo in 2005 against the shipper which in turn commenced third-party proceedings against
Pantainer Ltd. and other companies of the Group. Neither Pantainer nor any other Panalpina Group companies are named defendants in
the Tokyo litigation. In July 2010, the court dismissed all claims of the plaintiffs and plaintiffs have appealed the judgment. The value in
dispute amounts to approximately CHF 8.5 million.
Business practices investigation
In November 2010, Panalpina entered into a Deferred Prosecution Agreement (DPA) with the US Department of Justice (DOJ) to resolve
claims against it arising from an investigation by the DOJ and the US Securities and Exchange Commission (SEC) for violations of the
US Foreign Corrupt Practices Act (FCPA). Under the DPA, the DOJ has agreed to defer any criminal prosecution for three years. Panalpina
has accepted certain obligations under the DPA, such as continuing to improve its compliance policies and procedures and providing
regular reports to the DOJ on the company’s progress. If Panalpina satisfies its obligations under the DPA, the DOJ has agreed to release
the company from criminal liability at the end of the three-year term.
As part of the settlement of the case, Panalpina’s US subsidiary, Panalpina Inc., has agreed to enter a guilty plea to charges related to the
violation of the accounting provisions of the FCPA, and to pay a fine of USD 70.6 million in four instalments. Panalpina, Inc. also consented
to a final judgment in a civil action brought by the SEC to disgorge USD 11.3 million in profits. These payments and the cost of the
related compliance consultancy forms part of a provision that was reserved in the reporting year.
Individual shareholder compensation complaint
In 2009, Panalpina was named as co-defendant in a civil action filed in the USA in which a former minority shareholder was seeking compensation
for alleged misrepresentations and the omission of material facts related to Panalpina’s business in Nigeria and the termination
thereof. In the reporting year Panalpina has settled this case at an insignificant nominal amount in order to avoid further litigation and
related cost.
Freight forwarding antitrust investigation
In October 2007, Panalpina’s headquarters in Switzerland and the USA were raided by the respective competition authorities. Further, a request
for information was served by the New Zealand Commerce Division and a document retention notice by the Competition Bureau Canada.
In April 2008, the Australian Competition and Consumer Commission served a notice on the Australian subsidiary requesting information
and documents and in June 2008, Panalpina’s UK subsidiary was the recipient of a request for information issued by the European
Commission requesting certain information and records relating to alleged antitrust violations in the freight forwarding industry. In August 2010,
Brazilian authorities announced preliminary investigations against the freight forwarding industry.
These activities were part of a coordinated investigation of several competition authorities against various major freight forwarding companies
for alleged anti-competitive behavior.
Furthermore, a civil class action lawsuit was filed in the USA against Panalpina and a number of its major competitors as a direct consequence
of these investigations alleging a conspiracy in the pricing of freight forwarding services. In July 2009, plaintiffs filed an amended
complaint adding additional defendants and claims. In November 2009, the Company, along with other defendants, filed motions to dismiss
the amended complaint for failure to state a claim and for lack of subject matter jurisdiction. Oppositions to the motions were filed in
January 2010. At this stage, Panalpina is unable to express an opinion as to the probable outcome of this litigation and thus to estimate
the potential loss, if any.
In 2009, the Competition Bureau Canada closed its investigation into alleged anti-competitive activity due to a lack of evidence substantiating
an undue lessening of competition.
In January 2010, the Australian Competition and Consumer Commission also discontinued its investigation.
In February 2010, Panalpina was served with a Statement of Objections by the European Commission, alleging anti-competitive behaviour
in the freight forwarding industry. In an oral hearing before the Commission’s case team held in July 2010, Panalpina has presented its
arguments. In January 2011, Panalpina received an additional request for information issued by the European Commission. A final decision
is not expected prior to mid-2011.
On 1 October 2010 Panalpina announced a settlement with the DOJ over violations of the Sherman Antitrust Act related to the sale of
international air freight forwarding services. Under the terms of the settlement, which is still subject to formal court approval, Panalpina has
agreed to pay a fine of approximately USD 12 million.
In the reporting year Panalpina also started settlement negotiations with the New Zealand Commerce Commission which are at a very
advanced stage. Consequently, the expected penalty has been provided for.
Internal fact finding and Panalpina’s cooperation with the competition authorities in jurisdictions which are still being investigated is ongoing.
It is not possible to predict the outcome of these proceedings at this stage. They may, however, result in material penalties being
imposed on Panalpina. As Panalpina is not yet in a position to assess its exposure and the potential financial consequences in these
proceedings, no related provisions have been made as of 31 December 2010.
Panalpina Annual Report 2010