Search

Editors

Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

« Hungarian telecom execs pay penalties for FCPA offenses | Main | Dr. Klaus Moosmayer: News from the B20 / G20 Process »
Monday
Apr242017

Rahul Rose on Unaoil: But are agents immune from prosecution?

There's a growing sense that agents and intermediaries that facilitate corrupt deals are immune from prosecution in the UK.

The Unaoil case -- and it should be stressed that no allegations of corruption against the company have been proven -- provides an opportunity to rectify this perception of impunity for intermediaries. It provides a chance for the SFO to show that it is serious about going after agents accused of corruption.

But the SFO has already faced some now-familiar obstacles in the Unaoil case -- judicial reviews.

Unaoil challenged an SFO investigation into allegations that the company paid bribes around the world. The challenge failed when two senior UK judges dismissed it earlier this year.

And as I said in the prior post, Corruption Watch understands that members of the Ahsani family, which runs Unaoil, have so far raised seven separate legal grounds for judicial review since June 2016, all of which have either failed, or have been withdrawn.

(Judicial reviews are a type of legal proceeding brought by an individual or company challenging a government body on the grounds that it has acted outside the scope of the law.)

So why do companies and individuals bring judicial review challenges against the UK Serious Fraud Office, given their slim chance of success?

The Soma Oil & Gas case provides some clues. In a 2016 judicial review application, the company accused the SFO of acting irrationally and unreasonably, and called for the prosecutor to shut down the strand of its investigation looking into allegations that payments made by the company to the Somali government to develop the country’s resources were in fact bribes.

The judicial review failed, but it forced the SFO’s hand. In August, a day before a High Court hearing for the judicial review claim, the SFO sent Soma a letter saying it had closed the strand of its investigation into the resource-building payments to the Somali government.

The letter showed the SFO to be a reasonable and rational prosecutor in the eyes of the judges overseeing the judicial review application. As one judge noted: “The short answer is that this [judicial review] claim must fail in the light of the 16th August letter.”

However, despite the claim failing, Soma got exactly what it wanted: for the SFO to close part of its investigation. Indeed, the entire SFO inquiry into Soma was shut down in December, a few months after the judicial review application was rejected.

Cases like Soma demonstrate the effectiveness of judicial reviews for companies facing investigation. While businesses have every right to challenge unlawful SFO decisions, judicial reviews have worrying side effects. They can cause long delays to investigations, drain the already limited resources of the SFO, and can, in some cases, influence the course of an inquiry despite having no reasonable prospect of success.

A case in point is the judicial review brought by two Alstom UK directors challenging the lawfulness of raids carried out by the SFO in March 2010 as part of its corruption investigation into the manufacturer. The judicial review claim was rejected in July 2011, but the proceedings caused significant delays to the SFO investigation. SFO staff were unable to examine documents seized during the raids for over a year while the judicial review proceeding was ongoing.

Cases like Alstom show that judicial reviews, even if unsuccessful, affect the course and pace of an investigation. As one senior white-collar lawyer said: “[E]ven if not won, [judicial reviews] can force the hand of the prosecutor in some way that is advantageous to your client.”

It is imperative in the Unaoil case that the SFO is not unduly influenced by the company’s challenges. Of the current roster of SFO corruption cases, the Unaoil investigation is among the most important. Not only are the allegations against the company grave, but the case also stands alone as one of the few occasions where the SFO has pursued an agent accused of corruption.

Intermediaries such as consultants or local marketing agents are implicated in the majority of the world’s major foreign bribery cases. Using an agent with close connections to an overseas government to pay a bribe not only wins business, but it also allows the company in question to distance itself from the corrupt activity.

A report by the Organisation for Economic Co-operation and Development, which analysed 427 foreign bribery proceedings between 1999 and 2014, found that agents had been used in three quarters of cases. All of the corporate foreign bribery cases recently concluded by the SFO -- Standard Bank, Sweett Group, XYZ, and Rolls-Royce -- involved the use of agents. Yet the SFO has not prosecuted an agent in connection with any of these cases.

In fact, Corruption Watch is aware of only one case in the last ten years in which the SFO has charged a middleman. In January 2010, the prosecutor brought charges against Alfons Mensdorff-Pouilly, a multi-millionaire Austrian count accused of paying bribes on behalf of UK government-backed defence company BAE Systems.

However, just a week later the SFO withdrew its case against Mensdorff-Pouilly after entering into a settlement with BAE Systems that forbade the agency from pursuing corruption prosecutions, including against individuals, that implicated the defense manufacturer. The count was subsequently awarded hundreds of thousands of pounds in damages by the UK government.

Under the current, more prosecution-focused leadership of David Green, who joined in 2014, it seems unlikely that the SFO would enter into a BAE-style settlement again. This is especially true of the Unaoil case, where the company did not self-report and appears from court documents not to be cooperating with SFO investigators.

_____

Rahul Rose is a senior researcher for Corruption Watch, a London-based NGO that undertakes cross-border investigations into grand corruption and pushes for effective enforcement of UK anti-corruption legislation. He can be contacted here.

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
All HTML will be escaped. Hyperlinks will be created for URLs automatically.