24 March 2009

International fraud and asset tracing litigation - spring: serious threats and bribery (Part 2)

Facts of the Case

The High Court decision reported in the Summer 2008 edition was appealed by the Serious Fraud Office (SFO) who took the case to the House of Lords.  

In summary, the SFO had been investigating allegations of corruption in relation to a defence company, BAE Systems Plc, and military aircraft contracts with Saudi Arabia. In 2006, as part of these investigations, the SFO had intended to obtain access to Swiss bank accounts.  This had provoked a specific threat by Saudi authorities that if the investigation was not stopped, contracts would be stopped and Saudi Arabia would withdraw from its counter terrorism arrangements with the UK.  As a result of this, the SFO decided to stop the investigation.  In April 2008, Lord Justice Moses and Mr Justice Sullivan had allowed an application for judicial review of the SFO's decision by Corner House Research and Campaign Against Arms Trade ©.  In doing so, the two judges had concluded that the SFO's decision had been unlawful as it had submitted to a threat, contrary to the rule of law.  

The Decision 

The House of Lords allowed the SFO's appeal.  The question was whether the director of the SFO had made a decision outside the lawful bounds of his discretion.  It was held that the decision was one that he had been lawfully entitled to make.  In the lower Court, the director of the SFO had submitted that his decision had been in accordance with Article 5 of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997.  C submitted that the director of the SFO had interpreted Article 5 incorrectly.  In short, Article 5 permits national investigators and prosecutors to act in accordance with the rules and principles applicable to their respective states.  However, in doing so they are not to be influenced by three specific considerations; (i) national economic interest, (ii) the potential effect upon the relations with another state, and (iii) the identity of the national or legal persons involved.  

As Article 5 is an unincorporated treaty provision which is not binding in domestic law, it was common ground that had the director of the SFO ignored it he could not have been impugned for doing so.  However, as the director had claimed to be acting in accordance with Article 5, the House of Lords did consider it but took the view that it was unnecessary to resolve the issues surroundings its interpretation on the basis that the director had given unequivocal evidence that he would undoubtedly have made the same decision even if he had believed it was incompatible with Article 5.  

Points of Interest

Although the House of Lords Appellate Committee were all in agreement, Baroness Hale, in particular, confessed she would have liked to have been able to uphold the decision of the lower Court on the basis that it was “extremely distasteful” that a public official should feel obliged to give way to threats of any sort.  Also, in this case, public safety was a strong determining factor in the decision making progress.  The House of Lords recognized that it was common ground that it would not have been lawful for the director of the SFO to take account of threats to himself of the “we know where you live” variety.  The reason for this lies in the difference between personal and public interest.  The “public interest” in this case was taken to mean something of importance to the public as a whole rather than just to a private individual. 

Category: Article