SFO Sighting

Like fashion trends, some legal matters have a habit of returning to court in another guise. This is one such case and one that will serve to underline the inadequacies of the legal tools the SFO has at hand when it comes to prosecuting corporate crime.

The High Court has until 20 March to decide whether to grant CAAT and Corner House a judicial review of the SFO’s decision to settle an investigation into BAE’s dealings into the company’s alleged corruption in arms deals.

Leigh Day & Co partner Richard Stein has instructed Blackstone Chamber’s Dinah Rose to lead the legal challenge.

This is the same legal team that acted for the campaign groups when they brought and subsequently lost a judicial review of the SFO’s decision to drop its case against BAE for alleged corrupt dealings in Saudi Arabia. 

At the time this was an embarrassing situation for the SFO to be in. The investigation was high profile and the Government appeared to meddling in its affairs.

The watchdog appeared to be barking, but it lacked bite.

To date the SFO has not successfully prosecuted a corporate in a contested trial, although it has achieved two corporate convictions through guilty pleas.

SFO insiders say the organisation’s real handicap is UK law, which fails to produce the same results as US corporate criminal law. The recent settlement with BAE is a prime example.

In the UK BAE, advised by Allen & Overy partner Jonathan Hitchin, agreed to plead guilty to failing to keep “reasonably accurate accounting records” in relation to its sale of a radar system to Tanzania and agreed to pay £30m.

In the US, meanwhile, where BAE was advised by Linklaters US head Larry Byrne, the company agreed to pay a $400m (£255.5m) fine and pled guilty to one charge of conspiracy to make false statements to the government.

Fed up with being criticised for failing to pull off a similar feat as the US Department of Justice, those inside the SFO are starting to lobby hard for an update of British law. The Bribery Bill may be on  its way, but further steps need to be taken. For one, the definition of corporate criminal liability should be expanded.

Currently, a company is only held criminally liable for those employees who are significant enough to be considered the directing mind of the company, most often seen as the board of directors. To take such a prosecution forward it must have a reasonable prospect of  conviction and the prosecution must be in the public interest.

In the US, there are three main areas under which a company can be held liable. These are if an employee has acted in the company’s interests; if what they do directly benefits the company; and it can be proven to relate directly to the company.

This is no silver bullet, but it is a significant step further than the SFO can go and its lawyers say it is an effective tool.

On the surface it may appear that the SFO is dreading further scrutiny of its settlement with BAE from the courts. Yet, in the longer term further court action could work to the advantage of the organisation in helping pile pressure on the Government to upgrade outdated laws.