On 29 March, two senior UK judges dismissed an attempt by Unaoil to challenge an SFO investigation into allegations that the company paid bribes around the world. It is the latest in a fast-growing list of failed judicial reviews against the SFO brought on shaky legal grounds.
Unaoil hit the front pages of newspapers around the world last year after the Huffington Post and Fairfax Media accused the oil consultancy of paying millions of dollars in bribes on behalf of major companies, including Rolls-Royce, Halliburton and Samsung. Authorities in the US, Australia and the UK are investigating allegations that the company used the bribes to secure its multinational clients contracts from governments across the world. The Serious Fraud Office (SFO) has accused the company of conducting no “lawful business”. Unaoil denies all the allegations against it.
So far, the company and its directors have brought multiple judicial review applications challenging the lawfulness of the SFO’s corruption investigation. 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.
When such challenges are brought against government investigators, they have an extremely slim chance of succeeding. However, in recent years there has been a spate of judicial reviews against SFO investigations, all of which have failed. There are concerns that these costly and time-consuming challenges are being used by well-resourced companies to affect the course of SFO inquiries, despite their small chance of success.
A fishing expedition?
The Unaoil judicial review rejected on 29 March was filed in response to raids on the company’s offices and the homes of its chairman, Ata Ahsani, and its chief operating officer, Saman Ahsani.
Following a letter of request from the SFO, police in Monaco carried out the raids in March 2016, seizing the company’s primary server as well as phones, laptops and diaries.
Unaoil sought to challenge the letter of request in the High Court, claiming that the SFO had failed to disclose important information and had misled Monaco police into carrying out a wide-ranging raid that amounted to a fishing expedition.
The judicial review claim asked for all the documents and devices seized to be returned and for any copies to be destroyed.
The legal grounds for Unaoil’s challenge were set out during a hearing on 1 December. During the hearing, Unaoil’s barrister Hugo Keith QC argued that the SFO, when asking for an overseas raid, is bound by a duty of candour to disclose relevant information in its letter of request that is favourable to the subject of the searches. The SFO failed to fulfill this duty, Keith said.
Keith complained that the SFO failed to mention that a transaction, which was characterised as corrupt in the letter of request, had been examined in an earlier High Court litigation without any finding of foul play. In the letter, the SFO accuses Unaoil of entering into sham contracts with a subsidiary of construction company Leighton Holdings. The SFO told Monaco police that the contracts were a front to cover up the truth: Leighton was giving Unaoil funds to bribe Iraqi officials. However, Justice Eder, who oversaw a High Court breach of contract dispute between Unaoil and Leighton, said in a 2014 judgment that evidence of corruption was at best “tenuous”.
Keith also said that the SFO had omitted key information about two cheques worth close to £2 million, which were discovered in March 2016 when a businessman working for Unaoil was arrested at a UK airport. In the letter of request, the SFO cited the cheques, which were made out to a suspect company, as grounds to believe that Unaoil may be committing offences “up to the present day”.
Keith said the cheques were actually a few years’ old, dated 2013 and 2014, and the SFO’s failure to include this information in the letter of request to Monaco created a false sense of urgency.
Lord Justice Gross and Mr Justice Nicol, the two judges overseeing the judicial review, dismissed this argument, saying while the cheques may have been a few years’ old when seized, they were still valid. “The carrying of cheques in those amounts, made out to a suspect company, supported, and fairly supported, the suspicions expressed by the SFO in the LOR [letter of request],” Lord Justice Gross wrote in the decision.
The judge also wrote that Justice Eder’s earlier conclusion that evidence of corrupt payments was tenuous was based on “seriously incomplete” documentation and information. Justice Eder himself remarked in his judgment that “certain aspects of the story are, to say the least, somewhat obscure”.
Lord Justice Gross added that arguments over whether the SFO should have included more information about the cheques or the Leighton-Unaoil litigation are actually besides the point, as the prosecutor is not bound by a duty of candour to disclose favourable information in letters of request.
The judge said a disclosure obligation of this kind would be “peculiarly inappropriate” for letters of request to foreign authorities. If the letter contained information that pointed towards the innocence of the suspect, Monaco police would probably have told the SFO to resolve its doubts before requesting a raid, the judge said.
“A LOR couched in such terms would be likely to cause real confusion to the requested state,” the judge said. “[It] would introduce unwarranted complexity…”
The judge also dismissed Unaoil’s claim that the SFO’s letter of request encouraged Monaco police to carry out a fishing expedition. The crux of Unaoil’s fishing-expedition claim is that the letter of request focused on suspicions of misconduct in Iraq, but called for Monaco police to seize a much wider range of material, including documents related to other jurisdictions.
However, Lord Justice Gross swiftly dismissed Unaoil’s complaint in his
decision, pointing out that the letter of request explicitly stated that the investigation spanned “several jurisdictions”. The judge also said there was no reason to doubt comments by SFO case controller Tom Martin in September 2016 attesting to the fact that the Unaoil investigation is focused on multiple jurisdictions.
Last chance saloon? Judicially reviewing the SFO
Buried deep within the judgment rejecting Unaoil’s judicial review, Lord Justice Gross makes a very important point, namely that such challenges to SFO investigations should be “very rare”. To bring home the point, he adds that he would “not [be] attracted to a development in the law which would encourage their increase”.
In the Unaoil case at least – which has seen a succession of highly experienced barristers representing the company, including former director of public prosecutions Lord Ken Macdonald QC – judicial reviews are anything but rare. In addition to the aforementioned judicial review that was rejected two weeks’ ago, Saman Ahsani has also challenged a notice compelling him to provide documents to the SFO.
Ahsani’s challenge was rejected in August by a judge who labelled the claim as “totally without merit”. Ahsani tried to revive the claim in October arguing that the notice should not require him to hand over documents stored outside the UK. However, this revived challenge was also rejected. Justice Dingemans, who rejected the revived application, labelled it an abuse of process. Specifically, the judge questioned why Ahsani had filed a separate judicial review rather than filing one application that incorporated both the challenge to the section 2 notice and the challenge to the letter of request.
Justice Dingemans told Ahsani: “These courts do not exist to allow litigants to come back on a revolving door basis if they have challenged public law decisions on one basis and failed.”
“This court is quite busy enough as it is,” the judge added.
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.
The flurry of judicial reviews in the Unaoil case form part of a growing list of recent challenges to SFO investigations, only some of which can be publicly named. In the past few years, judicial review applications have been brought by: Soma Oil & Gas; three senior employees of pharmaceutical company GlaxoSmithKline(GSK); and Colin McKenzie, who is a director of MIB Facades, a Welsh construction company linked to suspected bribery in the Middle East.
In all of these recent challenges the shadow of the Tchenguiz case looms large. In July 2012, following a judicial review, the High Court quashed warrants against millionaire brothers Robert and Vincent Tchenguiz, who had been the subject of a botched fraud investigation by the SFO overseen by former director Richard Alderman. The SFO, which admitted that it did not have a proper record of the evidence it used to obtain a search warrant for Vincent Tchenguiz’s home, ended up paying the brothers millions of pounds in damages.
Claimants currently bringing judicial reviews against the SFO would like to achieve a similar result, but the prosecutor is now a different, slicker beast under the leadership of its new director, David Green.
Unlike the Tchenguiz judicial review, the challenges brought by Unaoil, Soma, McKenzie and GSK staff have all failed. As the judge overseeing Soma’s judicial review application observed in October, challenges to the decisions of government investigators must pass a “a very high hurdle” to succeed.
So, why are companies bringing so many of these challenges given their slim chance of success? The Soma 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 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 who recently spoke to Global Investigations Review said: “[E]ven if not won, [judicial reviews] can force the hand of the prosecutor in some way that is advantageous to your client.”
Catching the middlemen
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 defence manufacturer. The count was subsequently awarded hundreds of thousands of pounds in damages by the UK government.
There is 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.