BAE Settlement: Judicial Review Dropped but Court Sanction Still Pending

The long-shot legal challenge to the BAE Systems settlement (which we have previously reported on here) brought by pressure groups The Corner House Group and Campaign Against The Arms Trade has been dropped.  The SFO has been injuncted since 1 March 2010 from taking the agreement to court for sanction while the pressure groups appealed a High Court decision not to grant them a judicial review  to challenge the  settlement with BAE and to drop “conspiracy to corrupt” charges against former BAE agent Count Alfons Mensdorff-Pouilly.

The Judicial Review process was the only realistic challenge that could have been made against a decision not to prosecute, however the judiciary  overturns the decisions of prosecutors only in exceptional circumstances, and on 8 April, press releases announced however that the appeals were not going to be proceeding.  Instead of the legal challenges, CAAT will instead be concentrating its efforts towards protesting at the forthcoming BAE Annual General Meeting on 5 May.

The Corner House website sets out the key problems that they saw with the proposed settlement:

• The SFO has apparently given an undertaking to BAE that it will never in future prosecute any individual if doing so involves alleging that BAE was guilty of corruption.
• No explanation has been given as to why the US plea bargain settlement on BAE’s deals in Eastern and Central European countries took priority over the SFO’s prosecution in the UK, given that BAE Systems is headquartered in the UK and the allegations relate to activities emanating from the UK.
• The SFO Director acknowledges that “a conviction for an offence of corruption would have had the effect of debarring BAe for tendering for public contracts in the EU” under Article 45 of the European Union Public Sector Procurement Directive 2004. The SFO’s own Guidance on Corporate Prosecutions states that “a decision not to prosecute because the Directive is engaged will tend to undermine its deterrent effect”, which “is intended to be draconian”. Yet the SFO Director states that this consequence would have been “a disproportionate outcome.”

The papers we have seen highlights to us a distinct lack of co-ordination with the DOJ, and gives the impression that the SFO has again been railroaded by the DOJ into agreeing something at the last minute, and on terms that were less favourable to the prosecutors than they might have otherwise been.

The SFO explains that was aiming to finalise its case on Eastern Europe by the end of January 2010 and to submit papers in mid-February to the Attorney General requesting consent to prosecute. On 29 January, however, the DOJ contacted the SFO and indicated that a plea agreement was imminent, with guilty pleas in respect of  Eastern Europe and Saudi Arabia, and a payment of $400 million.

The SFO contends that  this US deal would be “highly likely” to prevent prosecution in England for the offences involving Eastern Europe because of the principle of double jeopardy – a defendant cannot be prosecuted twice for the same crime on the same set of facts.

It is unclear whether this is really double jeopardy if the charges in the US were not of a similar character to those that would have been charged in the UK: in the US, BAE pleaded guilty to conspiring to make false, inaccurate and incomplete statements to the US authorities and to file false export licences; in the UK, the SFO was investigating corruption offences.

The next important step for the SFO is putting the settlement before the Crown Court for ratification.  However in light of the Court’s very recent criticism of the SFO’s approach to plea agreements in the Innospec matter (see here) and Robert Dougall’s sentencing (see here), we predict that this is not going to be an easy rubber-stamping exercise for Richard Alderman’s team.

The Corner House and CAAT press release can be found here.  The SFO’s grounds for contesting the Judicial Review claim can be found here.