Application for judicial review of Serious Fraud Office's BAE settlement turned down

by The Corner House and Campaign Against Arms Trade

first published 24 March 2010

PRESS RELEASE

The Honourable Mr Justice Collins today announced his decision to refuse to grant permission to Campaign Against Arms Trade (CAAT) and The Corner House to bring a full judicial review hearing against the decision by the UK Serious Fraud Office (SFO) to make a controversial plea bargain settlement with BAE Systems.

The two groups are taking legal advice on whether or not to appeal the decision.

Honourable Mr Justice Collins did, however, extend the injunction in force against the SFO from seeking court approval of its BAE settlement for a further eight days and continuing if the groups lodge an appeal.

Kaye Stearman of CAAT said:

"We are obviously disappointed by the Judge's decision to refuse permission. It implies that the law allows a giant company to pay a small financial penalty for 'accounting irregularities' rather than be charged and tried in open court on more serious criminal charges. The law should apply to all without fear, favour or prejudice."

Nicholas Hildyard of The Corner House said:

"Corruption is a serious and harmful crime and should be treated as such. Prosecutors' guidelines have been drawn up to ensure that it is. The public needs to have confidence that justice can be served by the new plea bargaining system in which corporates negotiate their crime and punishment."

The two groups had argued that the proposed settlement is unlawful because:

  • the SFO did not follow the correct prosecution guidance (including its own guidance) on plea bargains;
  • the agreement does not reflect the seriousness and extent of BAE's alleged corruption and bribery offences;
  • the agreement does not provide the court with adequate sentencing powers; and
  • the public interest factors weighing in favour of prosecuting BAE on bribery and corruption charges outweigh those against prosecution.

Under the SFO's proposed settlement, BAE would plead guilty in court only to "accounting irregularities" in its 1999 sale of a radar system to Tanzania and would pay penalties of £30 million. The SFO would not bring prosecutions relating to alleged bribery and corruption in BAE's arms deals elsewhere, including in the Czech Republic, South Africa and Romania, and would close all its BAE investigations.

Honourable Mr Justice Collins also refused to grant permission to bring a full judicial review hearing against the SFO's decision to discontinue its prosecution of Count Alfons Mensdorff-Pouilly with conspiracy to corrupt in connection with BAE's deals with eastern and central European governments.

ENDS

Judicial Review Application: Facts and Grounds

Interim Injunction Order

Refusal

BACKGROUND

The Serious Fraud Office has been investigating alleged bribery and corruption in BAE's arms deals since 2004 in several countries (including Chile, Czech Republic, Qatar, Romania, Saudi Arabia, South Africa and Tanzania). BAE is alleged to have paid bribes, often in the form of commissions to "advisers" to clinch the deals.

On 1 October 2009, the SFO announced that it intended to prosecute BAE Systems for offences relating to overseas corruption.

On 29 January 2010, the SFO charged Count Alfons Mensdorff-Pouilly with conspiracy to corrupt in connection with BAE's deals with eastern and central European governments including the Czech Republic, Hungary and Austria. In the course of these preliminary hearings, the SFO told the courts that "From 2002 onwards, BAE adopted and deployed corrupt practices to obtain lucrative contracts for jet fighters in central Europe." It was a "sophisticated and meticulously planned operation involving very senior BAE executives."

Mensdorff-Pouilly was granted bail of £1 million on Thursday 4 February 2010.

On 5 February 2010, however, the SFO announced its plea bargain settlement with BAE. Under the SFO's proposed settlement, BAE would plead guilty in court to "accounting irregularities" in its 1999 sale of a radar system to Tanzania and would pay penalties of £30 million. The SFO would not bring prosecutions relating to alleged bribery and corruption in BAE's arms deals elsewhere, including in the Czech Republic, South Africa and Romania.

This settlement was announced in conjunction with a much larger settlement made by the US Department of Justice with BAE. Under this settlement, BAE admitted making false statements in 2000-2002 in relation to BAE's arms deals with Saudi Arabia and passing covert payments through the United States in regard to its arms deals in Central European countries. It will be fined $400 million (£256 million). Because it has not pleaded guilty to corruption charges, BAE can continue to bid for US military contracts.

Later on 5 February 2010, the Serious Fraud Office announced that it was withdrawing proceedings against Count Alfons Mensdorff-Pouilly on the grounds that it was no longer in the public interest to continue.

On 12 February 2010, lawyers acting on behalf of Campaign Against Arms Trade (CAAT) and The Corner House sent a "Letter Before Claim" to the Director of the Serious Fraud Office laying out their intention to request a judicial review of the SFO's decision to enter a plea agreement with BAE and of the decision to withdraw proceedings against Count Alfons Mensdorff-Pouilly.

On 26 February 2010, the groups' lawyers lodged papers at the High Court in London requesting the Judicial Review and asking for an injunction to delay the SFO from seeking court approval for its plea bargain settlement with BAE Systems pending the outcome of a Judicial Review.

On 1 March 2010, the High Court granted the injunction, which would be in force until the Court decided whether or not to give permission for the judicial review.

NOTES

  1. Campaign Against Arms Trade (CAAT) works for the reduction and ultimate abolition of the international arms trade.

    The Corner House aims to support democratic and community movements for environmental and social justice through analysis, research and advocacy.

  2. Summary of investigations into BAE

  3. The Serious Fraud Office is a UK government department that investigates and prosecutes complex fraud.

  4. BAE Systems is the world's fourth largest arms producer. It makes fighter aircraft, warships, tanks, armoured vehicles, artillery systems, missiles and munitions. Its foremost markets are Saudi Arabia and the United States. It has consistently denied any wrong-doing.

  5. A judicial review is a court proceeding in which a judge reviews the lawfulness of a decision or action made by a public body.