Client Alert

A Judicial Take On SFO Investigative Powers

02 May 2017

The High Court of Justice of England and Wales (“The High Court”) recently provided a rare insight into the difficulties that companies and individuals may face when challenging the basis of a Serious Fraud Office (“SFO”) investigation.  Unaoil Group ("Unaoil"), a Monaco based company providing industrial solutions to the energy sector in the Middle East, Central Asia, and Africa, challenged the basis on which the SFO conducted its investigation against the company.  The High Court rejected the judicial review claim brought by Unaoil.[1]  This is the second judicial review decision that the SFO has won in twelve months and demonstrates the increasing confidence of the prosecuting authorities following the £497.25m Rolls Royce deferred prosecution agreement (DPA).  On 28 April 2017, the SFO announced an investigation into the activities of UK subsidiaries of the US engineering company KBR Inc. which related to its ongoing investigation of Unaoil.  This may indicate that the SFO are investigating even further into Unaoil and its business affiliates which include big names such as Rolls Royce and SBM Offshore, an oil services company.

Background

On 23 March 2016, the SFO requested assistance from the authorities in Monaco ("Monegasque authorities") in relation to an ongoing investigation against Unaoil as well as certain individuals who controlled the company.  The letter of request (“LOR”) was based on the suspicion that Unaoil and certain controlling members of the company had committed offences including corruption, conspiracy to corrupt, conspiracy to corrupt transactions outside the UK, and offences of bribery.  On 29 March 2016, the Monegasque authorities raided Unaoil’s offices as well as residences of certain controlling members to gather evidence requested by the SFO.  Unaoil, together with the individuals suspected[2] (the "Claimants"), subsequently claimed a judicial review of the LOR claiming that the SFO failed to disclose key information and the investigation was a fishing expedition and therefore constituted improper exercise of the SFO’s statutory powers to investigate.

The High Court rejected the claim and added that the SFO had acted in line with an international agreement, the Crime (International Cooperation) Act (CICA) 2003, that gives UK authorities the right to request assistance from foreign counterparts in order to investigate an offence that has or is suspected of having been, committed.  In particular, the Claimants requested that a “heightened procedural obligation” (or a duty of candour) should be applicable to the request of the Monegasque authorities as would be the case in a domestic investigation, and that the investigation be extended beyond the scope detailed in the LOR. 

The Court reinforced the Soma Oil & Gas’s ("Soma") judgment in relation to a judicial review of the SFO’s corruption investigation and stated “Challenges by way of judicial review to investigators in the conduct of an investigation have and should have 'a very high hurdle to overcome' and will be entertained only in exceptional circumstances”.  However, ultimately the Soma investigation, into allegations of bribery, was discontinued due to the SFO admitting to have gathered inadequate evidence.

The Claim

GROUND 1: Unlawfulness of LOR (Duty of Candour and Lack of Disclosure)

Lord Justice Peter Gross and Mr Justice Andrew Nicol found that no duty of candour could be superimposed onto an SFO’s LOR which was served on the foreign authority pursuant to the international scheme which CICA implements. Furthermore, such an obligation was said to invite “unwarranted complexity”. In order to ensure that the public interest of correctly prosecuting a crime is weighed against the rights of an individual, a balance must be struck. The judge notes “[…] the protections which are available serve to furnish a satisfactory balance”.

The Claimants also argued that the LOR mischaracterized the urgency of action and overstated the risk of evidence destruction. The Claimants supported their argument with the Australian Federal Police’s investigation into Leighton Offshore which was linked to Unaoil. The SFO argued that the claims were different and that the Claimants were not suspects in the Australian criminal investigation which was concerned primarily with Australian nationals and companies. The Court dismissed this claim and stated that it had no doubt that even if the judge issuing the LOR had hypothetically seen the Australian investigation, it was certain the LOR would still be issued as “realistically no judge would have been minded to risk destruction of evidence”. 

GROUND 2: Fishing Expedition

The Claimants also put forward that while the LOR noted the SFO’s interest in the materials held in relation to Iraq, the data collected included a number of Unaoil’s Middle Eastern operations. The Court dismissed the claim stating that it was clear when read as a whole, that the LOR was not restricted to Iraq. The Court also made frequent reference to the statement made on 30 September 2016 by Mr Martin (the case controller). This was used to confirm that the geographical scope was not limited to Iraq. It was noted that due to the nature of the allegations being investigated, it was “unlikely [the investigation would be] confined to a single jurisdiction”. While the LOR does not detail the grounds for suspicion, the Court noted that it did not consider this to be an obligation due to potential sensitivity at an early stage in an investigation.  

Key Takeaways

Soma's judgment, while a win for the SFO, ended with the SFO stating that it had inadequate evidence to support the bribery allegations.  The case therefore incited a lot of commentary about the potential to see a rise in the number of judicial review applications. However, the judgment stands as a clear indication from the judiciary that it is not interested in allowing suspects to hamper the autonomy of an SFO investigation through such applications.

The judgment comments that “[s]uch challenges to investigators should be very rare; we are not attracted to a development in the law which would encourage their increase”. While the comment was made in relation to the first ground for judicial appeal, it is likely that this summarises the tone the judiciary intends to take for investigations undertaken by UK prosecuting authorities going forward. If this is the case, it would put to rest any debate (if any remained) (SFO and Rolls-Royce agree to half billion pound DPA) regarding the likelihood of the judiciary to block a DPA once the SFO has agreed to the terms. Furthermore, with the upcoming Criminal Finances Act 2017 (due to be implemented later this summer), the stance of the judiciary seems to be in line with the authorities and legislators: to provide the prosecuting authorities with a wide remit of independence in order to investigate financial crimes committed by both corporates and individuals. The SFO will no doubt gain confidence from this judicial affirmation of its existing powers and autonomy.


[1] Citation: [2017] WLR(D) 230, [2017] EWHC 600 (Admin)

[2] The Queen on the application of Unaenergy Group Holding Pte Ltd; Unaoil Monaco Sam; Ata Ahsani; Cyrus Ahsani; and Saman Ahsani.

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