Monday, March 29, 2010

Tackling overseas corruption: a remarkable new judgement


In a remarkable and important judgement on an unsatisfactory plea agreement between the British Serious Fraud Office (SFO) and UK-based petro-chemical company Innospec (which produces potentially dangerous petrol additives), Lord Justice Thomas has ruled that the directors of the SFO “had no power to enter into the arrangements made and no such arrangements should be made again.” He stated that the SFO cannot agree penalties with an offender before bringing the facts of the case before a court because “the imposition of a sentence is a matter for the judiciary“.

Lord Justice Thomas stated that ”those who commit such serious crimes as corruption of senior foreign government officials must not be viewed or treated in any different way to other criminals. It will therefore rarely be appropriate for criminal conduct by a company to be dealt with by means of a civil recovery order“. His judgement throws into question the whole approach of the SFO to dealing with overseas corruption, which specifically offers companies the carrot of a civil settlement if they report wrongdoing to the SFO. “It would be inconsistent with the basic principles of justice for the criminality of corporations to be glossed over by a civil as opposed to a criminal sanction."

This is no trivial matter. Time and again the British state tends towards leniency for certain classes of criminals, bribe-payers, tax evaders, insider-traders, for example, which would not be extended to others. Knowing how devastating corrupt practices can be on their victims in the poorer countries makes it all the more important that companies whose bribe-paying activities are detected (as was the case with Innospec) should face the proper justice processes. Lord Justice Thomas has established a hugely important matter of principle, which as Sue Hawley of Corruption Watch points out, could lead to the unwrapping of the less than satisfactory settlement with BAE Systems:

“This is a remarkable judgement. The SFO’s negotiated settlement approach to overseas corruption has been shown to be far too lenient, utterly untransparent and potentially unconstitutional. In light of today’s ruling, the SFO will have to go back to the drawing board with how it deals with corruption. The courts have recognised how serious overseas corruption is and the need or very high penalties to sanction and deter it. The BAE settlement could potentially receive a very rough ride in the UK courts.”

More here.


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