The Serious Fraud Office (SFO), Britain's anti-corruption watchdog, has encountered a significant setback in its legal battle with Eurasian Natural Resources Corporation (ENRC). On September 3, 2024, the Court of Appeal refused the SFO permission to challenge a previous ruling that found the agency had initiated its corruption investigation into ENRC due to its own misconduct.
This decision stems from a High Court ruling in December 2023, which determined that ENRC was entitled to substantial compensation for a decade-long criminal investigation into alleged bribery. The probe, launched in 2013, was ultimately abandoned by the SFO in 2023 without any charges being filed. Throughout the investigation, ENRC consistently denied any wrongdoing.
The court's decision highlighted that the SFO would not have commenced the investigation if it had not improperly influenced ENRC's former lawyer to act against the company's interests. As a result, ENRC sought approximately £21 million ($28 million) for what it deemed "unnecessary" work related to the investigation. However, the High Court indicated that the final amount awarded would be less than the requested sum.
The financial implications for the SFO could be substantial. The agency has already recorded a provision of £237.7 million in its 2023/24 accounts, representing about 25% of ENRC's total claim. This figure pales in comparison to the nearly $1 billion that ENRC, a former FTSE 100 company, is seeking for losses allegedly caused by the probe. This larger claim will be addressed in a separate trial.
"We are disappointed by the Court of Appeal's decision. Any damages awarded are subject to ongoing proceedings."
This case is not an isolated incident for the SFO. The agency has faced numerous challenges in recent years, including the forced abandonment of high-profile prosecutions due to disclosure failures. These setbacks have raised questions about the SFO's effectiveness and operational procedures.
The potential liability for damages may be shared between the SFO and ENRC's former legal representatives, Dechert. Neil Gerrard, the firm's former co-head of white-collar crime, conducted an internal investigation for ENRC. The High Court previously ruled that Gerrard had engaged with senior SFO officials without proper authorization, constituting a "reckless breach of duty."
It's worth noting that the SFO, established in 1987, is a non-ministerial department of the UK government responsible for investigating and prosecuting serious or complex fraud and corruption. With an annual budget of approximately £50 million and a staff of around 500, the agency plays a crucial role in combating financial crime. However, this case highlights the challenges and potential pitfalls faced by anti-corruption bodies in their pursuit of justice.
As this legal saga continues to unfold, it serves as a reminder of the complexities involved in investigating and prosecuting high-stakes corruption cases, as well as the potential consequences when investigative agencies are found to have acted improperly.