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Judicial Review of BAE settlement

The Serious Fraud Office (SFO) had been investigating allegations of bribery and corruption against BAE Systems since 2004. These allegations involved the company's deals in Chile, the Czech Republic, Qatar, Romania, South Africa, Tanzania and Saudi Arabia, though the investigation of the last was stopped by the UK government in December 2006. Hungary and Austria were first mentioned on 29 January 2010 when Count Alfons Mensdorff-Pouilly was charged, see below. On 5 February 2010 the SFO announced that it had accepted a plea bargain by BAE and that all its investigations were at an end. This meant that, after a brief court appearance, the whole case would be closed.

CAAT and The Corner House mounted a legal challenge to the decision by the Director of the SFO to accept the plea bargain on the grounds that the SFO failed properly to apply prosecution guidance, including its own guidance. In particular, the plea agreement reached failed to reflect the seriousness and extent of BAE's alleged offending, which includes corruption and bribery, and to provide the court with adequate sentencing powers.

Pre-February 2010 SFO pursuing investigations
5 February 2010 SFO accepts plea bargain
12 February 2010 CAAT and The Corner House send legal letter to SFO
26 February 2010 Injunction sought and judicial review papers lodged with the High Court
1 March 2010 Injunction granted by the High Court
1 March 2010 BAE in US court
3 March 2010 BAE's US export licenses held up
24 March 2010 Appeal being considered as judicial review permission refused
8 April 2010 Withdrawal with regret

Pre-February 2010 - SFO pursuing investigations

In 2007, a month after the Government stopped the SFO inquiry into BAE Systems' arms sales to Saudi Arabia, the Government made it clear that the SFO should pursue the remaining investigations "vigorously".

The SFO announced on 1 October 2009 that it intended to seek the Attorney-General's consent to prosecute BAE for offences related to overseas corruption in Africa and Eastern Europe. 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.

5 February 2010 - SFO accepts plea bargain

Just week after Alfons Mensdorff-Pouilly was charged, the SFO announced that it had accepted a plea bargain where BAE would pay £30million and plead guilty to failing to keep reasonably accurate accounting records in relation to its activities in Tanzania. No action would be taken in respect of the allegations with regards to the other countries. Simultaneously, the US Department of Justice (US DoJ)announced that BAE would plead guilty to paying commission payments with regards to several deals. The company was expected to pay a fine of $400million.

Later the same day, the SFO announced that it had withdrawn the charges against Alfons Mensdorff-Pouilly and that the decision brings to an end the SFO's investigations into BAE's military contracts.

Shocked and angered by the decision, which meant that there would be no opportunity to discover the truth behind alleged bribery and corruption in the many BAE deals that were under investigation by the SFO, CAAT and The Corner House, who had worked together to bring a legal challenge of the Government's decision to stop the Saudi Arabia inquiry, consulted their lawyers.

12 February 2010 - CAAT and The Corner House send legal letter to SFO

Lawyers acting for CAAT and The Corner House sent a letter to the Director of the SFO laying out the groups' intention to request a judicial review of the 5 February decision to enter a plea agreement with BAE. The basis for the legal challenge was as follows: that the SFO failed properly to apply prosecution guidance, including its own guidance. In particular, the plea agreement reached failed to reflect the seriousness and extent of BAE's alleged offending, which includes corruption and bribery, and to provide the court with adequate sentencing powers. CAAT and The Corner House argued that the SFO had unlawfully concluded that factors weighing against prosecuting the more serious charges of corruption outweigh those in favour of prosecution.

26 February 2010 - Injunction sought and papers lodged with the High Court

The papers were lodged at the High Court asking for an injunction to delay the SFO from seeking court approval for the plea bargain settlement with BAE Systems pending the outcome of a judicial review. Papers requesting the latter were lodged at the same time.

1 March 2010 - Injunction granted by the High Court

The High Court has granted an injunction prohibiting the Director of the Serious Fraud Office (SFO) from taking any further steps in its plea bargain settlement with BAE Systems.

The injunction is in force until the Court has decided whether or not to give permission to CAAT and The Corner House to apply for a judicial review of the settlement. The SFO Director will now submit his legal arguments and a witness statement arguing why the decision to offer a plea bargain settlement with BAE was lawful. A judge will then consider the papers from both sides and decide, by 20 March 2010, whether to grant or refuse permission for a full judicial review hearing.

1 March 2010 - BAE in US court

On the same day, BAE pleaded guilty in the United States District Court in Washington DC to "conspiring to defraud the US by impairing and impeding its lawful functions, to make false statements about its Foreign Corrupt Practices Act compliance program, and to violate the Arms Export Control Act and International Traffic in Arms Regulations". The company was fined $400 million, one of the largest criminal fines in the history of the US DoJ's effort to "combat overseas corruption in international business and enforce US export control laws".

3 March 2010 - BAE's US export licenses held up

In the wake of BAE's US guilty plea, it was reported that the US State Department had placed a "temporary administrative hold" on weapons export licenses sought by BAE.

24 March 2010 - Appeal being considered as judicial review permission refused

CAAT and The Corner House are discussing an appeal with their lawyers after an permission for a judicial review is refused. Judge Collins had considered the original application, see 26 February above, the SFO and BAE grounds for contesting the claim, and the CAAT and The Corner House reply to these.

8 April 2010 - Appeal withdrawal with regret

A "holding" appeal had made, pending further clarification and legal discussion. The legal challenge had been brought relying upon the facts as we understood them to be, in particular, the SFO press release of 1 October 2009 in which it stated that it intended “to prosecute BAE Systems for offences relating to overseas corruption . . . in Africa and Eastern Europe”. In its grounds resisting our claim, see 24 March above, the SFO admitted “with hindsight” that while “the ordinary language of the press release” conveyed the impression that its investigation was complete and that it had decided to prosecute, the press release in fact “overstated the stage which had been reached in both the investigative and prosecutorial decision-making process”.

The SFO’s admission made it difficult to sustain any legal challenge to the lawfulness of the plea bargain agreement with BAE on the lesser charge of accounting misdemeanours in Tanzania, so, with much regret, CAAT and The Corner House sent a letter to the SFO's solicitors withdrawing their claim.