Litigation is often used by parties to achieve commercial aims that may be of considerably wider scope than the subject matter of the dispute before the courts. Often these are skirmishes in a much bigger battle straddling multiple jurisdictions. They frequently arise from the battle to control and benefit from the inception of commercial activities in emerging markets and developing nations. The case of R. (on the application of Soma Oil and Gas Ltd (“Soma”) v The Director of the Serious Fraud Office (“SFO”) [2016] EWHC 2471 (Admin) falls squarely within this category of cases.

Background

Soma was incorporated in 2013 for the purpose of investing in the exploration and drilling for oil in Somalia. It entered into contractual arrangements with the Somali Government for the purposes of exploration and possible production ancillary to which Soma also made financial support payments, referred to as “Capacity Building Payments” to the Somali Ministry of Petroleum and Natural Resources (“the Ministry”). The Capacity Building Payments to the Ministry also included the rebuilding and refurbishing of a data room.

In June 2015, the SFO commenced an investigation into bribery and corruption relating to Soma’s activities in Somalia, specifically surrounding the financial support payments made to the Ministry.

By May 2016, Soma perceived the investigation was dragging on. The existence of the investigation was problematic in respect of fund raising for Soma’s continuing exploitation of the Somali oil fields, such that it gave rise to the very real prospect of insolvency where, “posthumous exoneration… would provide scant comfort”.

In correspondence from May 2016, the SFO indicated that whilst a decision on the Capacity Building Payment issue would be forthcoming in the next few weeks, there were other strands of inquiry that were ongoing.

On 10 August 2016, Soma commenced proceedings for Judicial Review, characterising the SFO’s behaviour as irrational and seeking an order that the SFO terminate its investigation into the Capacity Building Payments issue, or to make a decision whether to prosecute Soma in respect of it and also seeking disclosure of the nature of the other strands inquiries the SFO was pursuing.

On 16 August 2016, the SFO wrote to Soma to confirm the investigation into the Capacity Building Payments issue was to be closed but that the other strands inquiry were ongoing and would not be closed. The SFO invited Soma to withdraw its application for Judicial Review. Soma refused to do so on the basis that it required a public decision on the issue.

Decision

Soma’s application for Judicial Review was refused principally on the grounds that it could not have hoped to achieve more from it than what they got as a result of the SFO’s letter dated 16 August 2016. As to the public element, the Court found that the “ability to communicate the contents of the [SFO’s letter] was all that Soma could realistically ask for”.

However, the Court went further and stated that the application would have had no real prospect of succeeding in any event for the following reasons:

  • Challenges to the decisions of prosecutors can only be advanced on very narrow grounds and, even then, will succeed only in very rare cases1;
  • If anything, it is even more difficult to challenge the decisions of investigators than it is to challenge the decisions of prosecutors;
  • „„ “Only in highly exceptional cases will the court disturb the decisions of an independent prosecutor and investigator…” because, “the powers in question are entrusted to the officers identified, and to no one else. No other authority may exercise these powers, or make the judgments on which such exercise must depend. Secondly, the courts have recognised…it is within neither the constitutional function nor the practical competence of the courts to assess their merits.. .Thirdly, the powers are conferred in very broad and unprescriptive terms”.2
  • Irrationality is not easily established. A very high threshold needs to be crossed. A working definition being that, “…irrationality is only one facet of unreasonableness. A decision is irrational…if it is lacking ostensible logic or comprehensible justification”.3

The Judge found, in respect of the Capacity Building Payments issue, “nothing about the conduct of the investigation would have persuaded me that this case was “wholly exceptional…so as to warrant and justify the Court’s intervention…It cannot be said there was any undue delay [and] there was nothing whatever irrational about either the commencement or the continuation of this investigation”.

So far as the other strands of inquiry was concerned, the Judge found that it was an ongoing inquiry in respect of serious criminality that, “could not possibly be described as disproportionate”. It was recognised by the Judge as a sensitive inquiry where more disclosure could not be given. The Judge concluded that, “there is no basis whatever to go behind the SFO response and compel further disclosure of a continuing investigation into serious crime, with sensitive international dimensions”.

The outcome was, therefore, that all the relief sought by Soma was refused and it was ordered to pay 80% of the SFO’s costs, assessed at £16,000.

Commentary

The outcome of this case is not at all surprising. The ability to challenge a prosecutor’s decision whether or not to prosecute is extremely limited. It is even more difficult to challenge an investigator’s decision whether or not to continue its investigation. However, to say that Soma has been unsuccessful would be wrong. What it has achieved is precisely what it wanted: a public proclamation that the SFO has closed its investigation into the Capacity Building Payments issue. Ithas most likely cost Soma a six figure sum in respect of its own legal costs and it has been ordered to pay £16,000 in respect of the SFO’s costs. When compared to the risk of losing the potential benefit of $40m exploration costs and the risk to raising billions required to pay for the production costs, it does not seem to be a big price to pay. The Court has been very careful to ensure that its decision is clear and unequivocal. This application was never likely to succeed and the Judgment will stand as authority in any future applications. There is a clear policy reason to ensure that applications of this nature remain exceptional and that the workings of the criminal authorities are not undermined except in the most serious of cases.

This does speak to the naivety of the SFO as to the operations of international companies in the developing world where they are often required to make social investments in local or government infrastructure in order to win contracts. However, corporate entities operating in challenging parts of the world need to be ready to face the scrutiny of UK prosecutors, more so now than ever before with the introduction of the Bribery Act 2010 and the SFO’s increasing activity with regard to international bribery and corruption. Ensuring a strategic approach, with thorough bribery and anti-money laundering risk assessments and mitigations in place in such circumstances, is key to having any form of defence against prosecution. Protecting commercial interests in not a binary decision and nor is the approach to dealing with the prosecutor: cooperation and the need to challenge the prosecutors’ position are not necessarily diametrically opposed positions.