The constitutional function of the courts and the separation of powers in our unwritten constitution are subjects which, in light of the High Court's recent judgment regarding Brexit, have attracted an avalanche of comment. In most "western" countries, the bedrock of judicial decision-making is a written code or legislative enactment. Nowhere is this approach more evident than continental Europe and in the interpretation of EU treaties by the ECJ. As this judgment of the High Court manifests, in our jurisdiction it is customary or common law that implications and inferences from past cases determine the outcome. Much of our law of fraud, both civil and criminal, is the product of legal evolution. Conspiracy for example, which is often pleaded when fraud is alleged either as a tort or a crime, was invented by courts during the nineteenth century to deal with perceived contemporary problems.
The law concerned with the conduct of criminal investigations and the decisions of prosecutors to launch or not to launch a prosecution is almost entirely judge-made. Or rather, there is almost none of it. Whilst there is a plethora of internal policing and prosecutorial extra-legal codes governing decision-making, the courts have eschewed a role which would amount to their superintending them. This is a field of State activity which, despite it having profound and damaging personal and economic consequences for those who are the targets or subjects of such investigations, the courts have held it to be virtually non-justiciable. As in the Brexit case, in which the High Court held the power of the executive to conduct foreign policy is ordinarily not susceptible to judicial review, in this albeit more prosaic area a similar strict self-denying ordinance has been adopted. A long and consistent line of cases has held that only in highly exceptional cases amounting to flagrant unreasonableness should a judge intervene.
In the face of such unpromising and daunting terrain, the application of Soma Gas and Oil Ltd to seek an order from the Admin Court compelling the SFO to immediately cease its investigation of it for suspected bribery was unsurprisingly regarded by the first judge who it came before as "extraordinary", "ambitious" and "facing a very high hurdle indeed". Undeterred, the applicant persevered for a hearing before a full court. The judgment was handed down last month, cited as R (Soma Oil and Gas Ltd) v Director of the SFO [2016] EWHC 2471. This judgment is an excellent instance of what proponents of a common law system contend, one which draws deeply and respectfully on a rich depositary of past decisions but is not so bound by them so as to impose a rule or decide a case which ignores the contemporary world outside of law. In this particular case, the commercial world had an immutable need for legal certainty.
In his judgment Gross L.J., after a factual summary, began his consideration of the law with a paean to the familiar authorities which if applied by him would mean that Soma's application was indisputably doomed. The Judge, however, perceived that the issues before him would not be justly dealt by such a legally self-contained or insular approach. This led him to peer over the legal fence and consider whether the economic consequences on Soma, of a judgment which put legal principle before pragmatism, necessitated the amelioration somehow of that principle.
Judges at least in the High Court, where in contrast to the courts above are not supposed to consider policy but follow precedent, are normally expert in disguising a preference for a just outcome over the rigid application of a legal rule. True to such form the camouflage is evident in this case and so, on the face of it, Soma lost its case and received an adverse costs order to boot. In reality, Gross L.J. arranged that it won by appearing to lose. Soma walked away with what it vitally needed: the elusive certainty which it would never have gained had it not launched its apparently hopeless application for relief. As a "unique exception" to its policy, the SFO informed it on the eve of the hearing that in relation to the commercial contract which Soma's business depended upon, "I can confirm... that there is currently insufficient evidence of criminality... to found any realistic prospect of conviction of your clients." Furthermore, it permitted Soma – after it provided a nominal undertaking about the confidentiality of this letter – to disclose it to all its potential investors.
The Judge regarded this last minute SFO volte-face as "fair, responsible and most welcome". So much so, he repeated this phrase even when he nonetheless curtailed the SFO's costs order by £5,000, ordering Soma to pay it a paltry £16,000. In this Judge's view, albeit unstated, justice had been done whilst settled rules had apparently not been disturbed. The humane and equitable common law at work.
One aspect of Article Six of the ECHR can be called the "right to a court". This is an aspect of the rule of law which, because of the Brexit case and the reaction to it, we are hearing a lot about. On a far smaller scale the Soma case demonstrates the potency of this right. In our common law system an independent and impartial tribunal is able not only to consider a legal rule but also, because of its remoteness and autonomy, the tribunal may be inclined to consider whether in the circumstances that rule is being applied reasonably. The SFO wisely realised when Soma was not to be dissuaded from seeking a hearing that no legal principle, even one expressed in absolutist terms, is unassailable and judges seeking to dispense justice in a civilised society will strive to find a means which avoids oppression.
It is notable that Soma did all it could to present its plight as best it could. Presumably it followed legal advice which was not only to conduct an internal investigation, the efficacy of which was vouchsafed by its solicitors, but also to waive its legal privilege over all their work. It is apparent that this waiver was a significant factor in Soma achieving the result it did. It deprived the SFO of a contention that it had not fully co-operated with its investigation, it made plausible Soma's claim that its competitors had maliciously beguiled the Foreign Office into believing that Soma had acted suspiciously (hence its referral to the SFO) and above-all it garnered judicial sympathy for a company whose talk of likely ruin unless the SFO did something remarkable was believed.
Finally, anxious as judges always are of proverbial floodgates being opened as a result of their judgments, Gross L.J. commented about the SFO's letter that "On no view can it be taken as any precedent whatever for any other suspect or investigation." There is nothing there to encourage another potential applicant. Although when it came to the final part of his judgment dealing with costs, he may have forgotten this stern admonition as he added, "I would not want to do anything to discourage the SFO from acting in such a fashion in the future." Maybe it should because as the SFO becomes involved in more and more investigations of prominent trading companies, including publicly quoted ones, the consequences for shareholders of long investigations where there may in fact be no criminal conduct revealed are serious. The SFO should be more accountable for its actions in long investigations.
This article was published in Law360.
Corker Binning is a law firm specialising in fraud, regulatory litigation and general criminal work of all types. For further information go to http://www.corkerbinning.com
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