This week the Serious Fraud Office (SFO), the UK government department responsible for investigating and prosecuting serious or complex fraud and corruption, announced the conclusion of legal proceedings brought against it involving the Eurasian Natural Resources Corporation Limited (ENRC) and the company’s former lawyers (click here).
In April 2013, the SFO launched a criminal investigation into suspected bribery, corruption and fraud involving ENRC, a Kazakh mining conglomerate, regarding one of its mines in the Democratic Republic of Congo (DRC) and other resource-rich but politically sensitive regions. The company was listed in London at the time but subsequently delisted in November 2013. The SFO’s investigation examined whether ENRC or its subsidiaries had engaged in any corrupt practices regarding its interests in the DRC, and other, resource-rich but politically sensitive regions. In 2011, ENRC had hired a well-known law firm to perform an internal investigation into whistleblowing regarding bribery and fraud at one of the Kazakh subsidiaries. The law firm had also held several sessions with the SFO before ENRC terminated Dechert's retainer in March 2013.
The SFO case was opened in April 2013 but as it progressed, several questions were raised about the SFO's own conduct, both in initiating and investigating the case. It later emerged that between 2011 and 2013, the SFO had engaged with the law firm and had received unauthorised information from it. The partner at the law firm who had led the work at ENRC was accused of secretly engaging with SFO officials without ENRC's authority, and of leaking privileged and confidential information to the press. The partner’s unauthorised contacts with the SFO occurred between October 2011 and March 2013, during which he met with SFO officials on dozens of occasions, with no ENRC representative present. As a result, ENRC decided to take legal action, initiating civil claims against both the law firm and the partner in 2017, and subsequently against the SFO itself in 2019. Ruling in favour of ENRC in 2022, the 386-page High Court judgment (click here) was scathing towards all parties involved, describing the SFO’s behaviour as “bad faith opportunism”.
Following this ruling, several follow-on trials were conducted to determine the size of the award to be made to ENRC by these parties, with ENRC seeking more than USD 167 million from the SFO alone and with the law firm having already made an interim payment of GBP 20 million towards ENRC's legal costs. On 24 August 2023, the SFO also announced that it had closed the investigation against ENRC, citing insufficient admissible evidence to successfully prosecute. This week’s announcement by the SFO confirms that a settlement with the SFO, the law firm and the partner has now taken place out of court and on terms which are confidential. In its announcement, the SFO claims that the wrongdoing that took place between 2011 and 2013 “could never happen again” and that it is now a “fundamentally different organisation” having overhauled how it operates with stronger governance, independent oversight and clearer safeguards.
While this case is somewhat of an extreme outlier, it does potentially raise several points of consideration for energy and commodity firms. While reliance on third-party counsel when interacting with regulators regarding company business is reasonably common, firms may wish to ensure that their internal policies regarding the mandatory presence of company officials in such circumstances are clearly stated.