The UK settlement followed an interesting negotiating process. The press reported negotiations having broken down in October over the SFO’s demand that BAE agree a payment of £300 million as part of a settlement. This was followed by the SFO’s announcement in the same month that it was seeking the necessary approval to prosecute. Without knowing the details, however, it is interesting to note that the initiation of proceedings against Count Alfons Mensdorff-Pouilly on 29 January 2010 took place in what must have been the final phase of negotiations with BAE—perhaps to encourage the company at a difficult moment?

In neither the United Kingdom nor the United States did the settlements involve BAE admitting bribery, ensuring that BAE was not debarred from US and European public procurement programmes, clearly an important factor.

It is not surprising, given the history of the investigations, the identity of the company involved and the amounts of the settlements, that they have led to a huge amount of comment and speculation.

Some see the novel approach of the SFO of reaching a settlement of this nature to be the right way for the SFO to achieve greater deterrence: the SFO does not have the resources to mount more than a handful of major prosecutions. However, if it can achieve settlements in a significant number of investigations, then it is more likely to achieve the deterrent effect it seeks, than by leaving larger numbers of companies undetected or not facing action.

The fact that BAE’s share price increased on the announcements of the settlements is an obvious reflection of the market’s view that even payments of US$450 million were a good price for bringing the SFO and DoJ investigations to an end. No one will pretend that £30 million will hurt BAE. But if the bigger picture is that this SFO settlement is a sign that the SFO will pursue a larger number of investigations to settlement along the lines of the DoJ, then this settlement is important for that reason.

Others are furious. They view the settlement as a means by which the facts will not be investigated in public at trial and by which BAE is let off the hook. At the forefront of those adopting this position are Corner House (which challenged the decision to drop the Al-Yamamah investigation) and Campaign Against the Arms Trade (CAAT).

Corner House and CAAT have published extracts of their formal letter to the SFO, warning of their intention to seek a judicial review of the SFO’s decision to enter a plea agreement with BAE if the SFO does not withdraw its agreement. The basis of the claim is that the SFO failed to apply guidance on plea agreements and that the SFO’s action was irrational, in that the SFO could not reasonably conclude that the public interest factors tending against prosecution clearly outweighed those tending in favour.

Whilst the Director of the SFO has defended his decision, no response to the threat of judicial review has been published. If judicial review is pursued, it must first pass a threshold test in obtaining the court’s permission to proceed. If it does not, that looks like an end of the matter in the United Kingdom.

The global nature of the activities undertaken by BAE that are currently under investigation make it obvious that many other countries have an interest in the company. Whilst Romania is reported as having concluded its investigation, BAE must be hoping that others will not take up the baton.

Nick Burkill, founder member of the Anti-Fraud Network, is a partner and head of Dorsey’s London Trial department and a member of the Electronic Discovery Practice Group. He specialises in commercial litigation and dispute resolution and has broad experience of domestic and international disputes. Contact Details: Tel: +44 020 7826 4583 burkill.nick@dorsey.com