Judgments - R (On The Application of Corner House Research and Others) V Director of The Serious Fraud Office

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23.  The judgment of the Divisional Court, given by Moses LJ, does not lend itself to simple or succinct summary. The breadth of the Director’s discretion in relation to prosecution and investigation was accepted, as was the reluctance of the courts to interfere with the exercise of the discretion (para 51). Authority was cited. Reference was made (para 52) to the Code for Crown Prosecutors, where the familiar two-stage test is explained and an illustrative list of factors which may be relevant to the public interest test is given. One common public interest factor telling against prosecution is that details may be made public that could harm national security. The court accepted, as a generality, that the Director’s discretion was of sufficient breadth to entitle him to take into account a risk to life and national security in deciding whether to continue an investigation (para 54). By article 2 of the European Convention on Human Rights, the Director and the Government were required to protect and safeguard the lives of British citizens. On an application for judicial review the court could not assess the extent of the risk to life or to national security by those who advised the Attorney General and the Director, and the Director himself could not exercise an independent judgment on these matters (para 55). He might lawfully accord appropriate weight to the judgment of those with responsibility for national security who had direct access to sources of intelligence unavailable to him. In cases touching on foreign relations and national security the duty of decision on the merits lay with the Government, and the courts were obliged to maintain the boundary between their role and that of the Government.

24.  The essential point of the claimants’ challenge did not, however, relate to the relevance of national security to the Director’s decision or the Government’s assessment of the risk to national security but to the threat uttered (as it was said) by Prince Bandar to the Prime Minister’s Chief of Staff (para 57). It was one thing to assess the risk of damage which might flow from continuing an investigation, quite another to submit to a threat designed to compel the investigation to call a halt. When the threat involved the criminal jurisdiction of this country, the issue was no longer a matter only for the Government, and the courts were bound to consider what steps they must take to preserve the integrity of the criminal justice system. The constitutional principle of the separation of powers required the courts to resist encroachment on the territory for which they were responsible (para 58). Had the threat been made by a person subject to English criminal law he would risk being charged with an attempt to pervert the course of justice (para 59) and threats to the administration of justice within the UK were the concern primarily of the courts, not the executive (para 60). The decisions of the Court of Appeal in R v Coventry City Council, Ex p Phoenix Aviation [1995] 3 All ER 37 and R v Chief Constable of Devon and Cornwall, Ex p Central Electricity Generating Board [1982] QB 458 were cited. Reference was made to the existing constitutional principle of the rule of law, now recognised in section 1 of the Constitutional Reform Act 2005, but the rule of law amounted to nothing if it failed to constrain overweening power (paras 61-65). It was beyond question that had the Director decided to halt the investigation in response to a threat made by those susceptible to domestic jurisdiction, the courts would have regarded the issues which arose as peculiarly within their sphere of responsibility (para 66).

25.  The court then considered how the courts discharge that responsibility, and held that the courts fulfil their primary obligation to protect the rule of law by ensuring that a statutory decision-maker exercises the powers conferred on him independently and without surrendering them to a third party (para 67). In yielding to the threat, the Director ceased to exercise the power to make the independent judgment required of him by Parliament (para 68). The court accepted (para 72) that in assessing the consequences of the threat the Director exercised an independent judgment, despite his total reliance on the advice of others, but that was not the point: in halting the investigation he surrendered to a threat made with the specific intention of achieving surrender. The court could identify no integrity in the role of the courts to uphold the rule of law if they (the courts) were to abdicate in response to a threat from a foreign power (para 76). Surrender deprived the law of any power to resist for the future, as recognized in Phoenix Aviation (para 79). Reference was made to the case of Leila Khalid, a PLO terrorist released by the Attorney General in face of a threat to kill Swiss and German hostages held by the PLO, and the court accepted that there might be circumstances so extreme that the necessity to save lives might compel a decision not to detain or prosecute (paras 81-82). But it was for the courts to decide whether the reaction to a threat was a lawful response or an unlawful submission (para 82), and in the present case the court had to assess whether the Director and the Government yielded too readily (para 84). The present case was distinguishable on its facts from that of Leila Khalid (para 85).

26.  The court was also bound to question whether all the steps which could reasonably be taken to divert the threat had been pursued (para 86). It did not accept that due consideration had been given to persuading the Saudis to withdraw their threat (paras 87-88). No one had suggested to the Saudis that threats were futile since Britain’s democracy forbade the exertion of pressure on an independent prosecutor (para 90). There had been no sufficient appreciation of the damage to the rule of law caused by submission to a threat directed at the administration of justice (para 91), which the Director had not specifically considered at the time (para 92).

27.  The court laid down the principle that submission to a threat is lawful only when it is demonstrated to a court that there was no alternative course open to the decision-maker (para 99). That principle had two particular virtues: by restricting the circumstances in which submission might be endorsed as lawful, the rule of law might be protected (para 100); and, as this case was said to demonstrate, too ready a submission might give rise to the suspicion that the threat was not the real ground for the decision at all, but was a pretext (para 101). The court was driven to the conclusion that the Director’s submission to the threat was unlawful (para 102).

28.  The court also addressed a separate ground on which the claimants sought to challenge the Director’s decision: that the Director had taken account of the potential effect of the investigation upon relations between the UK and Saudi Arabia, a consideration which he was precluded from taking into account by article 5 of the OECD Convention (para 105). It was argued for the Director that since the Convention was an unincorporated treaty and had no effect in domestic law he was not bound by article 5 and therefore this issue was not justiciable (para 106). The court concluded that since the Director had publicly claimed to observe the prohibition in article 5 his legal self-direction could be reviewed, particularly since section 109 of the 2001 Act had been enacted to give effect to the Convention (paras 119, 121).

29.  The claimants also attached significance to the absence of any reference to national security in article 5 (para 123), but the court did not accept that it was for that reason a prohibited consideration (para 128). It did, however, find it difficult to distinguish between national security and relations with another state (paras 131-140). It concluded that the doctrine of necessity as recognised in international law provided a clear basis for distinguishing the one from the other (para 147). But the court drew back from giving a final ruling on interpretation. It had recognised (paras 141-142) the virtue of uniformity in the interpretation of international treaties and acknowledged (para 150) that the parties had, under the Convention, established a standing Working Group on Bribery as a mechanism for monitoring compliance with it. The court held that it was for the Working Group to achieve a consensus on the interpretation of the Convention (para 153), and a ruling was not in any event necessary since the court had already held the Director’s decision to be unlawful (para 154). The court therefore expressed no concluded view whether it had been open to the Director to consider that his decision was in compliance with article 5 (para 157).

The main issue

30.  It is common ground in these proceedings that the Director is a public official appointed by the Crown but independent of it. He is entrusted by Parliament with discretionary powers to investigate suspected offences which reasonably appear to him to involve serious or complex fraud and to prosecute in such cases. These are powers given to him by Parliament as head of an independent, professional service who is subject only to the superintendence of the Attorney General. There is an obvious analogy with the position of the Director of Public Prosecutions. It is accepted that the decisions of the Director are not immune from review by the courts, but authority makes plain that only in highly exceptional cases will the court disturb the decisions of an independent prosecutor and investigator: R v Director of Public Prosecutions, Ex p C [1995] 1 Cr App R 136, 141; R v Director of Public Prosecutions, Ex p Manning [2001] QB 330, para 23; R (Bermingham and others) v Director of the Serious Fraud Office [2006] EWHC 200 (Admin), [2007] QB 727, paras 63-64; Mohit v Director of Public Prosecutions of Mauritius [2006] UKPC 20, [2006] 1 WLR 3343, paras 17 and 21 citing and endorsing a passage in the judgment of the Supreme Court of Fiji in Matalulu v Director of Public Prosecutions [2003] 4 LRC 712, 735-736; Sharma v Brown-Antoine and others [2006] UKPC 57, [2007] 1 WLR 780, para 14(1)-(6). The House was not referred to any case in which a challenge had been made to a decision not to prosecute or investigate on public interest grounds.

31.  The reasons why the courts are very slow to interfere are well understood. They are, first, that 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 (as it was described in the cited passage of Matalulu)

“the polycentric character of official decision-making in such matters including policy and public interest considerations which are not susceptible of judicial review because 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.

32.  Of course, and this again is uncontroversial, the discretions conferred on the Director are not unfettered. He must seek to exercise his powers so as to promote the statutory purpose for which he is given them. He must direct himself correctly in law. He must act lawfully. He must do his best to exercise an objective judgment on the relevant material available to him. He must exercise his powers in good faith, uninfluenced by any ulterior motive, predilection or prejudice. In the present case, the claimants have not sought to impugn the Director’s good faith and honesty in any way.

33.  The first duty of the Director is, in appropriate cases, to investigate and prosecute. The Director and his colleagues performed that duty. They launched the investigation into BAE. They pursued it by serving a series of statutory notices to obtain the information they needed. They rejected strong representations made by the company and senior ministers including the Prime Minister at the end of 2005 that the investigation should be discontinued on public interest grounds. The duty to prosecute was spelled out in clear terms in the Case Controller’s brief to the Director of 19 December 2005. They continued the investigation until the autumn of 2006, by which time they were on the point of obtaining access to potentially significant Swiss bank accounts. That provoked the threat or threats by Saudi representatives which gave rise to these proceedings. Even then the Attorney General (3 October 2006) was of the firm view that the investigation should be continued if it was soundly based and the Assistant Director (27 October) explicitly recognised the SFO’s duty to continue to investigate. A month later the Director agreed to try and obtain evidence from Saudi Arabia bearing on the issue of principal’s consent.

34.  In para 18 of its judgment the Divisional Court recorded that in early 2006 the Attorney General and the Director were of the view that the public interest grounds relied on did not justify discontinuing the investigation and posed the question: “What changed later in 2006?". The Director gives the answer very clearly in para 21 of his second witness statement:

“It was only following my first meeting with the Ambassador on 30 November 2006 that I seriously began to entertain the thought that the national security public interest might be so compelling that I would have no real alternative. Ultimately, I was convinced by my discussions with the Ambassador and the Prime Minister’s minute that there was a very real likelihood of serious damage to UK national security".

It will be recalled that at the first meeting the Ambassador had described the threats to national and international security as very grave indeed and had said that British lives on British streets were at risk. At the second meeting he had again said that lives would be at risk. At the third he had spoken of a real threat to British lives. The Assistant Director, in the light of those statements, envisaged that the withdrawal of co-operation might lead to “another 7/7". It is not suggested that the fears expressed by the Ambassador and senior ministers were fanciful or ill-founded, or that the Director should have discounted them as being so.

35.  The evidence makes plain that the decision to discontinue the investigation was taken with extreme reluctance. As the Director put it in his second witness statement (para 11):

“The investigation and prosecution of serious crime is a major public interest that the SFO exists to promote. My job is to investigate and prosecute crime. The Al Yamamah investigation was a major investigation. The idea of discontinuing the investigation went against my every instinct as a prosecutor …”

The Attorney General on 13 December 2006 was said to be “extremely unhappy” at the implications of dropping the investigation at that stage. What determined the decision was the Director’s judgment that the public interest in saving British lives outweighed the public interest in pursuing BAE to conviction. It was a courageous decision, since the Director could have avoided making it by disingenuously adopting the Attorney General’s view (with which he did not agree) that the case was evidentially weak. Had he anticipated the same consequences and made the same decision in the absence of an explicit Saudi threat it would seem that the Divisional Court would have upheld the decision, since it regarded the threat as “the essential point” in the case.

36.  The Divisional Court was right to hold that a person subject to the jurisdiction of the court who sought to impede an SFO investigation would be at risk of prosecution for attempting to pervert the course of justice, and also right to hold that the Saudis were not subject to the court’s jurisdiction. But there is little assistance to be gained in resolving the present problem from the authority which the Divisional Court cited. The underlying dispute in R v Chief Constable of Devon and Cornwall, Ex p Central Electricity Generating Board [1982] QB 458 was between a public board seeking to exercise its statutory powers and perform its statutory obligations and a group of protesters unlawfully trying to stop it doing so. The effect of the decision was to remind the board of its right to exercise self-help and the police that they had the power to ensure that the board could perform its functions. In this context both Lord Denning MR and Lawton LJ (at pp 471E and 473A) referred to the rule of law. But the case involved no choice between competing aspects of the public interest.

37.  R v Coventry City Council, Ex p Phoenix Aviation and others [1995] 3 All ER 37 involved three applications for judicial review. The underlying dispute was between three sea and airport authorities and groups unlawfully seeking to prevent the authorities handling live animal cargoes. The Divisional Court held, first, that the authorities had no discretion to refuse to handle the cargoes. On that basis there was again no choice between competing aspects of the public interest: there were authorities subject to a public duty on one side and groups unlawfully seeking to prevent the authorities performing their duty on the other. But the court went on to consider what the position would be if the authorities had had a discretion, and in that context emphasised the importance of maintaining the rule of law. The court said (at p 62 e-h) that public authorities must beware of surrendering to the dictates of unlawful pressure groups, that it is one thing to respond to unlawful threats and quite another to submit to them, and that yielding to the threats would encourage the protesters to concentrate on an even smaller number of outlets. The Divisional Court in the present case relied strongly on these dicta. But even on the assumption which underlay this part of the judgment, there were on one side authorities with a discretion to perform their public duties and on the other protesters seeking unlawfully to prevent them doing so. The court pointed out, moreover, that the police had ample powers to control unlawful protest and ensure that the general public, including other port users, were not intolerably affected by it (p 63j). Thus there was no significant factor to weigh against the public interest in performance by the authorities of their public duty. In R v Chief Constable of Sussex, Ex p International Trader’s Ferry Ltd [1999] 2 AC 418 the situation and the outcome were different, because the Chief Constable had a discretion how best to deploy the resources available to him and protection of the company’s right to ship live animal cargoes had to be balanced against the other demands on and duties of the police.

38.  The Divisional Court held (para 68) that “No revolutionary principle needs to be created … we can deploy well-settled principles of public law". But in para 99 of its judgment the court did lay down a principle which, if not revolutionary, was novel and unsupported by authority:

“The principle we have identified is that submission to a threat is lawful only when it is demonstrated to a court that there was no alternative course open to the decision-maker".

The virtues which the court saw in that principle have been summarised in para 27 above, but the second of those (that, as this case was said to demonstrate, “too ready a submission may give rise to the suspicion that the threat was not the real ground of the decision at all; rather it was a useful pretext”) should not be understood as reflecting on the good faith of the Director or the Attorney General which has never been in issue. The objection to the principle formulated by the Divisional Court is that it distracts attention from what, applying well-settled principles of public law, was the right question: whether, in deciding that the public interest in pursuing an important investigation into alleged bribery was outweighed by the public interest in protecting the lives of British citizens, the Director made a decision outside the lawful bounds of the discretion entrusted to him by Parliament.

39.  The decision of the then Attorney General to release Leila Khalid to avert a threat by the PLO to execute Swiss and German hostages was described as “clearly defensible” in Edwards, The Attorney General, Politics and the Public Interest (1984), p 325, and is not criticised by the Divisional Court. It is perhaps the only occasion on which a British public prosecutor has been deflected from what would otherwise have been his duty by a foreign threat. But the case is not easily distinguished. It is true that the threat to the hostages was more direct and immediate than that to the British public in the present case. But the Ambassador did not give the Director to understand that the contingency of which he warned was remote or improbable, the potential loss of life in the present case was much greater and the threat here was to those whose safety it is the primary duty of the British authorities to protect.

40.  The Divisional Court accepted that the Attorney General had no choice but to release Leila Khalid. Here, it was found, there were other things the Director could have done. It could have been explained to the Saudis that under the British constitution the Director is independent of the Government and any attempt to deflect him from his duty would be futile. Attempts should have been made to dissuade the Saudis from implementing their threat. It was submitted in argument that the Saudi threat to withdraw security co-operation put them in breach of Security Council Resolution 1373 (2001) on measures to counter terrorism and a complaint could have been lodged with the United Nations. These findings and contentions overlook the important fact that the Director was a prosecutor with no diplomatic access to representatives of the Government of Saudi Arabia. He was, as the Divisional Court rightly held, obliged and entitled to rely on the expert assessments of others. These findings and contentions are also untenable on the facts. Evidence before the House shows that the Saudis were repeatedly told of the separation, under our system, between the prosecuting authority and the executive but, according to the Ambassador, found it difficult to accept that the UK Government and the Prime Minister could not stop the investigation if they chose to do so. Considerable thought was given within the SFO to the possibility of persuading the Saudis to withdraw their threat, but this was not in the Ambassador’s view a viable course of action. The notion of complaining to the United Nations, if put to the Divisional Court, did not receive its endorsement. As a means of achieving wholehearted co-operation such an initiative would seem unpromising. The Director has accepted that he did not at the time assess whether there would be a threat to British national security if other countries learned that Britain had given in to pressure but has also explained that his view at the time was, and remains, that the case was wholly exceptional and unlikely to have any appreciable effect on other corruption cases. A discretionary decision is not in any event vitiated by a failure to take into account a consideration which the decision-maker is not obliged by the law or the facts to take into account, even if he may properly do so: CREEDNZ Inc v Governor General [1981] 1 NZLR 172, 183.

41.  The Director was confronted by an ugly and obviously unwelcome threat. He had to decide what, if anything, he should do. He did not surrender his discretionary power of decision to any third party, although he did consult the most expert source available to him in the person of the Ambassador and he did, as he was entitled if not bound to do, consult the Attorney General who, however, properly left the decision to him. The issue in these proceedings is not whether his decision was right or wrong, nor whether the Divisional Court or the House agrees with it, but whether it was a decision which the Director was lawfully entitled to make. Such an approach involves no affront to the rule of law, to which the principles of judicial review give effect (see R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 73, per Lord Hoffmann).

42.  In the opinion of the House the Director’s decision was one he was lawfully entitled to make. It may indeed be doubted whether a responsible decision-maker could, on the facts before the Director, have decided otherwise.

Article 5 of the OECD Convention

43.  It is common ground that had the Director ignored article 5 of the OECD Convention, an unincorporated treaty provision not sounding in domestic law, his decision could not have been impugned on the ground of inconsistency with it. But the Director publicly claimed to be acting in accordance with article 5. The claimants accordingly contend (1) that it is open to the domestic courts of this country to review the correctness in law of the Director’s self-direction; (2) that our courts should themselves interpret article 5; (3) that the Director’s interpretation should be held to be incorrect; and (4) that the Director’s decision should be quashed. Each of these steps in the argument is, in the judgment of the House, problematical.

44.  In support of step (1) in this argument reliance was placed in particular on R v Secretary of State for the Home Department, Ex p Launder [1997] 1 WLR 839, 866-867 and R v Director of Public Prosecutions, Ex p Kebilene [2000] 2 AC 326, 341-342, 367, 375-376. Both cases concerned decision-makers claiming to act consistently with the European Convention at a time when it had not been given effect in domestic law. The courts accepted the propriety of reviewing the compatibility with the Convention of the decisions in question. But there was in the first case no issue between the parties about the interpretation of the relevant articles of the Convention, and in the second there was a body of Convention jurisprudence on which the courts could draw in seeking to resolve the issue before it. Whether, in the event that there had been a live dispute on the meaning of an unincorporated provision on which there was no judicial authority, the courts would or should have undertaken the task of interpretation from scratch must be at least questionable. It would moreover be unfortunate if decision-makers were to be deterred from seeking to give effect to what they understand to be the international obligations of the UK by fear that their decisions might be held to be vitiated by an incorrect understanding.

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