UK fraud agency and Dechert liable for costs in ENRC case, High Court rules

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The UK Serious Fraud Office and law firm Dechert are on the hook to pay potentially millions of pounds to Eurasian Natural Resources Corporation, after the High Court ruled major mis-steps by both parties led to unnecessary costs for the Kazakh mining group.

In a judgment handed down on Thursday, Mr Justice David Waksman said that if it were not for wrongdoing by the SFO, the agency would never have opened a criminal investigation into ENRC.

As a result of the SFO’s case, ENRC undertook unnecessary work, which incurred costs and wasted management time, Waksman ruled.

The SFO opened a probe into ENRC in 2013, before closing the investigation 10 years later in August citing “insufficient admissible evidence to prosecute”.

The case was plagued by questions over the conduct of Neil Gerrard, a former partner at Dechert instructed to advise ENRC.

In a summary of a ruling last year, Waksman said the SFO had breached its duties by accepting information from Gerrard that was “plainly unauthorised” and “against his client’s interests”.

ENRC had sought more than £21mn in legal costs and unnecessary work, costs and management time at the trial in March.

Dechert has already paid ENRC about £9mn for work and costs, meaning ENRC’s total outstanding claim is just under £12mn, according to the judgment.

Waksman indicated that the SFO would pay a quarter of the damages he ultimately assessed. He added that Dechert and Gerrard would be jointly liable for the remainder.

The claim relates to costs paid in the preliminary phase of the SFO’s probe, which preceded the opening of its formal criminal investigation in 2013.

The exact amount the SFO, Dechert and Gerrard will be liable to pay will be decided at a hearing in early 2024. Waksman rejected ENRC’s claim for exemplary damages against the SFO.

“ENRC is entitled to significantly more by way of damages than Dechert and the SFO have contended, though not as much as ENRC has sought,” Waksman said in his judgment. “But for the SFO’s wrongdoing, it would not have commenced the criminal investigation.”

Further losses to ENRC from the fact it was under criminal investigation will be assessed at another trial. ENRC is seeking as much as $1bn in costs and lost revenues from the criminal probe.

“While these proceedings are about conduct by former SFO staff which took place over 10 years ago, we are disappointed by the commercial court’s findings and are carefully considering this complex judgment,” the SFO said in a statement.

The SFO is attempting to rebuild its reputation under new director Nick Ephgrave, a former police officer who took up the helm in September, after a number of collapsed cases in recent years. The ENRC case was closed by his predecessor, Lisa Osofsky, before her term ended.

Dechert said it was “considering the detail of this judgment and will be seeking to resolve the damages issues” as soon as possible. Gerrard did not immediately respond to a request for comment.

“Today’s judgment is a testament to ENRC’s determination to clear its name in the face of dogged and baseless denials of wrongdoing by both Dechert and the SFO,” said Michael Roberts, ENRC’s lawyer at Hogan Lovells.

“This landmark judgment sends a clear message that the use by law enforcement of defence lawyers as covert informants against their clients is unlawful and will not be tolerated,” he added.

Additional reporting by Kate Beioley