Bribery as a Defence to a Contract Claim
Bill Dixon, a partner in FSP’s Dispute Resolution team, looks at a recent High Court decision which considered whether a contract obtained through bribery was enforceable.
There has been a major international effort in recent years to combat corruption. This has led to successive pieces of legislation in the UK making it a criminal offence in many situations for individuals or businesses to be involved in corruption. In some circumstances, this may even apply to a UK business operating overseas.
The English courts sometimes refuse to enforce a contract on public policy grounds. For example, a court would not enforce a contract to carry out an illegal act. This would include a contract for payment of a bribe.
What if the contract itself is lawful but it was only obtained by the payment of a bribe? This was recently considered by Mr Justice Burton in National Iranian Oil Company v Crescent Petroleum. The case concerned a Middle East oil contract. The court concluded that there was no general public policy reason for the courts to refuse to enforce a contract which had been obtained by corrupt means, at least as a matter of general principle.
The judgment however only dealt with the contractual position. In practice anyone involved in a situation where a contract may have been obtained by corruption ought to take advice at the earliest possible opportunity given the wider criminal and regulatory issues which may be relevant.