News & Insights

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.