News & what's on - Written by Barry & Richard on Thursday, May 29, 2014 10:14 - 0 Comments
Hello! Innospec woes as bribery losers sue for damages
By Stuart McNeil, Partner Pinsent Masons
“Follow-On” damages claims are a regular feature of competition cases, with customers of cartels suing for over-charging, reduced margins and reduced sales volume.
Could they soon be common place in bribery and corruption cases?
While the glamour of celebrity weddings is not normally associated with bribery cases (nor for that matter successful singer songwriters of which more anon), legal principles that were successfully deployed by Catherine Zeta-Jones and Michael Douglas in suing Hello! magazine (when a photographer blagged his way into their wedding and took secret photos), are capable of being used by disappointed competitors to launch potentially huge follow on damages claims.
The tort of causing loss by unlawful means, with the addition of conspiracy, provides a potentially potent weapon.
Innospec (and one of its employees) is the unfortunate target in one such action.
It is facing a US$42m claim in the English High Court by Jalal Bezee Mejel Algaood & Partners (JBMA), a Jordanian firm that alleged that Innospec’s US$6.3m bribes prevented the firm from winning contracts with the Iraqi Ministry of Oil. Innospec has made clear that it considers the claims to be without merit. The civil trial started this month and is due to finish at the end of June.
Perhaps Innospec is “fortunate” to only face one court case.
Claims of conspiracy to injure by unlawful means can potentially be made by any disappointed competitor that lost out due to a bribe being paid. Whilst only one competitor would (ordinarily) have secured the contract tainted with the bribe, that does not mean that only one disappointed competitor can successfully sue.
If a competitor can prove that the bribe was a mean of inflicting harm and that it otherwise had a “substantial chance”, in percentage terms, of being awarded the contract, it may be able to sue for that percentage of anticipated profit. The lost opportunity can be less than 50% and still be “substantial”.
Two’s company. Three’s a crowd.
If there were two or three, other bidders in the running, each of whom were targeted and had a “substantial” chance of being awarded the contract, the damages claims would soon mount up.
There is, of course, much more to a successful claim.
The modern tort of conspiracy to injure by use of unlawful means, where the competitor’s loss is just the flipside of the bribing party’s gain, requires proving a “predominant intention to injure” the disappointed competitor to be actionable. As part of the control mechanism to keep the tort under limits, a claimant must (as stated above) show that the bribe was the “instrument” used to inflict harm on it, not simply that it happened to lose money as a result of a bribe being paid.
The distinction is not always obvious, and the cases are highly fact specific, but the more players in the immediate commercial field the more difficult it will be to show that you were targeted. Tenders therefore provide the most fertile litigation opportunities.
If a claimant can establish the requirements for the tort, the courts are used to awarding damages contingent on the volition of a third person. Whether it is the chance of someone winning a beauty contest, someone living longer (or being cured) had a correct diagnosis been made, or being awarded a contract in a commercial bid, the loss is capable of judicial determination. It is very much a case of old (often centuries old) principles being deployed in the 21st Century.
How many reasons do you want NOT to bribe
Criminal actions, debarment, penalties and disgorgement, shareholder and Regulator sanction and loss of commercial contracts are enough reasons not to bribe.
Irrespective of the decision in Innospec it is clear that the legal principles established in a photography case involving beautiful people are very relevant in the ugly world of bribery; those reasons may be growing.
It’s all gone Lionel Richie
Put another way, if you are a business which has lost out to bribery and want redress, then as the great man sang [about the claims of conspiracy to injure by unlawful means]:
“Hello. It is me you’re looking for.”