In August 2008, four BA executives were charged with having dishonestly agreed with others to run a cartel on the market for passenger air transport services. The prosecution was abandoned after it emerged that the OFT had not reviewed, and had not disclosed, 70,000 electronic documents, including 12,000 to and from key prosecution witness Paul Moore, Virgin Atlantic’s former corporate affairs chief.

Alice Englehart, Senior Litigation Associate in the Litigation Corporate Group comments: This case was a high-profile attempt by the OFT to secure its first contested criminal prosecution under the Enterprise Act 2002 which came into force in June 2003, the only other case having never gone to trial due to the defendants pleading guilty pursuant to a plea bargaining arrangement entered into with the Department of Justice in the US. The collapse of the case could have major implications for the way in which the OFT pursues others in the future under the Act. It will need to carry out much soul searching if the criminal cartel offence – lauded on its introduction as one of the greatest deterrents against cartel activity – is to realise its objective.

Foremost amongst the issues the OFT needs to consider are:

• whether it was right effectively to delegate the critical task of document disclosure to the in-house legal team and external lawyers of Virgin, the only other party in the cartel and the whistleblower in the case;
• whether the OFT itself should become more actively involved in the collection of evidence, and if so, whether it has the necessary resources to do so in large and often complex cases;
• whether the OFT needs to re-evaluate its enforcement priorities and concentrate on trying to secure convictions in those cases where the prosecution case may be easier to prove even if they fail to produce the high profile scalps which the BA case sought to do; and
• whether the OFT’s leniency programme needs a major overhaul. For example, how can the prosecution rely, as portrayers of the truth, on the evidence of those who have already admitted they were dishonest when blowing the whistle and how will a jury react to the evidence of those witnesses?

The OFT has come out fighting, emphasising that its commitment to investigating and prosecuting those who engage in criminal cartel activity remains as strong as ever. However, there are several lessons to be learned. Now the OFT needs to prove itself.

Vince Neicho, Litigation Support Manager, comments: It appears that the 70,000 e-mails, over a wide date range, had not been reviewed as they were in a container file that was “corrupt”. Access had been gained to the contents of the corrupt file during the course of the hearing. What is not clear is whether or not the e-mails were disclosed as “corrupt” or at all. The questionnaire drafted by the Senior Master’s Working Party (already in the public domain and likely to become part of the CPR in October) asks “Are any documents which may be disclosable encrypted, password protected or for other reasons difficult to access, or do you have any reason to believe that they may be? If so, state…your proposals for making them accessible”. Had the questionnaire been in play here, the problem may have been identified and resolved much earlier in the process.

Further information

This case summary is part of the Allen & Overy Litigation Review, a monthly update on interesting new cases and leglisation in commercial dispute resolution.  For more information please contact Sarah Garvey sarah.garvey@allenovery.com, or tel +44 (0)20 3088 3710.