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R v Innospec: the court's view on corporate "plea bargains"


Although the court reluctantly fined the company an amount that the company had agreed to pay in total, the court did so on a different basis to that agreed, and commented unfavourably on such arrangements.


Innospec Ltd, an English company and a subsidiary of Innospec Inc, a US company, manufactured and sold TEL, a fuel additive.  Investigations of the Innospec entities by the US and UK authorities indicated that Innospec Ltd had paid bribes totalling an estimated US$8m to government officials in Indonesia and that Innospec Inc had bribed government officials in Iraq.

Discussions between the SFO in the UK and the SEC, OFAC and the DOJ in the US, and the Innospec entities resulted in an agreement that the Innospec entities should plead guilty to charges relating to corruption and pay predetermined penalties.  It was agreed that Innopsec Ltd would pay a third of the total amount, ie US$12.7m.  Although a higher amount could have been sought, the US and UK authorities agreed to accept the reduced penalties in light of the group's co-operation and the fact a larger penalty would bankrupt the companies.


In accordance with the agreement, Innospec Ltd was charged with corruption-related offences in England and pleaded guilty.  In sentencing the company, however, the court expressed a number of reservations about the way the matter had been dealt with.  In particular:

  • Sentencing was a matter for the courts, and not the SFO, which was limited to making submissions to the court as to the appropriate sentence.  The SFO should not agree a penalty with the offender or with other authorities.
  • Corruption of foreign government officials by corporates was a serious matter and more serious than, for example, cartel offences.  It would rarely be appropriate for such conduct to be dealt with by civil recovery orders (as had been proposed for part of the agreed sum).  The court indicated that the starting point for a fine in this case would have been a fine comparable to that imposed in the US and in the order of tens of millions of pounds; a fine of US$12.7m was "wholly inadequate to reflect the criminality displayed by Innospec Ltd".
  • The court nevertheless decided to impose a fine equivalent to the sterling value of US$12.7m on the basis that to do otherwise would be unfair and unjust, in light of the US-UK arrangement and its approval by the US Federal District Court.  As in R v Whittle (where the court was asked to impose a minimum sentence for a cartel offence set by reference to US considerations), however, the court was clearly reluctant to have its hands bound by arrangements agreed in the US.
  • It is critical for a company to be able to demonstrate that it has fundamentally changed and will not engage in corrupt activity in the future.  The court indicated that it would not have accepted a fine of US$12.7m if it had not been satisfied that Innospec Ltd had changed.
  • The court might be willing to approve compliance and monitoring regimes.  However, the court indicated that it would prefer any available money to be used to pay financial penalties rather than to run a monitoring regime.

Further Information

For more information please contact Jonathan Hitchin, or tel +44 20 3088 4818, Arnondo Chakrabarti, or tel +44 20 3088 4424) or Davina Given, or tel +44 20 3088 3768).




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