High Court slashes SFO’s damages bill in ongoing litigation with mining giant

The High Court yesterday dismissed an application brought by mining giant Eurasian Natural Resources Corporation (ENRC) to add $91m (£77m) to its claim for damages over a failed Serious Fraud Office criminal investigation.

The Kazakh company sought to make two amendments to its claim, including that its losses should include the diminution in value of ENRC and its affected subsidiaries as well as its increased borrowing costs as a result of the SFO’s criminal investigation.

ENRC claimed that in borrowing costs and in commercial terms, its total incidental cost or losses as a result of the criminal investigation totalled $91.3m (£77.1m) with 14% of the claim ($12.6m) relating to borrowing by ENRC itself and the remainder related to borrowing by the company’s subsidiaries.

Handing down judgment in the Rolls Building, Mr Justice Waksman said that if the amendment was allowed, the SFO and other defendants – which include international firm Dechert and its former head of white collar crime Neil Gerrard – would be prejudiced. ENRC would also face prejudice as it could not claim for its losses in the subsidiaries that 'make up most of the claim’, the judge said. The company was ‘the author of its own misfortune’ and should have claimed the damages it now sought at the outset of the claim.

Following the ruling, an SFO spokesperson said: ‘All damages must be based on proof of loss. We welcome today’s decision which substantially reduces the damages that may be recovered in this case. This matter remains ongoing and any damages awarded are yet to be determined.’

The SFO had made a £237m provision in its annual report and accounts for damages to be paid to ENRC which is expected to now be ‘substantially less’.

The judgment is the latest in a long-running and multi-pronged litigation which centres on the SFO’s decade-long investigation into the mining company over alleged bribes paid to secure access to mining contracts. The SFO opened a criminal investigation into ENRC in 2013 which it closed in August 2023, due to ‘insufficient admissible evidence to prosecute’.

The phase 2 trial, which will deal with quantum, follows Mr Justice Waksman’s judgments on causation and loss claimed by ENRC for unnecessary work, legal costs and wasted management time. An earlier trial, which took place in 2021, was concerned with liability.

A spokesperson for ENRC said: ‘We disagree with the judgment and the dismissal of some losses on a technical basis. We are considering appealing and/or filing new claims from subsidiaries and affiliates of ENRC Ltd for the losses that have been incurred by them as a direct result of the unlawful criminal investigation.

‘The wrongdoings of the SFO and Dechert have had a profound and lasting impact on ENRC’s business for over a decade, resulting in significantly increased borrowing costs and hindering the company's growth. While we have only claimed for losses such as legal fees and higher borrowing costs, the full extent of the damage caused by the SFO and Dechert’s reprehensible conduct far exceeds these figures.’