Victor Dahdaleh corruption trial collapses

The Serious Fraud Office's ability to prosecute complex cross-border cases faces intense scrutiny after the collapse of British-Canadian billionaire Victor Dahdaleh's trial - one of the highest-profile bribery prosecutions for years.

The trial was halted on Tuesday after Judge Nicholas Loraine-Smith directed the jury at Southwark Crown Court to return a not-guilty verdict on all charges against Mr Dahdaleh.

The SFO said it was offering no evidence in the case, after a witness changed his evidence and two US lawyers declined to testify in court.

Mr Dahdaleh had denied the eight counts of corruption, conspiracy and money-laundering brought by the agency.

The trial included allegations that Mr Dahdaleh had paid bribes of £38m to a senior member of the Bahraini royal family to win contracts - worth at least $3bn - between Alba, the Gulf state's national aluminium company, and western businesses.

The trial collapse came after the judge asked the SFO to reconsider its position due to concern over an aspect of the case: that it had "delegated" investigation duties in Bahrain to US law firm Akin Gump, which was engaged in a "hotly contested" US civil lawsuit against Mr Dahdaleh.

Last week, SFO case officer Sasi-Kanth Mallela, under cross-examination in the trial, denied delegating the case investigation to Mark MacDougall, a lawyer at Akin Gump.

However, Judge Loraine-Smith interjected: "you delegated the investigation in Bahrain to Akin Gump", to which the SFO investigator replied: "That's right".

This is the latest blow for the SFO, which has been involved in a series of controversies, including a £300m legal claim from the Tchenguiz brothers, property entrepreneurs, after the agency's botched investigation of them.

Last night, the SFO said Alba gave documents to Akin Gump, the company's lawyers and that the agency had asked for specific items under disclosure processes. The SFO added: "No aspect of this investigation was outsourced".

Philip Shears QC, barrister for the SFO, told the jury on Tuesday that he had discussed matters at the "highest level" with the SFO and the attorney-general. They accepted there was no longer a realistic prospect of conviction, after a witness, Bruce Hall, who had earlier pleaded guilty, changed his evidence in the witness box. Akin Gump lawyers were also unwilling to come to court, he told the jury.

The case raises questions about the SFO's use of external companies, as it steps up complex investigations spanning several jurisdictions.

Labour MP Emily Thornberry, shadow attorney-general, said she was supportive of the SFO bringing prosecutions, but there should not be a conflict of interest in companies used to assist investigations. They should be able to be strong, credible witnesses in any trial, she said.

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"You need to bear in mind these people need to give evidence in court and have a robust case," she added.

The trial has had several dramatic twists and turns.

In April, Mr Dahdaleh's trial was postponed for months after allegations that two senior lawyers at Allen & Overy, who were then defending Mr Dahdaleh, put "substantial pressure" on prosecution witness Mahmood al-Kooheji, chairman of Alba, at a meeting attended by Mr Dahdaleh and his Bahraini lawyer.

Mr Dahdaleh's bail conditions included not contacting prosecution witnesses. He had to change his legal team and his bail was revoked.

Last week Judge Loraine-Smith had to caution Mr Kooheji not to talk to Mr MacDougall - at that time still due to give evidence - after the pair were seen by Mr Dahdaleh's lawyers having lunch on the first day of Mr Kooheji's witness evidence.

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