The UK Serious Fraud Office (SFO) announced on 1 October 2009 that it will seek the Attorney-General's (AG) permission to prosecute BAE Systems (BAE) over allegations of corrupt activities in relation to deals to sell arms to Tanzania, South Africa, the Czech Republic and Romania. It has been reported (although not announced by the SFO) that this decision has been taken following the breakdown of plea negotiations.

Any agreement reached between BAE and the SFO under the Attorney-General's Guidelines on Plea Discussions in Cases of Serious or Complex Fraud (AG's Guidelines) would require a guilty plea from BAE. It would appear that this was not the issue preventing agreement; rather that they were far apart in terms of an acceptable penalty.

It is easy to understand why the negotiations may have failed. The SFO has secured only one conviction of a corporate defendant for overseas corruption (Mabey & Johnson) and that was by way of a plea agreement. Pleading guilty would be a difficult decision for the BAE directors, considering the uncertainty of a conviction at trial and the lack of precedents from which to gauge an acceptable penalty. Equally, there are obvious reasons why a plea agreement would be desirable for BAE, not least certainty as to penalty and considerable savings on legal costs.

Unless it pleads guilty, BAE can only be convicted if one or more of its senior managers is also convicted. Has the trial of the individuals and/or BAE been prejudiced by the reports in the media about the plea negotiations? It has been reported that any trial would be by a judge only and not a jury, and if so, this may not be an issue. However, the legislation that would allow a judge only trial (section 43 of the Criminal Justice Act 2003) has yet not been enacted.

There may now be a good argument for saying that a fair trial is no longer possible because any jury is bound to be improperly influenced by the knowledge that BAE was considering pleading guilty.