The Serious Fraud Office is embroiled in a fiasco that may inadvertently have settled the fate of José Sócrates, the Portuguese Prime Minister, and determined the outcome of that country’s elections in September.

Beyond Portuguese domestic politics, though, it could also lead to the decapitation of Eurojust, the European Union body designed to help to fight cross-border crime, and have wide implications for UK citizens who face prosecution under the proposed overseas bribery law.

Early this year the SFO wrote to the Portuguese authorities naming Sócrates as a suspect in a corruption investigation. The letter was leaked and sent shockwaves through Portugal. Sócrates was accused of bribery in 2002, when Minister for the Environment, over the building of the largest shopping complex in Europe. It was built by Freeport, a British company, on the Tagus estuary nature reserve, and opened by Prince Edward in 2004.

At about the same time the Portuguese police received an anonymous letter alleging bribes had been channelled to Sócrates by Freeport. Portuguese police wrote to the SFO in August 2005 requesting various pieces of evidence. There was little or no response. The Portuguese investigation apparently petered out, with no one arrested or formally classified a suspect.

Simultaneously, the SFO was investigating BAe and other allegations of overseas corruption pre-dating the Anti-Terrorism Crime and Security Act 2002 (where there was no jurisdiction to prosecute). Meanwhile, it apparently sat on the police request from Portugal, despite the implications for Portuguese democracy and its potential for the prosecution of UK citizens abroad accused of bribery.

When Freeport was taken over by the Carlyle Group in 2007, the SFO returned to the subject and that July, nearly two years after the request for information by the Portuguese authorities, Charles Smith, Freeport’s consultant in Lisbon, was interviewed under caution by the City of London Police. He denied the bribery allegation in spite of having been secretly filmed by Freeport in 2006 admitting the offence.

Even by the usual standards of crossborder fraud investigations, matters proceeded at a glacial pace. Portuguese sources suggest that there was little or no exchange of information until late last year when Portuguese and British authorities met in the Hague under Eurojust

The SFO proposed a joint investigation. The Portuguese authorities rejected this, saying that any admissions made by Smith in 2006 to Freeport were inadmissible in Portugal. The Portuguese Attorney-General issued a thinly veiled attack on the SFO lamenting its tardiness and stating that there was no admissible evidence of corruption by a government minister.

The SFO began its own investigation into the UK end of the scandal and launched an appeal for assistance from Portugal, requesting the collection of evidence about UK nationals. Unfortunately, the request named the Portuguese Prime Minister as a suspect in the UK investigation and the letter was entirely predictably leaked to the Portuguese press.

The Portuguese Attorney-General retaliated with a press release emphasising that the SFO had produced no relevant evidence and that a foreign police force could not make a suspect of a Portuguese citizen in this way.

Relations between the SFO and its Portuguese counterpart have become acrimonious and Eurojust has proved incapable of resolving matters. Meanwhile, Sócrates’ socialist Government took a hammering in last month’s European elections and is likely to lose the general elections — in no small part owing to the speculation and scandal surrounding the investigation.

With the SFO being seen as careless in labelling the Portuguese Prime Minister as a suspect, the president of Eurojust facing disciplinary proceedings, the grinding delay in cross-border investigations and constant leaking, international efforts have been gravely set back.

There are, nevertheless, encouraging steps both at home and abroad. Legislation introducing a standardised European evidence warrant will come into force by January 2011. This requires investigative authorities to provide other states with documentary evidence within 60 days of request.

Jack Straw, the Justice Secretary, has made it clear that he sees no reason why the Corruption Bill cannot be enacted before a general election. This will not only simplify and clarify the patchwork of offences on bribery and corruption, it will also create a specific offence of corrupting a foreign official and make it an offence for a company negligently to allow bribery by an employee or agent. This will help to settle issues of jurisdiction and facilitate the prevention of corruption as well as its prosecution.

The devastating consequences of white collar crime, as highlighted by the Bernard Madoff case, make it essential that lessons are learnt to develop and strengthen the proper channels of communication so that authorities may provide each other with admissible evidence when required.

Meanwhile, UK companies and citizens suspected of international bribery and corruption should expect more prompt and focused investigations — and ones less often derailed by the politics that have surrounded recent highly publicised requests for mutual international assistance.

Arturo John is a solicitor and Ben Rose a partner at Hickman & Rose

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