Legal threats in the UK and US see Murdoch's companies hire extra counsel

It may have taken News International and the Metropolitan Police far too long to take allegations of widespread phone-hacking by now-defunct Sunday tabloid the News of the World (NoW) seriously, but they are certainly making up for lost time now.

With the ongoing saga seeing senior figures stand down on a daily basis, the story is moving so fast that articles are out of date almost as soon as they are published. But what doesn't look likely to change quickly are the huge potential legal ramifications facing Rupert Murdoch's empire, both here in the UK and in the US, with the company facing the real possibility of substantial civil litigation claims from victims and shareholders, as well as criminal proceedings.

While in the UK the investigation is so far still in the hands of the police, who are targeting individual journalists and executives, the real concern for News Corporation will be what unfolds in the US. With the US' far tougher record of pursuing civil and criminal enforcement against corporate wrongdoing, not to mention the near-inevitable fallout from stock-drop securities litigation, the possible downside is far higher there than the reputational and political damage being done in the UK.

So far, the early FBI investigation has focused on allegations that the phones of 9/11 victims were hacked by NoW, but the allegations of police bribery by journalists at the paper mean News Corp faces the possibility of investigation under the much-feared Foreign Corrupt Practices Act (FCPA), which has huge global reach.

Although no investigation had been confirmed at press time, the UK's Serious Fraud Office (SFO) has already spoken with the US Department of Justice and has stated that it will work with the department should it decide to launch proceedings under the FCPA. Ironically, for a scandal that started here, the SFO would likely play second fiddle to the US.

Although the SFO has confirmed that it will consider holding its own UK investigation in response to political pressure, advisers suggest this is less likely as the Bribery Act, which came into effect this summer, is not retroactive and the scale and complexity of the scandal does not fit with its normal remit.

One regulatory partner comments: "It's fascinating and reminds me of BAE. Of course, it's of huge public interest here but the way the US will view this is that it is the primary regulator of News Corp. That's the interesting thing about bribery [investigations]… the extra-territoriality."

A former SFO lawyer adds: "It wouldn't make sense to pursue News Corp under the bribery laws that were in force prior to July. The FCPA is much more powerful and will allow the US Government to hang News Corp out to dry."

The appointment of a number of senior lawyers on both sides of the Atlantic in recent days gives some indication of how seriously News Corp is now taking the threats. In the UK, News Corp, which has appointed Olswang to advise on clean-up operations at News International, this week named Lord Grabiner QC as the chair of a new high-level standards committee charged with leading the company's response to the hacking claims.

Meanwhile, in the US, the company, which has traditionally turned to Skadden Arps Slate Meagher & Flom and Hogan Lovells, has appointed star partner Brendan Sullivan at litigation leader Williams & Connolly as its primary outside counsel. Whether justified or not, these legal threats will not abate soon.

As one litigation partner comments: "Whether you're looking at the regulatory aspects, the wider litigation or the potential commercial aspects, it is going to be a fascinating, politicised process here and in the US."