UK: UK Supreme Court Ruling On Territorial Extent Of SFO's Powers Impacts SFO's Evidence Gathering Capabilities

On February 5, 2021 the Supreme Court handed down judgment in the case of R (on the application of KBR, Inc) v Director of the Serious Fraud Office, finding in favor of the Appellant, KBR, Inc (KBR).¹ This high-profile case concerned the territorial extent of the UK Serious Fraud Office's (SFO) powers under Section 2 of the Criminal Justice Act 1987, so-called ‘Section 2' or ‘Here and Now' Notices (S2 notices). The outcome has implications for the SFO's evidence gathering capabilities.

KBR was incorporated in the USA, had no registered office or fixed place of business in the UK, and did not carry on business in the UK. In 2017, one of its UK-based subsidiaries, Kellog Brown & Root Ltd, was under investigation by the SFO. In July of that year at a meeting in London, the SFO served an executive vice-president of KBR with a S2 notice, requiring the US parent company to produce documentary material held abroad. Failure to comply with a S2 notice carries a criminal penalty. KBR resisted the S2 notice and brought a judicial review, which was dismissed by the Divisional Court. KBR appealed to the Supreme Court on the ground that the statutory power under Section 2 does not have extraterritorial effect, and accordingly the S2 notices were unlawful. The Supreme Court agreed with KBR and allowed the appeal.

The Supreme Court noted that it was common ground between the parties that a UK-based company would be required to produce a document that it held overseas following a S2 notice. The court confirmed that its judgment did not restrict the effect of Section 2 notices when served upon companies that had a registered office or fixed place of business in the UK, or that carried on business in the UK.² The fact that KBR's officer was in the UK when she was served with the S2 notice was irrelevant (forestalling any risk of the SFO luring unwitting officers of foreign companies to meetings in the UK). The Supreme Court found that the correct mechanism for the SFO to obtain the relevant evidence would have been via a mutual legal assistance request to the US authorities.³

Footnotes

1 [2021] UKSC 2.

2 Para 26. 

3 Paras 44 to 45.

Originally Published by WilmerHale, February 2021

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