UK: Executives Confront New Extradition Threat

This article originally appeared in the September 2005 issue of International Financial Law Review.

The reach of US law has recently been extended. A new fast-track extradition regime between the US and the UK, coupled with the aggressive approach of the US authorities towards prosecuting alleged white-collar criminals and the willingness of the US courts to adopt a broad approach to assuming jurisdiction over a defendant, means UK executives are facing heightened risks of being extradited from their home country to the US for alleged white-collar crimes.

If extradited to the US, they face a judicial system where plea-bargaining is prevalent, conviction rates in some US courts exceed 90% and sentences are stiff. The 25-year sentence handed down to Bernie Ebbers, ex-WorldCom chief executive demonstrates the US crackdown on white collar crime.

Given that almost all UK businesses have some link to the US, whether it be direct (for example, a subsidiary or branch office) or indirect (for example, a customer or a shareholder) it is imperative that UK businesses are aware of the risk of investigation and prosecution by US authorities. Even links to the US that would be viewed by most as flimsy might be enough to find jurisdiction in the US: an email or fax that crosses US borders could be enough. As a result, an individual can fall within the jurisdiction of the US courts without ever having carried out any substantive business in the US or, indeed, visited the country.

Also, because the new extradition arrangements between the US and the UK have only been ratified by the UK, a one-way street has been created. UK citizens are subject to the new US/UK extradition regime, which does not require any evidence to make a successful extradition application, while US citizens still benefit from the protections afforded by the previous extradition arrangements.

Pressure is being brought to bear in the UK parliament, numerous extradition cases concerning UK citizens are being fought and the High Court has granted two judicial review applications arising from the extradition arrangements. But whatever the outcome of these challenges, the new extradition regime and associated risks for UK executives will stay, in the short-term at least.

The case of Ian Norris, one of the UK’s highest profile extradition cases, illustrates the flaws of the new regime. Norris is the ex-chief executive of The Morgan Crucible Company plc, a blue-chip UK company that manufactures carbon products. Morgan is alleged to have had dealings with a European cartel that extended to the US. Despite the fact that the alleged cartel was European and was dealt with by the European Commission in 2003, the US authorities proceeded with criminal charges against some individuals, including Norris, in respect of peripheral instances of price-fixing that are said to have occurred in the US.

Under the old regime, price-fixing would not have been an extraditable offence because it did not appear on the specified list of extraditable offences. However, under the 2003 Act, even though price-fixing offences were not criminal in the UK at the time they were said to have been committed, the US Department of Justice (DoJ) proceeded with an extradition request on the basis that price-fixing might amount to the English common law crime of conspiracy to defraud, in an attempt to observe the rule of dual criminality. The DoJ is not deterred by the fact that a UK citizen has never before been prosecuted for conspiracy to defraud in relation to price-fixing offences.

Norris has no way to properly contest the charges in the English courts. The extradition request is based on information set out in the US indictment and in an affidavit by one of the prosecuting lawyers at the DoJ. The English courts must accept this information and are unable to examine the evidence, or lack thereof, relating to the charges.

Norris’s case shows that the DoJ will target UK citizens in circumstances where the alleged conduct took place primarily outside the US. It is of no consequence that the vast majority of the evidence required for a substantive defence of the allegations is based outside the US; there is no concept of ‘natural forum’ in extradition. If extradited, Norris will have to defend the charges from the US, far from where the actual evidence is based, and possibly from prison if bail is not granted.

The Extradition Act 2003 and the 1972 Extradition Treaty between the UK and the US govern the US/UK extradition process. In 2003, a new extradition treaty was agreed between the UK and the US to ease the extradition process from both the UK to the US and the US to the UK. Although the provisions of the 2003 Treaty have been implemented in the UK, they are not in force in the US, since the 2003 Treaty is yet to be ratified there. At this time, the US Senate has not scheduled any ratification vote.

Under the previous regime, offences had to appear on a list of specified offences considered serious enough to warrant a case for extradition. But under the 2003 Act now just two essential requirements must be met for an offence to be classified as an extradition offence. The first is that the alleged conduct constitutes a crime in both the UK and the US, that is, there must be dual criminality. The second is that the crime in each country carries a potential prison sentence of at least 12 months. The result is that almost all financial crimes in the UK will fall within the definition of an extradition offence.

In tandem with this, US authorities now need not provide any evidence of the alleged offences. Previously, the US had to produce evidence demonstrating a prima facia case. But now a US prosecutor only has to provide a so-called hearsay affidavit that sets out the allegations of the suspected crimes. There are no safeguards regarding the source of information; this is left to the discretion of the individual prosecutor. Furthermore, even if the defendant is completely innocent of the alleged offences, there is no opportunity for a UK citizen to contest the actual charges in England.

Contesting an extradition request from the US within this new framework is challenging. The 2003 Act contains bars to extradition, but although these bars provide limited possibilities of defending an extradition request, in most cases of extradition to the US they will be irrelevant. Furthermore, new statutory time limits on the extradition procedures have been imposed and rights of appeal curtailed. The initial extradition hearing at London’s Bow Street Magistrates’ Court must begin within three months of the date of arrest. Even in the most complex cases, the hearing is unlikely to take more than a few days. The request for extradition is then sent to the UK Secretary of State to make an order for extradition. Whereas the Secretary of State previously had discretion whether or not to make an order for extradition, under the new arrangements this discretion has been removed.

Following the Secretary of State ordering extradition, there are two levels of appeal. The first is to the High Court; the second is to the House of Lords. It might also be possible to appeal points under the Human Rights Act to the European Court of Human Rights.

Statistics from the Home Office state that, to date, the US has made 39 extradition requests of the UK under the new regime and that of these 12 are for offences involving fraud. The Home Office does not collate statistics for extradition requests relating to white-collar crime, but it has been widely cited in public and parliamentary debate that about half of US extradition requests to the UK under the new regime have been for white-collar offences.

Whatever the precise statistics, one matter is certain: although the roots of the new extradition regime lie in the effort to combat international terrorism, it is clear that the US DoJ intends to use the powers granted to it within the new framework to target alleged white-collar criminals.

If enough pressure is applied, there is the possibility that the Treaty will be ripped up altogether: the termination clause in the 2003 Treaty provides that either state may terminate the Treaty at any time by giving written notice to the other state effective six months after the receipt of such notice. Alternatively the UK Government may remove the US from the list of designated States in the Extradition Act 2003 that are permitted to dispense with prima facie evidence: this is the crux of Ian Norris's application for judicial review regarding current US/UK extradition procedures, which was granted in July of this year.

A third outcome is that the US may sign the 2003 Treaty, although there is no indication that this will occur this year.

Whatever the imbalances and injustices of the current UK/US extradition regime, its existence is a fact and UK businesses should be taking a long hard look at themselves to ensure they have adequately analyzed and prepared for the risk of doing business with the US.

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