Last week the Supreme Court heard the long-awaited appeal in the case of R (KBR Inc) v Director of the Serious Fraud Office. The issue before the Court was: can the Director of the Serious Fraud Office ("the SFO") issue a notice under section 2(3) of the Criminal Justice Act 1987 ("the CJA 1987") to a foreign company requiring the production of documents held abroad ("the s2 Notice")?
KBR Inc ("KBR"), a US-incorporated company, challenged the validity of the s2 Notice served on one of its officers who had attended a meeting at the SFO pertaining to the SFO's investigation of KBR Ltd (a UK company), a subsidiary of KBR. The Notice required KBR to produce documents held abroad. KBR challenged the s2 Notice but, in September 2018, the High Court rejected KBR's challenge on the basis that:
- Section 2(3) of the CJA 1987 ("section 2(3)") has extraterritorial effect and does extend extraterritorially to foreign companies in respect of documents held outside the jurisdiction when there is a sufficient connection between the company and the jurisdiction [own emphasis];
- Mutual Legal Assistance ("MLA") is additional to, and not primary to, the SFO's powers under section 2 of the CJA 1987; and
- Section 2 of the CJA 1987 does not have any requirements of 'service'.
This was undoubtedly a decision that caused much concern; this meant that the SFO could, outside the slow but conventional MLA route, compel a foreign company (provided there existed a "sufficient connection"), under pain of criminal sanction, to produce material held abroad. Furthermore, it meant that there was a basis upon which, by extension, other law enforcement agencies in the UK could utilise their compulsory powers under domestic laws to obtain material held abroad, rather than relying on MLA. Perhaps not unsurprisingly, KBR sought to challenge the High Court's ruling in the Supreme Court by way of the rarely used leapfrog appeal procedure.
In arguing that the SFO does not have the power under section 2(3) to issue a notice to a foreign-incorporated company requiring the production of documents held abroad, KBR's arguments included the following points:
- There is a presumption that a statute does not have extraterritorial effect, not least because it would otherwise be a breach of international comity. The intention of Parliament was to address extraterritorial effect, in the context of the investigation of crime, through international agreements;
- The terms of the CJA 1987 did not contain anything that positively supported the view that it was intended to have extraterritorial effect. It was unlikely that Parliament intended, by implication [own emphasis], that the SFO should unilaterally have the power under the CJA 1987 to demand a foreign corporation to provide documents located abroad on pain of suffering criminal sanctions, when Parliament had consistently focussed on international cooperation as the route to deal with this issue;
- Whilst the SFO argued that MLA had its limitations – such as there being jurisdictions with whom there were no MLA treaties – that was a matter for Parliament to resolve, and not the Court. Parliament had addressed the question of obtaining evidence for criminal investigations from abroad through MLA. For the SFO to argue that there was no compulsion to utilise MLA was, whilst correct, to miss the point; if the SFO wished to obtain evidence from abroad for the purposes of investigation, then its power was through the MLA route, and not section 2(3);
- Whether to introduce a 'substantial connection' test (as applied by the High Court) into section 2(3) would be a question to be answered by legislation, rather than one of judicial interpretation; and
- It was accepted that there was, of course, a strong public interest in the investigation of crime, but the legal question before the Court was how Parliament intended that public interest to be advanced.
The SFO's arguments
In seeking to resist the appeal, the SFO argued inter alia that:
- It had to be borne in mind that the SFO had to deal with complex, multi-jurisdictional investigations, and the SFO needed to ensure that it could perform its functions of investigating such matters effectively. There was a very strong public interest, both nationally and internationally, in ensuring effective investigation by the SFO;
- As the SFO can prosecute an overseas company under the Bribery Act 2010, it would be surprising if it could not access relevant materials when seeking to find out whether such a company had been involved in a bribery offence;
- Parliament cannot have intended a jurisdictional limit to section 2(3); Parliament must have intended that section 2(3) would assist in the investigation of serious crime of the type with which the SFO was charged. The intention of section 2(3) was to provide as long a reach as possible; and
- MLA provisions are permissive and explicable as creations of legislative power. However, they are not indications of a Parliamentary intention that MLA should be the exclusive means by which this sort of information be gathered: as the High Court held, the powers of MLA are additional to section 2(3). To treat MLA as the exclusive means through which the SFO can access material held abroad by a foreign company would be to risk its ability to conduct effective investigations.
Although we must wait until the judgment is handed down, it is shaping up to be one of particular significance with important practical consequences if the SFO successfully resists KBR's appeal. There is no dispute that law enforcement agencies need to conduct their investigations swiftly and effectively, and there is force in their complaint that MLA entails notoriously laborious (occasionally non-existent) processes. However, the question at hand is whether this need should open the door to the courts (as opposed to Parliament) conferring on law enforcement agencies a range of domestic statutory powers with extraterritorial reach, when this would require the courts to infer Parliamentary intention about a matter on which the legislation is expressly silent. By way of comparison, section 43 of the Investigatory Powers Act 2016 explicitly imposes a mandatory requirement on, inter alia, overseas postal or telecommunications providers to assist in the retrieval of overseas data, and section 85 expressly provides for the extraterritoriality of certain provisions.
Does the solution lie in encouraging greater and speedier co-operation where MLA arrangements exist, rather than looking to extend the reach of domestic powers? And is it not incongruous that the Supreme Court is being asked to endorse a wholesale change in the way these domestic powers are interpreted and might be used to obtain evidence held overseas, particularly at a time when Parliament has recently explicitly legislated to provide statutory mechanisms for these purposes in the form of Overseas Production Orders and European Investigation Orders? If MLA is to be "additional to, and not primary, to" section 2(3), there is a strong argument that Parliament should provide for this expressly in legislation.
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