Today, 5 February 2021, the UK Supreme Court has handed down the long-awaited judgment on the extra-territoriality of the Serious Fraud Office’s powers to obtain documents. The Supreme Court held that Section 2 Notices do not have extra-territorial effect against a foreign company that does not carry on business in the UK. (R (on the application of KBR, Inc) (Appellant) v Director of the Serious Fraud Office (Respondent)  UKSC 2).
Facts and appeal
As we previously reported, KBR Inc. appealed the judgment of the Administrative Court, which had held that section 2(3) of the Criminal Justice Act 1987 (the CJA), under which the UK Serious Fraud Office (the SFO) could require a relevant person to produce relevant documents for an SFO investigation, has extra-territorial application to foreign companies in respect of documents held abroad where there was a “sufficient connection” between the foreign company and the UK. This wording is not included in the CJA itself. For further details of the original decision, see our article here.
Points in issue
It was common ground in the appeal that a Section 2 Notice could compel a UK company to produce documents held outside the UK. The issue in this case was whether a Section 2 Notice could compel a foreign company that did not carry on business in the UK to produce documents held outside the UK.
KBR Inc. argued that an interpretation of the CJA which would allow Section 2 Notices to have extra-territorial effect would go against what Parliament intended when it passed the legislation. The issue of international comity was raised, and KBR argued that given the formalisation of Mutual Legal Assistance through various treaties (MLATs), Parliament could not have intended to give the SFO such broad extra-territorial powers. In particular, it was questioned whether this outcome would be appropriate where the operation of such powers is not subject to the safeguards set out in MLATs.
The SFO argued that to restrict the power of Section 2 Notices in such a way that they would have no effect abroad would create a disconnect where UK authorities could prosecute a foreign company but not investigate it effectively outside of the UK.
Decision and reasoning
The Supreme Court noted that the starting point is the presumption that UK legislation is generally not intended to have extra-territorial effect. This presumption can be overturned by express words in the legislation or by necessary implication. There is no such express wording in section 2(3) itself nor in another other provision of the CJA.
The SFO argued that the extra-territorial effect of section 2(3) must be implied because its purpose – to facilitate the investigation of serious fraud (among other things), which often has an international dimension – could not otherwise be achieved. However, the Supreme Court held that there is nothing in the legislative history of the CJA that suggests that Parliament intended that section 2(3) should have extra-territorial effect. Rather, the Supreme Court found that legislative history shows that Parliament intended that evidence should be obtained from abroad by establishing reciprocal arrangements for co-operation with other countries through MLATs which are fundamental to principles of comity which govern relations between states.
The Supreme Court also noted that the Administrative Court’s decision to imply a “sufficient connection” test in section 2(3) was inconsistent with the intention of Parliament and would involve illegitimately re-writing the statute.
The Supreme Court’s decision confirms that the traditional presumption against extra-territoriality still applies and that the Court will not give effect to public policy considerations where that effectively involves the re-writing of legislation contrary to the intention of Parliament when it was enacted.
In practice, the decision limits the ability of the SFO to serve effective Section 2 Notices on the representatives of a foreign company while they are in the UK as a short-cut to the traditional MLAT route. It does not prevent them pursuing that traditional route. It is important to note that the decision is grounded in the facts of this case, and just because a company is registered outside the UK, it will not necessarily be outside the jurisdiction of a Section 2 Notice, if for example it carries on a business in the UK.
There remains another route for law enforcement agencies, including the SFO, to obtain extra-territorial data through the use of the US Clarifying Lawful Overseas Use of Data Act 2018 and the UK Crime (Overseas Production Orders) Act 2019. A Data Access Agreement signed by both the US and the UK Governments facilitates requests for electronic data related to serious crimes which are made directly to technology firms in the respective countries. This option offers a faster means of evidence-gathering by providing an alternative to the traditional mutual legal assistance regime, and is likely to become an increasingly important route to obtain company data and communications. For more information, see our blog.
The authors would like to thank Fran Garvey, trainee, for her contribution to this blog post.