Two years have passed since the High Court decision in R (On The Application Of KBR Inc) v The Director of the Serious Fraud Office  EWHC 2368 (Admin) (“KBR”) (see our summary of the decision here). Yesterday, the Supreme Court heard KBR’s appeal (“Appeal”) against that ruling, which had determined that the Serious Fraud Office (“SFO”) can require a foreign company to produce documents held overseas, pursuant to section 2(3) of the Criminal Justice Act 1987 (“CJA”). Lord Pannick QC represented KBR Inc and Sir James Eadie QC represented the SFO.
At first instance, the High Court held that section 2(3) CJA, under which the SFO can require a relevant person to produce documents for an SFO investigation, had extraterritorial application to foreign companies in respect of documents held abroad, where there was “a sufficient connection between the company and the jurisdiction.”
The KBR decision has the potential for wide-ranging impact, in particular given that the arguments for and against extra-territoriality in the context of production powers could apply equally to other investigatory bodies. Indeed, since KBR, the tax case of Jimenez, R. (On the Application of) v The First Tier Tribunal (Tax Chamber)  EWCA Civ 51 followed the decision, with the Court of Appeal confirming that HMRC can issue an information notice in respect of a person residing abroad. Both KBR and Jimenez distinguished the earlier case of Perry & Ors v Serious Organised Crime Agency  UKSC 35, in which the Supreme Court had set aside freezing and disclosure orders (under the Proceeds of Crime Act 2002) on the basis that the court did not have the power to make orders against persons/property located outside the jurisdiction (the point was subsequently addressed in legislation).
The Appeal went ahead yesterday, notwithstanding that, in August 2020, KBR Group stated that the US Department of Justice and the SFO were no longer continuing the underlying investigation into it, in respect of alleged corrupt payments to Monaco consultancy Unaoil. Given the importance of the point broadly, the continuation of the challenge is welcome.
Arguments heard in the Supreme Court included:
- The role of Parliament versus that of the Court: i.e. which is the more appropriate to decide on the extraterritorial application of an investigatory power.
- Provisions of the CJA: an assessment of the terms of the Act and overall consideration as to whether it was drafted with the intention of conferring extraterritorial powers upon the SFO in the manner seen in this case.
- International comity and the existence of Mutual Legal Assistance (“MLA”) agreements: specific consideration as to whether, given the formalisation of MLA through various treaties, Parliament can have intended to confer on the SFO such a broad extra-territorial interpretation of their section 2 powers, or indeed whether that is desirable, in particular where the operation of such powers is not subject to the safeguards set out in those MLA treaties.
- Practical implications: including where jurisdictional limits should be set if documents are held on the Cloud and/or the location of documents is practically difficult to identify.
The High Court decision was not uncontroversial, in particular given the concept of “sufficient connection” to the UK, which is language which does not feature in the CJA. Readers will have to stay tuned to see whether the Supreme Court confirms that the SFO’s powers should have been applied in this way. The Appeal was heard on 13 October 2020 in the Supreme Court by Lord Lloyd-Jones, Lord Briggs, Lady Arden, Lord Hamblen and Lord Stephens. Judgement is expected to be handed down in due course and readers will be updated when this happens.
Written by Kate Meakin, Partner, and Rebecca Heptonstall, Trainee Solicitor.