Last week the UK’s Supreme Court delivered its judgment in R (on the application of KBR, Inc) v Director of the Serious Fraud Office [2021] UKSC 2. In a unanimous decision, the Supreme Court rejected the SFO’s argument that it had the power to compel the production of materials held overseas from companies incorporated outside the UK in the context of cross boarder criminal investigations. In doing so, the Supreme Court overturned the 2018 finding of the High Court that the SFO was so empowered in cases where the recipient of a request had a “sufficient connection” with the UK.
The Criminal Justice Act 1987 (“CJA”) provides wide ranging powers to the Director of the SFO to compel the production of materials from a suspect or any other person in connection with an investigation by issuing what is commonly referred to as a “section 2 notice”. The SFO issued a section 2 notice to a senior officer of KBR, Inc. during a meeting at the SFO’s offices on 25 July 2017. Representatives for KBR, Inc applied to have this section 2 notice quashed on the basis that, inter alia, the notice requested material held outside the jurisdiction from a company incorporated in the United States of America, and that the CJA had no extraterritorial application which would allow such a notice to be lawfully issued. On 17 April 2018 the High Court dismissed the application and found that, notwithstanding the lack of express wording within the CJA, the policy underlying the CJA powers must have intended for there to be an element of extraterritoriality. Lord Justice Gross concluded that the relevant sections of the CJA, “extends extraterritorially to foreign companies in respect of documents held outside the jurisdiction when there is a sufficient connection between the company and the jurisdiction” (emphasis added). The court found that, as a result of KBR, Inc.’s UK subsidiary and their connection with the issues under investigation, there was a sufficient connection, and therefore the section 2 notice was lawful.
The Supreme Court unanimously overturned this decision. The Court found that to uphold the finding of a ‘sufficient connection’ test in this context would, “usurp the function of Parliament” and, “involve illegitimately re-writing the statute”. Delivering the judgment, Lord Lloyd-Jones referred to the already well established “machinery” of mutual legal assistance available to the SFO when seeking materials held outside the jurisdiction, and stated, “It is to my mind inherently improbable that Parliament should have refined this machinery as it did, while intending to leave in place a parallel system for obtaining evidence from abroad which could operate on the unilateral demand of the SFO, without any recourse to the courts or authorities of the State where the evidence was located and without the protection of any of the safeguards put in place under the scheme of mutual legal assistance”. There was therefore no basis to suggest a judicially developed ‘sufficient connection’ test applied to the exercise of CJA powers, and the SFO were not entitled to seek production of these materials by reliance on those powers. Instead, the well-established mutual legal assistance framework was the proper mechanism for seeking such materials held outside the jurisdiction.
This important judgment is delivered at a time when cross border criminal investigations are common place, due in large part to a more globally connected and technologically advanced business landscape than existed at the time of the CJA’s commencement in 1987, and at a time when the criminal justice agencies in the UK have lost access to certain investigative tools, such as the European Investigation Order, as a result of Brexit. On the one hand, whilst the SFO still has available to it the mutual legal assistance framework, this decision will undoubtedly be a blow to the SFO, who are empowered to prosecute overseas companies, but must now seek to do so with limited extraterritorial investigative powers. On the other, this decision is an important affirmation that global cooperation in criminal matters remains subject to checks and balances that preserve State sovereignty and respect for international law.
