Author: Azizur Rahman
9 February 2021
3 min read
Aziz Rahman of Rahman Ravelli assesses the implications of the Serious Fraud Office’s defeat in a Supreme Court case relating to the agency’s use of Section 2 of the Criminal Justice Act to obtain documents held in other countries.
On February 5, 2021 the Supreme Court’s judgment in the case of R (on the application of KBR, Inc) v Director of the Serious Fraud Office made it clear that the Serious Fraud Office (SFO) could not use section 2 of the Criminal Justice Act 1987 to force KBR to hand over documentation held abroad.
But while the Supreme Court’s decision may make it more difficult for the SFO to carry out cross-border investigations - and raises questions about the effectiveness of the Criminal Justice Act - it should not be seen as a sweeping ban on international use of section 2 notices.
The US-based company KBR was arguing that a notice issued under section 2 (3) of the Act – which compelled the company to disclose information – could not have such extraterritorial reach. The Supreme Court agreed with KBR. In judgement, the Court said the UK parliament had not intended for section 2 notices to be used in this way. It rejected the SFO’s argument that the Criminal Justice Act could be interpreted as giving it the power to compel companies to produce evidence that is held in other countries.
Yet while the SFO’s powers have been clarified (and restricted) by the judgement, this should not be seen as a total bar on the agency’s efforts to use section 2 to seek documents held abroad. The judgement relates to KBR, which is a foreign company that has never conducted business in the UK and does not have a registered office (or any other presence) here. Any variation of these circumstances could mean the SFO may succeed with its use of section 2 in cases that cross borders.
The Supreme Court itself noted that a UK company could be compelled to produce documents that it holds overseas. And if a section 2(3) notice for documents held overseas was served on a foreign company that conducts business in the UK and/or has a registered office here, it would be hard for that company to argue that the notice is less valid than one served on a UK firm (although much may depend on the extent of the foreign company’s presence and activities in the UK). Should a section 2(3) notice for documents held in the UK be served on a foreign company that does not conduct business in the UK and has no UK registered office, it would seem unlikely that the SFO could be denied the right to compel the production of material that is already in the country.
In the three situations outlined above, it seems as if the SFO has more scope for using section 2(3) than it had it in the KBR case. It would be inaccurate, therefore, to see this judgement as preventing the SFO using the Act in all cases where there is an international element.
In the KBR case, the SFO had issued the section 2 notice in 2017. The High Court had then rejected KBR’s judicial review claim of the notice in 2018. In doing so, the High Court stated that a section 2 order can have extraterritorial reach, as long as there is a “sufficient connection” between the company and the UK.
But the Supreme Court said that the lower court’s “sufficient connection” standard is not supported by the language of section 2 of the Criminal Justice Act. This is a notable blow to the SFO.
Looking at how the SFO conducted this case can prompt questions about decisions taken by the agency. But its belief that section 2 notices need to have international reach is understandable, given the transnational nature of a lot of the crime it investigates. With the Supreme Court now having made it clear that there are limits to the scope of section 2 notices, doubt has now been cast over the future usefulness of this part of the Act.
The Supreme Court expressed its belief that the UK parliament intended for information held abroad to be obtained by well-established international evidence-sharing procedures, such as the Mutual Legal Assistance Treaty. But the SFO not being able to resort to such use of section 2 notices is likely to slow the pace of its investigations.
The SFO has had overseas production orders at its disposal since 2019. These do give the agency some scope when it comes to seeking data that is held abroad from communications providers. In the past, the SFO Director Lisa Osofsky has been quite open in calling for changes to the law; particularly regarding the creation of an offence of failure to prevent economic crime and on the issue of corporate liability. It would hardly be surprising if she now argued for changes to be made in relation to section 2 notices; on the basis that the law is not now equipping her agency with the tools it requires.
The KBR case has highlighted the important issue of the effectiveness of the Criminal Justice Act and made clear the international limitations imposed on the SFO regarding section 2 (3). Yet while this judgement has denied the SFO use of section 2(3) in this case, it will not apply to every set of circumstances when the agency will be seeking documentation from abroad and / or from a foreign company.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.