The Court ruled in favour of the US company KBR, Inc. in R versus Director of the Serious Fraud Office. KBR had refused to comply with the SFO’s requirement to produce documents held overseas during an investigation into the company.
The SFO compelled KBR to do so in 2017*, based on the provisions of section 2 (3) of the Criminal Justice Act 1987 (CJA):
The Director [of the SFO] may by notice in writing require the person under investigation or any other person to produce […] any specified documents which appear to the Director [of the SFO] to relate to any matter relevant to the investigation or any documents of a specified description which appear to him so to relate.
In so ruling, the Supreme Court overruled the previous decision of the Divisional Court that held that even though there were not any clear provisions in the CJA regarding its extraterritorial application, the SFO could use the so called section 2 notice, provided that there was a “sufficient connection” between the foreign company and the UK.
According to the judgment of the Supreme Court, in investigating cross-border crimes the SFO cannotcompel a foreign company that has no UK registered office or fixed place of business and which has never carried on business in the UK, to produce documents it holds outside the UK.
The Court held that the conclusion made by the lower Court regarding the “sufficient connection” test in that context “would usurp the function of Parliament” and “would involve illegitimately re-writing the statute”. The Court stated that “when legislation is intended to have extra-territorial effect Parliament frequently makes express provision to that effect”. Therefore, the SFO can employ the already well established “machinery” of mutual legal assistance (MLA) to seek necessary documents.
The SFO has been using section 2 notices for many years. Their use suited not only the SFO that could promptly obtain necessary documents but also often recipients who were provided with a seemingly lawful basis to produce often confidential and sensitive documents to the SFO.
The ruling of the Supreme Court will considerably complicate the SFO’s operations as it will now have to resort to the slow and cumbersome MLA procedures.
Some experts rightly point out that the situation is further complicated by the recent Brexit as the UK lost access to certain investigatory powers it enjoyed by virtue of the UK’s membership of the European Union, such as the European Investigation Order (EIO), which enabled the SFO to quickly obtain evidence, including documents, located in the EU.
Therefore, the decision will require that the UK Government reconsiders the scope of the SFO’s powers, in order to ensure that it has the tools it needs to operate as a leading criminal enforcement agency also in foreign bribery cases.
*In 2017, the SFO opened an investigation into the activities of the UK subsidiary of KBR, Inc. - Kellogg Brown & Root Ltd - for suspected offences of foreign bribery. The SFO noted in a press release that the case was linked to the Unaoil proceedings (which we have mentioned here).
It should be also highlighted that in 2009 KBR, Inc. was held liable by the US law enforcement bodies for having violated the Foreign Corrupt Practices Act (FCPA). In 2016, the company reported that it was cooperating with the US law enforcement authorities investigating the Unaoil case.