UK Supreme Court limits extra-territorial reach of SFO investigations under the Criminal Justice Act 1987

On February 5, 2021, the Supreme Court of the United Kingdom ruled in favor of KBR, Inc., a US company, agreeing to quash a July 2017 notice issued by the Serious Fraud Office pursuant to section 2(3) of the Criminal Justice Act 1987 requiring KBR, under criminal penalty, to produce to the SFO documents held by the company outside of the UK.

KBR does not do business in the UK and does not maintain a place of business there.  Its subsidiary, Kellogg Brown and Root Ltd, is a UK company; but the SFO’s notice was directed to KBR, and not to the UK subsidiary, the documents requested were located outside of the UK, and the collating of the material required by the section 2 notice would be performed outside of the UK. 

KBR applied to the Divisional Court for judicial review to quash the notice on the grounds that (1) the notice requested materials held outside the UK from a company incorporated in the US and was therefore ultra vires;  (2) the director of the SFO erred in exercising his authority under section 2 despite his power to seek mutual legal assistance from US authorities; and (3) service of the notice was not effective. 

The application was dismissed, and the Divisional Court considered that the SFO’s power to compel the production of documents extends territorially to foreign companies in respect of documents held outside of the jurisdiction when there is a “sufficient connection” between the company and the jurisdiction. KBR appealed on the ultra vires question.  The Divisional Court certified two points of law, and the Supreme Court granted permission to appeal on those issues: i) whether the SFO can exercise its power under section 2(3) of the Criminal Justice Act 1987 to compel KBR, a non-UK company, to produce documents held by the company outside of the UK, and ii) if so, whether the SFO has the power to do so by reference to the “sufficient connection.”

In construing section 2(3) of the 1987 Act, the Supreme Court looked to the language of the statute, the legislative history and intent, and the presumption that UK legislation is generally not intended to have extraterritorial effect, as well as to the principles of international law and comity.  By analogy and in support of the presumption that, unless a statute clearly provides to the contrary, it will not have extra-territorial effect, the Court was referred to Serious Organised Crime v. Perry [2012] UKSC 35; [2013] 1 AC 182, in which the Supreme Court construed section 357 of the Proceeds of Crime Act 2002 as not permitting a disclosure order to be imposed on persons outside of the UK. 

In the current case, the Supreme Court ruled that the Divisional Court had no basis for applying a sufficient connection test, and allowed the appeal, holding that the SFO does not have the power under s2(3) of the Criminal Justice Act 1987 to compel the production of extraterritorial materials held by a non-UK company. 

UK Supreme Court Press Summary | Judgment 

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