Supreme Court decides that SFO does not have the power to compel a foreign party to produce documents held overseas

• United Kingdom

• Financial services disputes and investigations
• Litigation and dispute management - Disclosure Other

11-02-2021

R (on the application of KBR, Inc) v Director of the Serious Fraud Office [2021] UKSC 2

Facts of the case

• On 25 July 2017, as part of a criminal investigation into KBR Ltd, the UK subsidiary of US company KBR Inc, the Serious Fraud Office (“SFO”) issued a notice pursuant to Section 2(3) of the Criminal Justice Act 1987 (the “CJA”) requiring KBR Inc to produce documents held by it outside the UK. KBR Inc applied to the High Court for permission to apply for judicial review and, if permission was granted, the quashing of the notice.
• In a decision handed down in April 2018 and discussed in an earlier edition of ESCOU, the High Court granted KBR Inc permission to apply for judicial review, but subsequently found that it preferred the SFO’s arguments on jurisdiction, and its construction of section 2(3) of the CJA, and dismissed KBR Inc’s claim.

• In its judgment, the High Court held that KBR Inc’s “own actions make good a sufficient connection between it and the UK” in that certain payments which had featured centrally in the SFO’s investigation of KBR Ltd had been approved by KBR Inc and paid through its treasury function, which was based in the USA. This view was strengthened by the fact that one of KBR Inc’s senior corporate officers was based in, and worked from, the UK at the relevant time.

The decision

• The Supreme Court allowed the appeal, ruling that section 2(3) of the CJA does not have extra-territorial effect when considering evidential material held outside of the UK jurisdiction by a non-UK company.
• Agreeing with KBR Inc, the Court indicated that the starting point when interpreting section 2(3) of the CJA is the presumption that UK legislation is not intended to have extra-territorial effect. If there was an intention for legislation to have extra-territorial effect, this would ordinarily have been made clear by the inclusion of express wording: this does not feature in section 2(3).

• The Court acknowledged that international systems of mutual legal assistance are designed to facilitate criminal proceedings and investigations and that these carry certain protections and safeguards relating to how documentary evidence may be used and the provision for its return. The Court considered it unlikely that Parliament would have intended for such systems to operate alongside a broad power permitting the SFO to compel foreign companies to produce documents held outside of the UK jurisdiction without any protection or safeguards.

Analysis and practical advice

• The Supreme Court’s ruling means that the SFO cannot bypass the process of mutual legal assistance in order to obtain evidential material which is held in a foreign jurisdiction by non-UK persons.
• The decision provides welcome clarity after the High Court gave judgment to the opposite effect, contrary to what had been understood by practitioners to be the position. If allowed to stand, that decision would have potentially have widened significantly the scope of documents which might find their way into civil proceedings.

• International companies should take steps to understand their own records, but particularly their IT architecture so that in the event of receiving a Section 2 Notice the company would be able to quickly identify which material falls within the jurisdiction of the UK and therefore potentially within the scope of the Notice.

For more information, please contact: