On 5 February 2020 the Supreme Court issued its judgment in R (KBR, Inc) v Director of the Serious Fraud Office. The judgment, unanimously upholding KBR, Inc's appeal, frustrated the Serious Fraud Office's ("SFO") attempt to require a foreign company to produce documents held abroad.
Background
KBR, Inc is a foreign company which does not, and has never, carried on business in the UK. It has a UK subsidiary, which, in 2017, was the subject of an SFO investigation. In connection with that investigation the SFO served a notice under section 2(3) of the Criminal Justice Act 1987 (the "CJA"). That notice purported to require KBR, Inc to produce certain documentation to the SFO.
KBR, Inc refused to produce the documentation, and sought judicial review in the High Court of the SFO's decision to issue the notice. KBR, Inc argued that:
- the SFO did not have the power to require production of documentation held by a foreign company outside the UK; and,
- the SFO could not do so given they could seek "mutual legal assistance" – cooperation – from the United States authorities, where KBR, Inc is incorporated.
KBR, Inc also took issue with whether the notice had, in the circumstances, been validly served.
The High Court rejected KBR, Inc's argument that, as a foreign company, it could not be required to produce documentation it held outside the UK. The court relied upon the fact that serious financial crime often has an international element in finding that foreign companies can be required to produce documentation held abroad if there is a “sufficient connection” between the company which is subject of the notice and the UK. It also rejected KBR, Inc's challenges based on the availability of mutual legal assistance and the validity of service.
Appeal to the Supreme Court
KBR, Inc sought to appeal the decision of the High Court to the Supreme Court. The Supreme Court granted permission to appeal on the question of whether the SFO had the power to require production of documentation held by a foreign company outside the UK.
In giving its judgment, the Supreme Court rejected the arguments of the SFO, and overturned the decision of the High Court. The Supreme Court concluded that:
- the wording of section 2(3) and the surrounding legislative context did not support the view that Parliament had intended them to have extraterritorial effect.
- a test based on "sufficient connection" had no basis in the CJA.
The effect of the decision is that the SFO cannot require foreign companies which have no presence in the UK to produce documentation which is held outside the UK. The SFO can continue to rely on mutual legal assistance to seek support in their investigations from authorities where companies of interest are based.
Implications
For the SFO, the judgment poses challenges. The interpretation given to section 2(3) by the Supreme Court means that, rather than relying on its own powers, the SFO will need to seek the assistance of foreign regulators to obtain documentation held by foreign companies abroad. The SFO's dependency on mutual legal assistance provisions will add, at least, another layer of bureaucracy to international investigations, with associated increases in necessary time and expense.
However, the significance of the judgment can be overstated. The impact of the decision on the enforceability of a section 2(3) notice is, as discussed above, limited to specific factual criteria. The judgment does not give any indication that a foreign company with a substantial UK business presence or a non-UK company with the documents sought held in the UK would fall outside the ambit of a section 2(3) notice.
Brodies regularly advises corporate and individual clients facing regulatory investigations. For more information, please contact our Corporate Crime and Investigations Team.
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