On September 6, the United Kingdom High Court, in KBR Inc v. The Director of the Serious Fraud Office, [2018] EWHC 2368 (Admin), upheld the use of a notice by the United Kingdom Serious Fraud Office (SFO) to obtain information located outside the United Kingdom from a company incorporated in the United States. Because this decision appears to have received comparatively little attention to date, this post will summarize the decision and highlight its significance for global enterprises.
Subsection 2(3) of the Criminal Justice Act 1987 vests the SFO Director with broad authority to issue written notices that “require the person whose affairs are to be investigated (“the person under investigation”) or any other person whom he has reason to believe has relevant information to answer questions or otherwise furnish information with respect to any matter relevant to the investigation at a specified place and either at a specified time or forthwith.” In April 2017, in relation to its ongoing investigation into the activities of Unaoil, the SFO announced that it had opened an investigation into the activities of the United Kingdom subsidiaries of KBR Inc., as well as their officers, employees, and agents, for suspected bribery and corruption offences.
In April 2017, the SFO issued a section 2 notice to a KBR Inc. United Kingdom subsidiary, Kellogg Brown & Root Ltd (KBR Ltd.), seeking documentation. In response, according to the High Court, KBR Ltd. provided three categories of documents: (1) documents that were already under KBR Ltd.’s custody or control that were located in the United Kingdom prior to the issuing of the April notice; (2) documents located outside the United Kingdom and sent to KBR Ltd. at KBR Inc.’s direction to forward to the SFO; and (3) on a “voluntary basis” in respect of documents located outside the United Kingdom that KBR Inc. had disclosed to the United States Department of Justice and the Securities and Exchange Commission (SEC) as a result of their inquiries into Unaoil.
In July 2017, the SFO issued a section 2 notice, directing KBR Inc. to produce documents that it held outside the United Kingdom, and served that notice on KBR Inc.’s Executive Vice President, General Counsel and Corporate Secretary, Eileen Akerson, who was temporarily present within the jurisdiction (i.e., for a meeting with the SFO concerning the investigation). KBR then challenged the notice on three grounds. First, it asserted that the July notice was ultra vires because it requested material held outside the jurisdiction of the United Kingdom from a company (KBR Inc,) that was incorporated in the United States. Second, it asserted the Director had made an error of law to exercise his section despite the fact that he also had the power to seek Mutual Legal Assistance (“MLA”) under the bilateral MLA treaty from the US authorities. Third, it asserted that the SFO did not effectively serve the July notice by handing it to Ms. Akerson.
The opinion by Lord Justice Gross considered and rejected each of the three grounds in turn. On the matter of jurisdiction and ultra vires action, the court, after an extended discussion of various United Kingdom decisions bearing on various aspects of jurisdiction, said regarding the extraterritorial reach of section 2 that:
the legislative purpose and the mischief at which s.2(3) is aimed permits of no such doubt. As already indicated, the SFO’s business is ‘…top end, well-heeled, well-lawyered crime…’. By their nature, most such investigations will have an international dimension, very often involving multinational groups conducting their business in multiple jurisdictions, whether through a branch or subsidiary structure (it should matter not). It follows that the documents relevant to the investigation of a UK subsidiary of such a group may well be spread between the UK and one or more overseas jurisdictions. The simplicity of document transfer and access has of course been massively enhanced by internet and web technology post-dating 1987 but, as already discussed, it cannot be suggested that the international dimension of the SFO’s mandate was unknown or not appreciated at the time of the enactment of s.2(3). For my part, putting to one side for the moment, any questions of MLA, there would be a very real risk that the purpose of s.2(3) would be frustrated . . . if, as a jurisdictional bar, the SFO was precluded from seeking documents held abroad from any foreign company.”
The Lord Justice concluded that “s.2(3) extends extraterritorially to foreign companies in respect of documents held outside the jurisdiction when there is a sufficient connection between the company and the jurisdiction.” He further stated that he was “amply satisfied that there was here a sufficient connection between KBR Inc and the jurisdiction so as to fall within the extraterritorial reach of s.2(3).”
On the matter of the availability of the MLA process, Lord Justice Gross addressed three main points:
- The use of the MLA procedure pursuant to the Criminal Justice (International Co-operation) Act 1990 or the Crime (International Co-operation) Act 2003 “is an additional power to that contained in s.2(3), CJA 1987. The availability of MLA gives the Director additional options; it does not curtail his discretion to use the separate power of issuing s.2(3) notices. . . . [A] State is entitled but not obliged to proceed by way of the MLA route. It follows that KBR Inc has failed to demonstrate any error of law on the part of the Director in the exercise of his discretion to issue the July Notice.”
- “[E]ven where there is an available MLA regime, there may be good practical reasons for the Director preferring to proceed by way of s.2(3) notices” (i.e., the risk of delay in the formal MLA process).
- The 1994 U.S.-UK MLA treaty “has not been enacted in domestic UK law,” but in any event article 18.2 of that Treaty – which pertains to consultation regarding matters for which assistance could be granted under the Treaty, — “inferentially reinforces the SFO’s case in respect of jurisdiction (Issue I above) – by contemplating extraterritorial action, albeit subject to the terms of the Article.”
On the matter of service, Lord Justice Gross wrote that subsection 2(3) “does not require a notice to be ‘served’ on KBR Inc., KBR Inc. “was plainly present in the jurisdiction through Ms Akerson when the July Notice was given to her,” “it is obvious that the contents of the July Notice were communicated by Ms Akerson to KBR Inc.,” and subsection 2(3) “requires no additional formality beyond the giving of the notice and there is no basis for importing any such requirement.” As an afterword, he commented that “there are unappealing features of the SFO’s decision to give the July Notice to Ms Akerson in the course of attending a meeting to discuss the investigation – but however those features might impact on the willingness of others to attend such meetings in the future, they do not serve to invalidate the giving of the July Notice.”
Note: From time to time over many years, certain members of the bar whose practice includes international criminal investigations have complained about (and even formally opposed) the United States’ aggressive assertion of authority to obtain relevant evidence extraterritorially. After the KBR decision, the United States now finds itself in august company with the United Kingdom. Other non-UK companies with subsidiaries or operations in the United Kingdom can therefore expect that in the future they may receive section 2 notices for evidence located outside the United Kingdom, even if those companies are not themselves targets of the investigation.
The High Court’s requirement that the SFO must show “a sufficient connection” between a company from which documents are sought and the United Kingdom is sure to be a ground for future challenges to the SFO’s use of Section 2 notices, but is unlikely to be an insuperable obstacle for the SFO in all but rare cases. In those rare cases, as indicated in the High Court’s decision, the SFO can always avail itself of MLA processes in jurisdictions that are parties to bilateral or multilateral MLA treaties with the United Kingdom. Finally, the United Kingdom may be able to request further evidence-gathering assistance by certain jurisdictions in which domestic laws – such as 28 U.S.C. §§1782 and 1783 and the Foreign Evidence Request Efficiency Act of 2009 in the United States – provide government authorities in those jurisdictions with broad authority to compel testimony or evidence production through various means to assist the United Kingdom in its investigations.
Dipping Through Geometries 