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The Serious Fraud Office (“SFO”) had served a notice under s.2(3) of the Criminal Justice Act 1987 (“CJA”) (a “section 2 notice”) on KBR Inc, a non-UK company without a registered office or business in the UK, requiring it to produce documents located in the US in relation to the agency's investigation into a subsidiary company, KBR Ltd. Refusing KBR Inc's application for judicial review of the notice, the first instance court had found that section 2 notices could be used to compel production of documents held abroad by foreign companies where there was a “sufficient connection" between the company and the UK, and that accordingly, KBR Inc was obliged to hand over the relevant data. KBR Inc appealed this decision and, given the importance of the case, the appeal was “leapfrogged” to the UK’s Supreme Court.
The Supreme Court overturned the first instance finding, noting that there is a presumption, rooted in both the requirements of international law and the concept of comity, that UK legislation is not generally intended to have extra-territorial effect. There was nothing in s.2(3) CJA to suggest that Parliament had intended otherwise in this instance and the provision could not therefore be used by the SFO to compel the production of documents held outside the UK by a non-UK person.
The Supreme Court’s decision will be disappointing for the SFO, whose efforts to investigate overseas companies in connection with cross-border crime where crucial documentary evidence is held overseas can be frustrated by a mutual legal assistance process unsuited to modern communication methods. However, the Supreme Court has deferred to Parliament and declined to engage in what it referred to as an illegitimate re-writing of the statute. In particular, the agency’s argument that an extra-territorial effect had to be implied into s.2(3) CJA in order for it to achieve its purpose in international investigations failed. It was improbable that Parliament would develop and refine reciprocal arrangements to regulate the use of evidence held overseas whilst simultaneously intending these systems to operate alongside a unilateral power for the SFO to compel foreign entities to produce same evidence at will. Analogies drawn with other statutory provisions should be treated with caution, being enacted for different purposes and in different contexts.
However, alternative means of compelling the production of electronic data by overseas persons are still available to enforcement agencies. The Crime (Overseas Production Orders) Act 2019 (“COPOA”) authorises domestic law enforcement agencies, including the SFO, to apply for a court order with extraterritorial effect to obtain electronic data direct from communication service providers based outside the UK. The bilateral data access agreement signed with the US in October 2019 was the first to be agreed under this legislation and is likely to impact considerably on the conduct of UK-US cross-border criminal investigations. Companies should be aware that data stored outside the UK by overseas entities may still be obtained by enforcement agencies here.
9 February 2021
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