High Court finds that SFO can compel production of documents held outside UK

Written on 17 Sep 2018

In a significant judgment handed down on 6 September 2018, the High Court held that the Serious Fraud Office (SFO) can compel the production of documents located outside of the jurisdiction from a foreign company.

In its key finding in R (on the application of KBR Inc.) v Director of the Serious Fraud Office [2018] EWHC 2368 (Admin), the Court held that:

s2(3) extends extraterritoriality to foreign companies in respect of documents held outside the jurisdiction when there is a sufficient connection between the company and the jurisdiction.”

This decision is the first determination by an English court of the extraterritorial reach of the compulsory document production powers that are available to UK criminal law enforcement agencies, and the ruling may embolden other agencies, for example the Financial Conduct Authority and the Competition and Markets Authority, who have similar compulsory powers.

What was the dispute about?

The case related to an on-going SFO bribery investigation involving KBR Ltd, a UK company. In April 2017, the SFO issued a notice pursuant to s2(3) Criminal Justice Act 1987 to KBR Ltd, requiring the production of specified material.

In July 2017, two officers from KBR Inc, KBR Ltd’s US parent, attended a meeting with SFO in London. The SFO, it appears, had previously become concerned that KBR Ltd had not produced the requested material and so, during the July meeting, the SFO issued a KBR officer present (its General Counsel) with a section 2(3) notice addressed to KBR Inc.

This notice required production of the same material specified in the previous notice, as well as further material. KBR Inc. applied, by way of judicial review, for the latter notice to be quashed to the extent that it sought to compel the production of material held overseas.

What did the Court decide?

In ruling against KBR Inc, the court made three central findings:

Extraterritorial reach

Section 2(3) is capable of extending to some companies in respect of documents held abroad.

As noted above, jurisdiction will extend outside the UK if the company concerned has “sufficient connection” with the UK. This will be a fact-specific question to be determined on a case-by-case basis, but the court gave some guidance in ruling that the following would not amount to the requisite sufficient connection:

  • The fact that KBR Inc was the parent company of KBR Ltd.
  • The fact that KBR Inc had provided some limited voluntary cooperation for the SFO.
  • The fact that the KBR Inc General Counsel had met with the SFO in London.

In finding that there was a sufficient connection in this case, the court noted that some of the allegedly corrupt payments made by KBR Ltd had required approval from KBR Inc and had been processed by KBR Inc in the US.

Mutual Legal Assistance

It was a matter of discretion for the SFO as to whether it proceeds to secure documentation held overseas through the use of a section 2(3) notice or through the use of the Mutual Legal Assistance (MLA) provisions. Given the time and cost of the MLA process, it might be reasonably expected that the SFO (and potentially other agencies) will in the future exercise that discretion by issuing a section 2(3) notice in reliance on this decision.

No prescribed method of service

The court rejected the argument that the second notice had not been validly served as it had been handed to the KBR Inc GC, who had only been in the UK temporarily. It held that section 2(3) contains no provision as to the mode of service required and the court was not willing to imply any such requirement.

Osborne Clarke comment

Whilst the ruling does stress that the issue of sufficient connection will be a fact-specific consideration, there is now clear authority that section 2(3) of the Act has extraterritorial reach. As such, in our view it is likely that the SFO (and, as mentioned, potentially other agencies) will seek to obtain access to documents held overseas with greater regularity.

To the extent, however, that Lisa Osofsky, the new SFO Director, has reiterated that the SFO will look to full cooperation being demonstrated by corporates seeking to avoid prosecution, it may be thought that taking a technical point to avoid disclosing material is not a strategy that will prove beneficial in the long run in any event. If the SFO is able to find sufficient evidence of the alleged wrongdoing, it will be interesting to see whether KBR Ltd is able to secure a Deferred Prosecution Agreement or, rather, is faced with full prosecution.

Finally, whilst the court has found that there is no prescribed mode of service required for a section 2 (3) notice, it does appear that the question of whether service is nevertheless required to be effected within the jurisdiction remains open. As such, foreign companies that may be subject to SFO investigation, may want to give careful consideration as to whether, and if so when, relevant company officers travel to the UK.