R v Director of the Serious Fraud Office

United Kingdom

05.02.2021

Criminal

SFO could not use the power in Section 2(3) of the 1987 Act to direct foreign companies to produce documents held outside the UK

The appellant, KBR, Inc, is a company incorporated in the USA. It does not have any fixed place of business in UK, and has never carried on business in the UK but has UK subsidiaries, including Kellogg Brown and Root Ltd (“KBR UK”). On 4 April 2017, the Director of the Serious Fraud Office (“SFO”) issued a notice under section 2(3) of the Criminal Justice Act 1987 to KBR UK. In response of notice, KBR UK provided various documents to SFO. On 25 July 2017, SFO issued further notice to KBR, Inc under section 2(3) for production of some additional material held by KBR, Inc outside the UK. KBR, Inc applied for judicial review to quash the July notice on ground that July notice was ultra vires because section 2(3) of the 1987 Act does not permit the SFO to require a company incorporated in the USA to produce documents it holds outside the UK. The question arise is that whether the SFO can use the power in section 2(3) of Act to compel a foreign company to produce documents it holds outside the UK.

The court observed that while construing section 2(3) of the Act, the presumption is that the UK legislation is generally not intended to have extra-territorial effect. This presumption comes from both the requirements of international law and the concept of comity, which is founded on mutual respect between States. This presumption against extra-territorial effect applies in this case because KBR, Inc is not a UK company, and has never had a registered office or carried on business in the UK. Also, when Parliament intends legislation to have extra-territorial effect, it often express the same by including wording in the statutory provisions. However, there is no such express wording in section 2(3) of Act.

There is no basis for the Divisional Court’s finding that the SFO could use the power in section 2(3) of the Act to require foreign companies to produce documents held outside the UK if there was a sufficient connection between the company and the UK. Implying a sufficient connection test into section 2(3) is inconsistent with the intention of Parliament and would involve illegitimately re-writing the statute.

Tags : Extra-territorial effect international law Concept of Comity

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