UK Supreme Court curbs SFO’s ability to get overseas documents
Multinational entities with a presence in the UK will welcome a decision of the UK Supreme Court that curtails the Serious Fraud Office’s ability to procure documentation from entities based outside of the UK.
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The decision overturns a highly controversial decision of the English High Court that found that the Serious Fraud Office (SFO) could make a request for documents held outside the jurisdiction by a foreign company where that company had a “sufficient connection” to the UK. The English High Court’s ruling was at the time a considerable boost to the SFO’s burgeoning investigative powers and expansion of the SFO’s jurisdiction.
However, the decision of the UK Supreme Court will bring the SFO’s ability to conduct comprehensive investigations into multinational companies that are engaged in complex cross-jurisdictional activities into focus. This is particularly noteworthy given that over the past decade the SFO’s caseload has become increasingly international (e.g. Airbus, Rolls Royce, Glencore etc.) and it has shown a growing willingness to use its powers to compel the production of documents, known as Section 2 powers, from the person/entity under investigation or any other person/entity, where the documents appear to relate to any matter relevant to its investigation. Perhaps also significant is that this ruling comes on the heels of the English Court of Appeal’s decision in ENRC, where the Court of Appeal similarly curbed an attempt by the SFO to expand its investigative powers.
The decision in brief
The decision was given in the case R v Director of the Serious Fraud Office.
In 2016, alongside similar investigations by the US Department of Justice and the Securities and Exchange Commission, the SFO began an investigation into the Unaoil Group, a Monaco based company, on grounds of suspected corrupt activities.
When it discovered that KBR UK, a UK subsidiary of US company, Kellogg Brown & Root Inc, had been engaged by Unaoil for consultancy services, the SFO commenced an investigation into the UK subsidiary for suspected bribery and corruption offences. As part of this investigation, the SFO sought and obtained various documents held by KBR UK.
Later, the SFO sought to compel the production of documents from the US entity, but KBR challenged its basis for doing so, principally on the grounds that the documents in question were held outside the jurisdiction of the SFO by a company incorporated in the US.
The English High Court dismissed the challenge, finding that there was “an extremely strong public interest in the extraterritorial ambit of [the SFO’s power to compel the production of documents]”.
However, this highly controversial and potentially problematic decision has now been overturned by the UK’s highest court, which found that “the presumption against extra-territorial effect clearly 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”.
What this means in practice
For Irish and international companies, the decision provides clarity and a welcome return to the status-quo. From an Irish perspective, it also brings the SFO’s abilities to access foreign documents in line with the ODCE’s limited extra-jurisdictional powers and reliance on mutual legal assistance treaties.That said, if an Irish company is issued with a Section 2 notice by the SFO, our advice is to consider it carefully and particularly to assess any impact compliance or non-compliance may have on the position of the overall group
From an enforcement perspective, the decision may somewhat fetter the SFO’s ability to investigate allegations of complex international fraud in circumstances where data is required that is located outside of the UK (albeit that there remain other methods of obtaining such data by the SFO, such as overseas production orders). It will not therefore be a surprise if the UK government reviews the scope of the SFO’s powers in order to ensure that it has the necessary tools to operate as a leading criminal enforcement agency in the future.
While the decision is likely to be viewed as a set-back by the SFO, it cannot claim to be surprised with the Supreme Court’s findings. The SFO has been using Section 2 notices to compel the production of documents held outside of the UK for many years, and where challenged it routinely relied on mutual legal assistance treaties and, up until its departure from the EU, European Investigation Orders, to obtain material located in other jurisdictions. If the SFO believed Section 2 to have the extra-territoriality it claimed, it would simply have issued such notices in all cases.