UK: Limits On Serious Fraud Office's International Document Compulsion Powers Confirmed By Supreme Court

On 5 February 2021, the Supreme Court handed down its judgment in the case of R (on the application of KBR, Inc) (Appellant) v Director of the Serious Fraud Office (Respondent) [2021] UKSC 2 ("KBR v SFO"). The Supreme Court unanimously ruled that section 2(3) of the Criminal Justice Act 1987 ("CJA 1987") does not give the Serious Fraud Office ("SFO") the power to compel a foreign company to produce documents held outside the UK.

This decision overturns the Divisional Court hearing in 2018, where the High Court considered that section 2(3) CJA 1987 has international application if there is sufficient connection between the company receiving the notice to produce materials and the UK. The Supreme Court, however, found that there was nothing in the wording of the CJA 1987 to imply the Parliament's intention that section 2(3) should have such wide application.

Background of the case:

KBR is a company incorporated in the United States, with a subsidiary in the UK called Kellogg Brown and Root Ltd. In 2017, the SFO issued a section 2(3) notice requiring the UK subsidiary to produce certain documents and materials. The subsidiary provided most of the materials, apart from certain documents, which they claimed were held by KBR in the United States. Following the response, the SFO met with KBR in London to discuss the exchange of materials. In addition to discussing, the SFO served a section 2(3) notice on KBR to produce the documents held in the United States, failing which they would face criminal sanctions. KBR refused to do so and filed a claim for judicial review on the basis that the notice was ultra vires. KBR claimed the SFO should have requested an application for assistance under the mutual legal assistance agreements between countries.

The judgment:

The High Court declared KBR unsuccessful, however permission for appeal was granted. The Court of Appeal also declared KBR unsuccessful, giving section 2(3) a large international application in circumstances where there is "sufficient connection" between the foreign company and the UK.

The Supreme Court, on the other hand, unanimously allowed the appeal and upheld KBR's claim, ruling that section 2(3) does not have extraterritorial effect. The SFO can compel the production of documents held by UK companies in the UK and internationally but cannot issue such notices on non-UK companies. The Supreme Court further clarified that the SFO does not have jurisdiction to do so, even though KBR was "sufficiently connected" to the UK subsidiary. The SFO must make use of the mutual legal assistance frameworks developed by Parliament to resolve international investigations.

Conclusion and implications:

The SFO has been increasingly confronted with highly international investigations (such as the Airbus investigation related to the criminal conduct in Malaysia, Sri Lanka). When demanding materials held overseas in such investigations, the SFO must seek mutual cooperation and mutual legal assistance requests between countries. However, these requests can often delay the process of obtaining the relevant documents.

This is the first case addressing the international powers of section 2(3). The Supreme Court limited section 2(3)'s application to UK companies only, perhaps escaping the difficulties that an extraterritorial application would have posed to multinational corporations with subsidiaries in the UK. Instead, the framework of mutual legal assistance remains the route for the SFO when requesting the provision of internationally held documents by non-UK companies.

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