A US company has a subsidiary based in the United Kingdom. It recently learned that its subsidiary is under investigation by the UK's Serious Fraud Office (SFO). The US company has received a notice to produce documents related to that investigation. The general counsel of the US company wants to know if it can challenge the request for documents on the grounds that the parent company's documents are located in the US and are therefore beyond the jurisdictional reach of UK authorities.
English Court: Documents Held by Foreign Company Must Be Produced If "Sufficient Connection" Between Company and UK's Jurisdiction
In September 2018, in R (KBR Inc) v. Serious Fraud Office  EWHC 2012 (Admin), the English High Court held that a foreign company that has a "sufficient connection" to the jurisdiction must produce documents to the SFO even when the company does not conduct business in the UK.
In that case, the US company KBR Inc. had received notice pursuant to an English statute—section 2(3) of the Criminal Justice Act of 1987 (CJA)—to produce certain documents to the SFO. The SFO sought the documents as part of its investigation into KBR's subsidiary, which was registered in the UK. KBR challenged the request for documents on numerous grounds, including arguing that the statute could not operate extraterritorially to apply to KBR's documents located outside the UK.
The court held, inter alia, that the relevant provision of the statute could be applied extraterritorially to foreign companies that held documents outside the UK in situations where there is a sufficient connection between the company and the jurisdiction. Although it did not set forth a clear test, the High Court outlined several factors that would aid in the determination of what would entail such a "sufficient connection." Importantly, the court noted that what did assist in establishing a sufficient connection to the UK were the facts that the payments central to the SFO's investigation of the UK subsidiary, as well as the underlying contracts and arrangements at issue in the investigation, were required to be approved by the parent company (KBR) and that the payments were actually paid by the parent company through its US-based treasury function.
By contrast, the court also noted that the following facts did not assist in establishing a connection to the UK:
- The mere fact that KBR was the parent company of the UK subsidiary;
- That KBR cooperated to a degree with the SFO's request for documents and remained willing to do so voluntarily (i.e., KBR would apply SFO search terms across data held in the US); and
- That a senior representative of KBR met the SFO in the UK as part of the investigation.
Ultimately, the court ruled that—in the circumstances of this case—there was a sufficient connection and that, therefore, the US parent could not quash the request for documents on jurisdictional grounds. The court relied on the fact that the parent had to approve the payments and transactions at issue in the SFO's investigation and that the payments were made through the parent. The court also noted that a corporate officer of the US parent was actually based in the UK and appeared to carry out his functions from the UK. The court did not say whether this was itself enough to establish a "sufficient connection", but it was a factor that was given weight in its overall analysis.
Strategies and Best Practices
As noted above, whether or not a US company would be deemed to have "sufficient connections" to compel the production of documents to the SFO in the UK is a highly factual question. The key principle appears to be that the parent company must have performed certain actions that are central to the investigation (e.g., approving the core payments or transactions at issue in an investigation by the SFO). However, the question of whether affirmative actions (rather than mere omissions) are required by the parent for such a connection to exist and to what degree such actions relate to issues that are central to an SFO investigation will inevitably be questions of fact that any company will have to evaluate carefully before taking any steps in response to receiving a notice to produce documents under section 2(3) of the CJA.
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