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Serious Fraud Office can’t demand evidence from companies with no UK ties, Supreme Court rules

·2-min read

The Serious Fraud Office can’t demand evidence from companies with no UK ties, the Supreme Court has ruled, dealing a “serious blow” to the fight against international fraud.

Senior judges unanimously reversed a 2018 lower court ruling that so-called Section 2 notices could have extra-territorial reach.

The SFO had issued a notice under section 2(3) of the Criminal Justice 1987, requiring US-based engineering firm KBR, which is under investigation for suspected bribery and corruption, to produce material held overseas.

The investigation into KBR was opened in 2017, and after a period of co-operation the firm applied for judicial review to quash the notice, arguing the section 2 power could not be applied to documents held outside of the UK.

On Friday, Lord Lloyd-Jones said the judges had assessed the way the 1987 law was passed in Parliament as well as the UK’s participation in international systems of “mutual legal assistance”.

“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,” the judges said.

The SFO said Section 2 powers were fundamental to its ability to investigate multinationals with complex corporate structures, but that it welcomed the court’s clarification.

It is still able to seek evidence as part of its investigations through “mutual legal assistance”, but it is considered a more cumbersome method.

KBR said it was “pleased”.

But legal experts said the ruling reinforces the limits on existing British law.

Kyle Phillips, a director in the corporate and financial crime team at Fieldfisher, said the decision was a “serious blow to the SFO”.

“Without being able to use its Section 2 of the of the Criminal Justice Act 1987 overseas, the SFO finds itself in a peculiar position of having the power to prosecute overseas companies or individuals, but with limited powers to investigate them”, he told the Evening Standard.

“When the Act was created in the 80s the world was a smaller place and as such the Supreme Court found that the section was not intended for use outside of the UK's jurisdiction.

“We’re now likely to see the SFO lobbying for new powers."

Former SFO general counsel and Kingsley Napley criminal litigation partner Alun Milford told City Am: “Given almost all of its cases involve some element of overseas evidence gathering, this decision will be disappointing for the SFO – not least since, following Brexit, it no longer has access to European Investigation Orders.”

But Andrew Smith, a partner at law firm Corker Binning said that the judgment “is a welcome reminder of the presumption against extraterritoriality in English criminal law.”

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