Supreme Court hands down judgment in SFO’s case concerning the extraterritoriality of section 2 powers - Appeal of KBR is allowed

The Supreme Court has today handed down judgment in the case of R (on the application of KBR, Inc) (Appellant) v Director of the Serious Fraud Office (Respondent) [2021] UKSC 2 concerning whether the Serious Fraud Office (“SFO”) can require a foreign company to produce documents held overseas, pursuant to its investigation powers under section 2(3) of the Criminal Justice Act 1987 (“CJA”).

The judges of the Supreme Court found unanimously against the broad extra-territorial impact read into the s2(3) power by the High Court: the SFO could not compel the production of documents held overseas on the basis of “a sufficient connection” between the foreign company and the UK.

The decision followed a “leapfrog” appeal from the High Court, the issue being a "point of law of general public importance”.  The Supreme Court considered the question of whether or not Parliament had intended to displace the general presumption against extraterritoriality in its enacting of section 2(3) CJA 1987, which provision is silent on its face as to extra-territorial effect.

The Supreme Court accepted the SFO’s argument (find our blog post on the hearing here) that the purpose of the statute was designed to facilitate the investigation of serious fraud, and that this increasingly involves an international dimension. It dismissed, however, the SFO’s submission that it was the intention of Parliament to confer the SFO with a broad power to compel foreign companies to produce documents held overseas, under threat of criminal sanction and without protection or safeguard. Instead, the Supreme Court held that Parliament had intended for the gathering of evidence from other jurisdictions by way of bilateral agreements (for example, mutual legal assistance arrangements) which would preserve the mutual respect between States and the principle of international comity (which serves to avoid the unreasonable interference with another country's sovereignty).

Following a unanimous decision, the Supreme Court allowed the appeal, ruling that the High Court had erred in its finding (see our blog post on that decision here) that the SFO could compel the production of documents held overseas if there was “a sufficient connection between the company and the UK.”  The practical effect of this decision being that foreign companies which hold documents overseas will not find themselves on the receiving end of a section 2(3) notice should a UK-based group entity be under SFO investigation.

Further analysis of the case and its potential implications will be published in due course.