US Company Not Bound to Produce Docs

Where a company was not a United Kingdom company and had never had a registered office or carried on business in the UK, there was a presumption against extra-territorial effect when construing section 2(3) of the Criminal Justice Act 1987: R (on the application of KBR, Inc) (Appellant) v Director of the Serious Fraud Office (Respondent) [2021] UKSC 2.

Reversing the Divisional Court, a unanimous Supreme Court held that the Serious Fraud Office (SFO) could not use the power in section 2(3) to compel a foreign company to produce documents it held outside the UK.

The appellant company, incorporated in the USA, did not have a fixed place of business in the UK and had never carried on business here.

Kellogg Brown and Root Ltd (KBR UK) did have subsidiaries in the UK.

In April 2017 the SFO issued a notice under section 2(3) of the 1987 Act to KBR UK which provided various documents to the SFO in response.

It made clear, however, that if and to the extent that it existed, some of the requested material was held by KBR Inc in the USA.

During a meeting in July of the same year the SFO served the Executive Vice President of KBR Inc with a further notice  under section 2(3) which contained multiple requirements for the production of material held by KBR Inc outside the UK.

Arguing that the July notice was ultra vires because section 2(3) of the 1987 Act did not permit the SFO to require a company incorporated in the USA to produce documents it held out side the UK, KBR Inc applied for judicial review to quash the notice.

The Divisional Court refused KBR’s application holding that there was sufficient connection between the company and the UK so the July notice was valid.

Supreme Court Justice Lord Lloyd-Jones, giving the judgment of the court with which all members agreed, said that the starting point when construing section 2(3) of the 1987 Act was the presumption that UK legislation was not generally intended to have extra-territorial effect.

That presumption was rooted in both the requirements of international law and the concept of comity which was founded on mutual respect between States.

The presumption against extra-territorial effect clearly applied in the present case because KBR Inc was not a UK company and had never had a registered office or carried on business in the UK.

The question for the Court was therefore whether Parliament intended section 2(3) to displace the presumption to give the SFO power to compel a foreign company to produce documents it held outside the UK.

When Parliament intended legislation to have extra-territorial effect, it often made it clear  by including express wording in the statutory provisions.  There was no such express wording in section 2(3).

The other provisions of the 1987 Act did not provide any clear indication either for or against the extra-territorial effect of section 2(3).

That the SFO could use section 2(3) to compel a UK company to produce documents it held overseas did not cast any light on whether the legislation could be used against a non-UK company in the very different circumstances of the present case.

Since 1987, successive Acts of Parliament had developed the structures of domestic law which permitted the UK to participate in international systems of mutual legal assistance to facilitate criminal proceedings and investigations.

It was unlikely that Parliament would have intended them to operate alongside a broad unilateral power which permitted the SFO to compel foreign companies to produce documents held outside the UK, under the threat of criminal sanction and without the protection of any safeguard.

In Serious Organised Crime Agency v Perry [2012] UKSC 35 the Supreme Court held that section 357 of the Proceeds of Crime Act 2002 (POCA) did not permit a disclosure order to be imposed on persons outside the UK.

This supported the view that section 2(3) of the 1987 was likewise not intended to have extra-territorial effect because of the close similarities between section 357 of the POCA and section 2(3) of the 1987 Act.

Implying a sufficient connection test into section 2(3), as the Divisional Court did, was inconsistent with the intention of Parliament and would involve illegitimately re-writing the statute.