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UPDATE 2-UK fraud office loses Supreme Court case against KBR over overseas documents

· 02/05/2021 05:45
UPDATE 2-UK fraud office loses Supreme Court case against KBR over overseas documents

Adds details from judgment, lawyer quotes

By Kirstin Ridley

- The UK Serious Fraud Office (SFO) on Friday lost a Supreme Court battle against U.S. engineering, procurement and construction company KBR Inc KBR.N over whether it has the power to compel foreign businesses to hand over documents held overseas.

In a judgment that will hamper cross-border criminal investigations, senior judges said they unanimously disagreed with a 2018 lower court ruling that decided so-called Section 2 notices could have extra-territorial reach.

"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 court said.

The SFO opened a bribery and corruption investigation into KBR's British business in 2017.

But after a degree of initial cooperation, KBR Inc challenged a Section 2 notice handed by an SFO case officer to a U.S.-based senior executive during a meeting in Britain in July 2017 to discuss the investigation.

KBR said the notice was "ultra vires", or beyond the SFO's legal authority, because it sought material held outside the UK, that the agency should have relied on Mutual Legal Assistance from U.S. authorities and that the notice could not just be handed to an officer temporarily in the jurisdiction.

Mutual Legal Assistance -- when enforcement authorities exchange information in different nations -- is considered a cumbersome route to obtaining evidence.

A failure to comply with a Section 2 notice, meanwhile, can lead to imprisonment or a fine. But its powers are enshrined in a 1987 law that did not envisage a time when corporate suspects could easily choose where to store documents.

Lawyers said the old law might be ill-suited to the modern age but that it was not the role of the courts to rewrite statutes to further a public interest in investigating crime.

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

Judith Seddon, a partner at Ropes and Gray, called the decision a "victory for principled statutory interpretation".


(Reporting by Kirstin Ridley; editing by John Stonestreet and Susan Fenton)

((kirstin.ridley@thomsonreuters.com; +44 (0) 207 513 5666;))