‘Serious blow’: Judges rule Serious Fraud Office powers to investigate foreign companies are limited

FILE PHOTO: Police officers stand on duty outside the Supreme Court in Parliament Square, central London
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Britain’s efforts to combat international fraud have been dealt a “serious blow” after top judges ruled powers to investigate foreign companies are limited.

Supreme Court judges on Friday decided the Serious Fraud Office cannot unilaterally demand documents and evidence from a company which does not have ties to the UK.

Legal experts said today’s ruling reinforces the limits on existing British law, and may see the SFO seeking new powers from the government to bolster its investigations.

The Supreme Court was deciding on a two-year legal battle between the SFO and US-based engineering firm KBR, which is under investigation for suspected bribery and corruption.

The UK crime agency issued a section 2 notice, under the 1987 Criminal Justice Act, demanding to see documents held abroad by KBR.

The firm fought back, arguing the section 2 power could not be applied to potential evidence held outside of the UK.

Delivering the ruling this morning, Lord Lloyd-Jones said the judges had assessed the way the 1987 law was passed in Parliament as well as British involvement in international schemes to facilitate “mutual legal assistance”.

He said it was “inherently improbable” that MPs had engaged with the international legal systems “while intending to leave in place a parallel system for obtaining evidence from abroad which could operate on the unilateral demand of the SFO, without any recourse to the courts or authorities of the State where the evidence was located and without the protection of any of the safeguards put in place under the scheme of mutual legal assistance”.

The investigation into KBR was opened in 2017, and after a period of co-operation the firm challenge the SFO’s section 2(3) notice, arguing the agency was acting outside of its legal authority.

Today’s ruling overturns a decision of a judge in the lower court which supported the SFO’s position.

Kyle Phillips, a director in the corporate and financial crime team at Fieldfisher, called today’s decision 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 said.

“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."

David Savage, head of financial crime at law firm Stewarts, said he expects the ruling to be welcomed by the international business community.

“In a world where international investigations and multi-jurisdictional settlements are increasingly the norm, it is to be expected that regulators and prosecutors are able to access evidence and documentation located overseas. 

“However, there are systems and controls, checks and balances which enable such global co-operation to take place in a proportionate manner.”

The SFO is still able to seek evidence as part of its investigations through ‘mutual legal assistance’, but it is considered a more cumbersome and time-consuming method.  

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