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11 Feb 2021

KBR v SFO: what are the implications for individuals who receive section 2 notices?

Earlier this week I reviewed the Supreme Court judgment in KBR v SFO [2021] UKSC 2, which held that a notice issued by the SFO’s Director under section 2(3) Criminal Justice Act (CJA) cannot compel a foreign company to produce material held overseas. I suggested that the judgment was limited to its specific facts and that, in different circumstances, UK and foreign companies can still be compelled to produce material held in the UK or overseas.

Even though the certified question referred to a “person” who receives a section 2(3) notice, the Supreme Court deliberately limited its analysis to the obligations of a foreign company. Did the Court give any clues as to what its conclusions would have been if the recipient of the notice was an individual and not a company? How, if at all, would the nationality and physical location of the individual influence the legal analysis?

The starting point in answering these questions is the heavy reliance placed by the Court on its judgment in SOCA v Perry [2012] UKSC 35. This case was concerned with the jurisdictional scope of a disclosure notice issued pursuant to section 357 of the Proceeds of Crime Act 2002 (POCA). Such a notice was addressed to Mr Perry, his wife and daughters. None of his family had British nationality or were resident or domiciled in the jurisdiction. The Court was unanimous that section 357 section contained no power to impose on persons outside the jurisdiction positive obligations to provide information or to render them subject to criminal sanction in the event of non-compliance. Such a situation would be a “particularly startling breach of international law.”

Perry is instructive not just because the Court in KBR relied upon and quoted it at length (it described the similarities between the SFO’s section 2(3) power and the section 357 power as “striking”), but because it concerns individual rather than corporate recipients of notices issued by law enforcement bodies. Insofar as individuals outside the UK can be compelled to produce information in response to such notices, Perry holds that, because there is no clear language displacing the presumption against extraterritoriality, the power under section 357 POCA “can only be exercised in respect of persons within the jurisdiction”.

So, with Perry in mind, consider four scenarios involving an individual recipient of a section 2(3) notice.

First, suppose the section 2(3) notice seeks to compel a person outside the UK to produce documents held outside the UK. These are the same facts as Perry. Accordingly, the notice would be invalid because the SFO cannot exercise its power in respect of a person who is outside the jurisdiction.

Secondly, suppose the section 2(3) notice seeks to compel a person outside the UK to produce documents held inside the UK. Such a notice would also be invalid, because the person is still outside the jurisdiction. The location of the documents is only relevant inasmuch as it suggests an alternative remedy for the SFO, namely that they should apply for a search warrant in respect of the UK premises where the documents are located, or serve a section 2(3) notice on a person within the jurisdiction who is authorised to produce them.

Thirdly, suppose we clarify the previous scenario so that the (overseas) person in question is a British national. Does that make a difference? Mr Perry was not a British national and, as the Supreme Court noted in KBR, “nationals travelling or residing abroad remain within the personal authority of their state of nationality and, consequently, it may legislate with regard to their conduct when abroad subject to limits imposed by the sovereignty of the foreign state.” Would the person’s British nationality diminish or negate the presumption against the extraterritorial application of section 2(3)? In my view, the answer is no. This is because jurisdiction in English criminal law is principally territorial; the only two alternative forms of jurisdiction are nationality-based and universal. If section 2(3) created nationality-based jurisdiction over the conduct of British nationals overseas, this would require clear statutory language in the CJA to this effect (akin to the language criminalising the acts of British nationals overseas in, for example, section 134 of the Criminal Justice Act 1988 or section 12 of the Bribery Act 2010). There is no such clear language in the CJA. As such, in my view, the notice could not compel an overseas British national to comply with the section 2(3) notice.

Fourthly, suppose the section 2(3) notice seeks to compel an individual who is in the UK to produce documents held outside the UK. According to Perry, the individual’s presence in the jurisdiction is sufficient to trigger the obligation. It matters not whether this individual is British. As long as he or she can access the overseas documents or can compel a third party to produce them in the UK, the notice would be valid. Compelling an individual who is in the UK to produce documents held overseas is not an exercise in extraterritoriality, but a reflection of the fact that individuals who enter the territory of the UK, even temporarily, fall within the scope of the SFO’s territorial powers.

These four scenarios illustrate an important point, which is that the analysis of a company’s obligations on receipt of a section 2(3) notice is more nuanced than the equivalent analysis of an individual’s obligations. A UK company can be compelled to produce documents held in the UK or overseas, but a British national cannot be so compelled unless he or she enters UK territory. Similarly, in certain circumstances, a foreign company can be compelled to produce documents held in the UK or overseas (for example, if it has a business presence in the UK), but a foreign individual cannot be so compelled unless he or she enters UK territory. The nationality of the individual is irrelevant; what matters is his or her physical location on receiving the section 2(3) notice.

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