Mr El-Khouri, a UK/Lebanese dual national, faced US extradition for alleged insider dealing using confidential information to trade CFDs from the UK. The Supreme Court allowed his appeal, ruling the conduct occurred outside the US, failing the double criminality test as UK insider dealing laws would not apply extraterritorially in corresponding circumstances.
Facts
Mr Joseph El-Khouri, a dual UK/Lebanese national residing in the United Kingdom, was sought for extradition by the United States to face prosecution in the US District Court for the Southern District of New York on seventeen counts of securities fraud, wire fraud, fraud in connection with a tender offer, and conspiracy.
The allegations concerned insider dealing. Mr El-Khouri allegedly made substantial payments to a middleman (CC4) to obtain confidential inside information about prospective mergers and acquisitions of companies listed on US stock exchanges. This information was allegedly sourced from CC1 and CC2, analysts working in London offices of investment banks with access to material non-public information about corporate clients.
Mr El-Khouri allegedly used this information to trade in contracts for difference (CFDs) based on anticipated movements in share prices on the Nasdaq and New York Stock Exchanges. Critically, he entered into these CFD transactions with a broker based in the United Kingdom. CFDs do not trade in the United States; a person trading CFDs does not buy or sell shares but purchases a financial instrument tied to the value of the underlying stock.
Payments allegedly made by Mr El-Khouri to CC4 in exchange for the information included payments for hotel rooms in New York, a yacht charter in Greece, and a ski chalet rental in France. The alleged profits amounted to nearly US$2 million.
The UK Financial Conduct Authority had previously investigated Mr El-Khouri between November 2016 and January 2018 but concluded there was insufficient evidence to prosecute.
Issues
The central issue was whether the conduct alleged in the extradition request constituted an ‘extradition offence’ for the purposes of Part 2 of the Extradition Act 2003, specifically whether the double criminality requirement in section 137 was satisfied.
Key Questions
1. Whether section 137(3) or section 137(4) applied – i.e., whether the conduct occurred ‘in’ or ‘outside’ the territory of the requesting state (the United States).
2. Whether the obiter dicta of Lord Hope in Office of the King’s Prosecutor, Brussels v Cando Armas [2006] 2 AC 1, concerning the interpretation of ‘conduct’ occurring in a territory, were correct.
3. If section 137(4) applied, whether ‘equivalent conduct’ in ‘corresponding circumstances’ would constitute an extra-territorial offence under UK law.
Judgment
The Supreme Court (Lord Lloyd-Jones and Lord Leggatt, with whom Lord Reed, Lord Briggs and Lord Stephens agreed) allowed the appeal, ordered the discharge of Mr El-Khouri, and quashed the order for his extradition.
The Correct Subsection
The Court held that the dicta in Cando Armas were mistaken. Lord Hope had suggested that acts done outside the territory of a requesting state could constitute conduct ‘in’ that territory if their intended effect was to bring about harm within it. The Court rejected this interpretation for three reasons:
“First, it does not accord with the language used. Second, it renders the distinction drawn in sections 65 and 137 between conduct that occurs ‘in’ and ‘outside’ the territory of the requesting state unworkable. Third, the justification given for the interpretation in Cando Armas is flawed.”
The Court emphasised that subsections (3) and (4) are mutually exclusive:
“The same conduct cannot, consistently with the statutory scheme, be classified as occurring in two different places at once, both ‘in’ and ‘outside’ the territory of the requesting state.”
Regarding the meaning of ‘conduct’, the Court stated:
“The word ‘conduct’ would normally and naturally be understood as a synonym for acts done by the requested person in the specified location and not as including effects (whether intended or not) felt in that location of acts done somewhere else.”
The Court concluded:
“For this purpose the court is concerned, and concerned only, with where the person’s acts specified in the extradition request were physically done, ignoring in the case of both provisions mere narrative background and focusing on the substance of the alleged criminality. The court is not concerned with where any consequences of those acts occurred or were felt.”
Application to the Facts
Applying this correct interpretation, the Court found:
“no part of the conduct alleged to constitute insider dealing can sensibly be considered to have occurred in the United States. The substance of the alleged criminality (dealing in securities using inside information and conspiring with others to do so) occurred in the United Kingdom and no relevant conduct occurred in the United States.”
The only act alleged to have occurred in the US (paying for a hotel room for CC4 in New York) was characterised as “purely incidental details of the narrative of events.” Therefore, section 137(4), not section 137(3), applied.
The Double Criminality Test Under Section 137(4)(b)
Under section 137(4)(b), the test requires considering whether ‘in corresponding circumstances equivalent conduct would constitute an extra-territorial offence’ under UK law. This requires a transposition exercise creating a ‘mirror image’ of events.
The Court examined whether equivalent conduct would constitute insider dealing under section 52(1) of the Criminal Justice Act 1993. Section 62(1) of that Act defines the territorial scope, requiring that the individual was within the United Kingdom at the relevant time, or the regulated market was UK-regulated, or the professional intermediary was within the UK.
“On the transposed facts, none of these conditions would be met. Mr El-Khouri was not within the United States at the time when he is alleged to have done any act constituting or forming part of the alleged dealing; the dealing is not alleged to have occurred on a market regulated in the United States; and the professional intermediary allegedly relied on by Mr El-Khouri was not within the United States when the alleged dealing occurred.”
The Court also rejected arguments that offences under section 329 of the Proceeds of Crime Act 2002 could apply extraterritorially, holding that R v Rogers [2015] 1 WLR 1017 was wrongly decided on this point:
“We do not think it seriously arguable that acquiring, using or possessing in the United States money which represents the proceeds of a crime in the United States can constitute an offence under section 329 of the Proceeds of Crime Act 2002.”
Implications
This judgment has significant implications for extradition law:
- It corrects a misinterpretation of the Extradition Act 2003 that had persisted since Cando Armas, clarifying that ‘conduct’ refers to physical acts, not their effects.
- It confirms that sections 137(3) and 137(4) are mutually exclusive categories determined by where acts were physically performed.
- It reinforces the protective function of the double criminality rule against exorbitant claims of extra-territorial jurisdiction by foreign states.
- It overrules R v Rogers regarding the extra-territorial scope of money laundering offences under the Proceeds of Crime Act 2002.
- It demonstrates that extradition requests for conduct substantially occurring within the UK, where the UK lacks extra-territorial jurisdiction over equivalent conduct abroad, will fail the double criminality test under section 137(4).
The case is significant in protecting individuals from extradition where the substance of alleged criminality occurred within the UK and where equivalent conduct abroad would not fall within UK extra-territorial criminal jurisdiction.
Verdict: Appeal allowed. Mr El-Khouri was discharged and the order for his extradition was quashed. The conduct alleged did not constitute an ‘extradition offence’ because the conduct occurred outside the United States (falling under section 137(4)), and in corresponding circumstances, equivalent conduct would not constitute an extra-territorial offence under UK law, thereby failing the double criminality requirement.
Source: El-Khouri v Government of the United States of America [2025] UKSC 3
