An officer of KBR, Inc travelled from the United States to meet the Serious Fraud Office in London. During the meeting she was handed a notice requiring the US company to produce records held abroad. The question was whether her presence in London brought the company within the reach of that statutory power.
The notice and the challenge
The SFO was investigating Kellogg Brown and Root Ltd, a United Kingdom subsidiary of KBR, Inc, in connection with its investigation into Unaoil. On 4 April 2017 it served a section 2(3) notice on that subsidiary, requiring material held by the subsidiary. The subsidiary produced material, but said that other material, if it existed, was held by KBR, Inc in the United States.
Law Teacher writing support
Writing a law essay?
We choose a writer who is an expert in your area of law and qualified to at least the academic level you select. Most of our writers hold a master’s degree or PhD, have teaching experience, or both.
Send us your question and, if you wish, any marking criteria. We’ll write an essay to your instructions.
At a London meeting in July 2017, company representatives explained that the board needed time to consider the request. The SFO handed a notice to an officer attending the meeting. It maintained that delivery to her in the United Kingdom made the notice enforceable against the US company.
Failure to comply with a section 2 requirement without reasonable excuse is a criminal offence. KBR, Inc sought judicial review to quash the notice. One ground was that section 2(3) did not authorise a demand for material held outside the jurisdiction from a company incorporated in the United States. The Divisional Court dismissed the claim on all grounds. On this issue, Gross LJ and Ouseley J held that the subsection had to have some extra-territorial reach and could apply to a foreign company, in respect of documents held abroad, where there was a sufficient connection with the United Kingdom. They found that connection in KBR, Inc’s links with the transactions under investigation. Only that issue was appealed.
Why the presumption applied
Lord Lloyd-Jones, with whom Lord Briggs, Lady Arden, Lord Hamblen and Lord Stephens agreed, started from the presumption that legislation is not intended to operate outside the United Kingdom unless the contrary intention appears. The presumption reflects international law and comity. It is weaker where Parliament legislates for its own nationals abroad, but this was not such a case. It was common ground that section 2(3) would authorise a notice requiring a British-registered company to produce documents held abroad. The Court was also not concerned with a foreign company that had a registered office or fixed place of business here, or that carried on business here.
KBR, Inc had never carried on business in the United Kingdom and had no registered office or other presence here. Its officers’ attendance at the meeting, and service on Ms Akerson while she was temporarily here, did not alter that. The presumption therefore applied. The question was whether Parliament intended the SFO to be able to compel a foreign company to produce documents held abroad under threat of a criminal penalty in this jurisdiction.
The statute and its history
Section 2(3) uses broad language about who may be required to produce documents but says nothing expressly about demands against foreign companies abroad. The territorial extent of the Act did not answer the separate question of how far this particular power reached.
He rejected the Divisional Court’s stepping stone: the fact that a United Kingdom company could not resist a lawful notice merely because documents were held on a server abroad did not show that Parliament intended the power to reach a foreign company with no presence here. A purposive argument had more force, because extra-territorial effect may be implied where a statutory purpose cannot otherwise be achieved. Whether it rebuts the presumption depends on the statute, its history, and whether Parliament provided another means.
The 1987 Act implemented the Roskill Report. The company-investigation powers to which that report referred could be used against a foreign company only if it was carrying on, or had carried on, business in Great Britain. The 1987 Act contains no equivalent provision. The report did not recommend a unilateral power to compel, by criminal sanction, production in this country of documents held abroad by a foreign company. It emphasised reciprocal arrangements.
Parliament then developed those arrangements. A letter-of-request power omitted from the truncated 1987 Act was enacted in the Criminal Justice Act 1988. Later legislation extended mutual legal assistance to investigations, with safeguards on the use and return of evidence, and enabled the Director of the SFO to seek assistance as a designated prosecuting authority. The United Kingdom and the United States also have mutual legal assistance arrangements. Lord Lloyd-Jones thought it inherently improbable that Parliament intended a parallel power under which the SFO could unilaterally demand documents held abroad, without recourse to the authorities where they were located and without those safeguards.
Why the analogies did not help the SFO
The Court drew support from Serious Organised Crime Agency v Perry. A comparable information-gathering power, also backed by criminal sanctions, did not authorise orders against people outside the jurisdiction. Delivery to an officer visiting London did not change the identity of the company addressed by the notice.
Other powers, including insolvency powers exercised by a court and information demands directed at UK taxpayers, had different safeguards or connecting factors.
No sufficient-connection test
The limitation adopted below had been suggested by the Divisional Court rather than advanced as the SFO’s primary case. Lord Lloyd-Jones held that it could not be read into section 2(3). A broad reading was not compelled by the language, purpose or context, and would conflict with the legislative scheme. The power is given to the SFO, not a court, so judicial discretion cannot restrain an exorbitant claim. A test which does not define a sufficient connection would be inherently uncertain. Implying one would rewrite the statute.
Verdict: The Supreme Court unanimously allowed KBR’s appeal. Section 2(3) did not authorise this notice. The position of a foreign company carrying on business in the United Kingdom or having a registered office or fixed place of business here was outside the appeal.
Source: R (on the application of KBR, Inc) v Director of the Serious Fraud Office [2021] UKSC 2
