Speaking on Monday 15 March 2021 at the 9th Annual European Compliance & Ethics Institute Conference, SFO Director Lisa Osofsky downplayed the challenges facing the SFO in the coming year. In particular, the Director appeared unfazed by February’s Supreme Court decision in R (on the application of KBR, Inc) v SFO  UKSC 2, in which the Court, reversing a 2018 ruling of the High Court on the territorial scope of section 2(3) of the Criminal Justice Act 1987 (a ‘section 2 notice’), held that the SFO had no power to compel foreign companies or persons to produce evidence held overseas. Ms Osofsky denied the decision had “killed” the SFO’s ability to build cases.
It is arguable that the Director’s optimism in the face of the Court’s decision is misguided. The decision in KBR, Inc has curtailed the SFO’s capacity to compel production of material held outside the jurisdiction at a time when investigations increasingly involve an international element, which is undoubtedly a significant blow for the SFO’s ambitions as a global enforcement agency. Ms Osofsky told the Conference that she welcomed the Court’s clarification of the law in relation to the SFO’s powers. In particular, she said she welcomed the Court’s confirmation that the SFO was still able to compel, by way of a section 2 notice, production by UK companies of documents held outside the jurisdiction. However, on the facts of KBR, Inc, KBR being a wholly foreign company with no ties to the UK, the Court was not in fact required to adjudicate that question. Whilst Ms Osofsky’s confidence may derive from the fact that it was common ground between the parties that a section 2 notice would apply to such a case, the question of whether a section 2 notice is in fact capable of compelling production by a UK company of documents held overseas remains open to future challenge in the courts.
The loss of the section 2 power in cases involving foreign companies will mean the SFO will have to fall-back on clunky Mutual Legal Assistance (‘MLA’) arrangements in order to acquire overseas evidence. The immediate effect of this will be a delay to evidence-gathering, and, in the case of UK-EU investigations, increased uncertainty as the SFO and its European counterparts attempt to navigate the unfamiliar and untested MLA arrangements in the Trade and Cooperation Agreement 2020 (‘TCA’). Yet, faced with these challenges, the Director went so far as to say that Brexit will have “no impact” at all on the SFO.
The transatlantic position is not without complications either. The SFO and the DOJ have indeed developed closer ties since Ms Osofsky, herself a former DOJ Special Attorney, took up the post. Historically, however, the relationship between the two enforcement agencies has at times been fraught. In 2017, they clashed over conflicting extradition requests in respect of Saman Ahsani, a suspect in the Unaoil bribery case, with the DOJ emerging victorious. Mr Ahsani was tried in the US and the SFO dropped its investigation without explanation.
From an enforcement perspective, the timing of the KBR, Inc decision could scarcely have been worse, coming just one month after the provisions of the TCA came into force. The TCA established a new framework for UK-EU cooperation on criminal justice matters, including MLA, post-Brexit. Though UK and EU negotiators attempted to replicate, insofar as possible, the arrangements existing prior to the end of the transition period, the new framework remains entirely untested. The Director may well have confidence in the SFO’s ability to grapple with the challenges posed by these changes but the road ahead is uncertain. The assertion that Brexit will have no impact on the SFO is remarkable at a time when UK and EU law enforcement entities are still in the process of implementing and adjusting to the new arrangements. Though the full impact on UK-EU cooperation is not yet known, the cross-border enforcement landscape has been dramatically altered and it appears beyond doubt that this will have some impact on the SFO.